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Pilbara Metals Group finds vehicle for ASX listing as manganese momentum builds

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Pilbara Metals Group finds vehicle for ASX listing as manganese momentum builds

Manganese sulfate hopeful Pilbara Metals Group has found a shell to backdoor list into the ASX in 2019, after having held off its initial IPO previously planned for the first quarter.

Pilbara Metals Managing Director Rob Mandanici told S&P Global Market Intelligence the company would likely backdoor list through an existing shell entity it has already identified, which would allow it to raise between A$4.5 million and A$6 million.

Mandanici's meetings with Korean chemical companies ECOPROGEM and LG Chem Ltd. in April revealed a trend towards higher-manganese cathodes for batteries, as they need to supplement their supply of both manganese sulfate and oxide, most of which currently come from Chinese sources via Japanese traders.

He said the Korean companies also agreed with Pilbara Minerals' assessment that the manganese sulfate market will grow to about 800,000 tonnes by 2025 and to 1.3 million tonnes by 2035 due to a growing preference for high-manganese cathodes.

This was reflected in reports that German chemicals giant BASF SE would significantly lift the manganese content in its cathodes within five years, and it is understood that at least one other major chemicals company is doing the same.

Yet even if the world does not move to high manganese content cathodes to such an extent, Mandanici said there would still be a shortage in the foreseeable future based on current demand for existing nickel-cobalt-manganese, or NCM, and lithium-manganese oxide cathode structures.

Pilbara Metals is continuing discussions with those Korean companies for off-take agreements, though Mandanici said the company has signed a memorandum of understanding with an undisclosed chemicals giant for all the high-purity product it aims to produce from the planned A$40 million plant in Western Australia.

Mandanici said the plant, which will produce 40,000 tonnes per annum of both high- and low-purity product, would likely be funded about 30% via equity and 70% from a mixture of debt and prepaid off-take deals to limit shareholder dilution.

A Benchmark Mineral Intelligence report issued to the ASX on May 8 by West Australian manganese hopeful Element 25 Ltd. detailed various projections which pointed to a "rising market" for manganese in batteries.

The report, authored by Richard Flook who established a specialist mineral and chemical consulting group after being managing director of Shinagawa Refractories Australasia Pty Ltd., noted a number of attempts in the past decade to enter the downstream manganese processing market.

Flook cited the success of major manganese producers and a number of attempts made over the past decade by various players to enter the downstream manganese processing market as evidence of the growing momentum due to the demand for battery materials.

Of particular note was CITIC Dameng Mining Industries Ltd., which not only owns Daxin that is reportedly China's largest manganese mine, but is also a globally significant producer of downstream products, recently issuing a profit forecast upgrade partly due to the increasing significance of battery materials.

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Flook also noted that South32 Ltd. the world’s largest manganese ore producer which operates the world’s biggest manganese mine at Groote Eylandt in Australia reported increased sales and prices and a 58% EBITDA margin in 2018. Anglo American PLC also has a 40% stake in Groote Eyland's manganese operations.

Element 25 Executive Director Justin Brown told S&P Global Market Intelligence that while battery supply chain players had initially targeted nickel-heavy cathodes like the NMC 811 to reduce the percentage of cobalt that has serious supply concerns, such moves have proven more difficult than expected due to thermal stability issues.

While some battery makers like Umicore SA are persisting with NMC 811, Brown said cathodes with up to 75% manganese content can have as little as 5% cobalt, which is known to stabilize cathodes, yet still contain high energy density, cost less and are still thermally stable.

High-manganese cathodes still need to "get the electrolytes right" before becoming commercially proven, but Brown believes the market will shift toward such cathodes once that issue is sorted out.