ASX-listed budding manganese producer, Element 25, has ticked off two more elements that are crucial to the extremely low CAPEX development of its Butcherbird manganese mine in the Pilbara. The Perth-based company is now firmly on course to achieve its production start-up target date of February next year after securing commitments totalling almost $10 million for a capital raise and signing up OM Holdings as its preferred offtake partner.
Element 25’s tin-rattling exercise that was embraced by investors and senior management has also been supplemented by a further $2 million convertible note arrangement, which it is in the final stages of squaring away.
The company says it is now pretty much fully funded to build the Butcherbird mine – for a CAPEX of only $15 million – and commence production.
Proceeds from the approximate combined $12 million capital raise will be pumped into Butcherbird’s first-stage project development, to be used predominantly for plant and equipment, mobilisation of the same and construction work to establish the first stage of manganese ore production.
The Butcherbird pre-feasibility study envisaged operating cash flows of about $32.1 million a year over the first five years of manganese ore production.
Importantly, Element 25 has also struck a take-or-pay offtake agreement to sell 100 per cent of the manganese ore produced from the first stage of the Butcherbird project to OM Materials, a wholly owned subsidiary of ASX-listed, Singapore-based integrated manganese and silicon company, OM Holdings Ltd, who is also the party set to provide the $2 million convertible note.
The proposed offtake contract between the two parties involves Element 25 supplying up to 365,000 tonnes per annum of manganese ore to OM Materials for an initial five years, with the provision for an extension subject to various conditions being met.
Commercial terms of the agreement revolve around discounted pricing using London-based Fastmarkets’ published 44 per cent manganese ore benchmark price adjusted for FOB delivery terms.
Given the soured relationship between Australia and China in Government circles post Coronavirus, the manganese ore offtake arrangement with OM Materials looks to be an astute move by Element 25 who will not have to navigate the geopolitical pitfalls of dealing with China.
Element 25 Managing Director, Justin Brown said: “OM Holdings are ideally placed to partner with Element 25 given their extensive smelting infrastructure in Malaysia and their experience in the silicomanganese markets into which the Element 25 ore will be placed.”
The company has submitted the key licence and permit applications to relevant state Government departments and may be about four to six weeks away from putting those to bed.
Approval from Main Roads for the proposed design of the access road where it intersects the Great Northern Highway is already in place and the path looks clear now for Element 25 to join the ranks of ASX-listed mineral producers – not that many have managed to produce manganese.
Is your ASX listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
