Element 25 Ltd. is looking to take advantage of structural changes in China to "out-compete" the Asian giant targeting the ex-China manganese market where a quarter of the metal's demand lies, as offtakers and funds are increasingly looking for ethically-sourced material in their investments.
The junior's Executive Director Justin Brown told the Technology and Low Emissions Minerals Conference in Perth, Australia, on Nov. 13 that China, the dominant producer in the high-purity class one manganese market is experiencing an increasing cost base.
This, combined with the Asian country's recent environmental drive, gives Element 25 an advantage to target ex-China markets like Japan and Europe. Though South Korea and North America are also options, the former has some commercial risk attached while the latter is mired in trade war tensions.
Advisory firm Moore Stephens said in a manganese market report in June that with China controlling about 97% of the world's electrolytic manganese (EMM) trade, "we are interested to watch this space as environmental regulation further tightens."
"European manganese traders are finding it increasingly difficult to source electrolytic flake, with Chinese producers not supplying any flake to the market at present. This supply squeeze is forcing traders to purchase flake from suppliers in Europe, who are demanding much higher prices due to the current supply shortage," the firm said.
Brown told S&P Global Market Intelligence on the conference sidelines that China's established manganese infrastructure lies about 1,000 kilometers or more from the coast, which makes the logistical challenge of getting ore, sourced from places like Africa, to its plants "quite difficult."
"The ex-China market is growing with the consumption of steel ... and environmental credentials is how you break into the market," he said.
While the premium manganese product comprising about 14% of the overall manganese market by volume and 40% by value, it is set to grow as a market out to 2027 at least in all three segments — manganese sulfate, EMM and electrolytic manganese dioxide.
High purity manganese is primarily used in batteries, series 200 stainless steel, specialty alloys and fertilizer and trace nutrients.
With that structural change in China in terms of cost, Brown said Element 25 benefits from lower-cost energy, with a high percentage of energy to be sourced from renewable energy with a wind, solar and gas solution planned for its Butcherbird project in Western Australia.
Though the scoping study was modeled on 100% gas power, Element 25's expected energy mix is up to 50% solar and wind for the electrolytic process to make metal, with both forms of renewable energy displaying a competitive levelized cost.
"We're only going to shift about 1.3 million tonnes of ore a year, as the mine is a very small part of this operation," Brown said.
"It's more about the decarbonized way we're making it, as it's an ambient temperature-atmospheric pressure leach, so we don't have to heat it up like the Chinese, who have to heat their ore to 1,000 Celsius to leach it."
Brown says that the gas pipeline running through the project, coupled with the renewable energy, will make power more cost-effective than in China, reduce Element 25's exposure to gas price volatility and make it more attractive to investors who are increasingly wanting "ethically sourced" materials.
He said a recent conversation with a major London fund revealed that firm is under pressure from its investors for such "ethical investments," including projects that used renewable power.
Financial advisory firm Argonaut's Metals & Mining & Energy Research Director Matthew Keane also told the conference Nov. 13 that there would be a "natural progression" towards increasing social and environmental focus of battery mineral investments.
"As we move into market balance in lithium there will be a higher focus on quality, moving away from direct shipping ores to higher quality concentrates," Keane said; while in the case of graphite, offtakers would look to cleaner, higher total contained carbons.
A metallurgical report is due for Butcherbird within a month. The mining lease application has been lodged and initial flora and fauna surveys complete. Brown told delegates that there had been "no red flags" on the environmental front thus far.