Element 25 (ASX: E25) has taken the first step into an alliance with Singapore-controlled OM Holdings (ASX: OMH) which would see the Perth junior supply manganese concentrates from its proposed Butcherbird mine south of Newman, Western Australia.
The company has signed a non-binding memorandum of understanding with a Singapore-registered subsidiary of OM Holdings.
Element 25’s wholly-owned Butcherbird project located in the southern Pilbara region hosts 263 million tonnes of manganese resources.
Apart from its mines in the Northern Territory (Bootu Creek) and in South Africa, OM Holdings operates smelting and sinter plants in China’s Guangxi province and in the Malaysian state of Sarawak. It also has marketing operations in Singapore and China trading manganese ore, ferrosilicon, ferromanganese and other items.
The companies are looking to negotiate a formal offtake agreement over the coming months.
This will cover between 50% and 100% of the concentrate produced at Butcherbird, over an initial five-year term, as well as pricing mechanisms and logistics.
Element 25 managing director Justin Brown said discussions between the two companies have highlighted the demand for a high-quality, reliable supply of manganese from Australia.
Butcherbird could be an early producer
Last month, Element 25 released a pre-feasibility study that showed Butcherbird could be developed at a cost of $14.5 million plus $9.2 million in working capital, with a six-month payback.
This was based on a maiden proved and probable ore reserve of 50.55Mt grading at 10.3% manganese, for a contained and recoverable 4.28Mt.
Adding in the measured and indicated resources, Butcherbird is expected to have a 42-year mine life.
Mr Brown said when releasing the study that the low capital and operating costs would transform Element 25 into producer state much earlier than previously expected.
“The robust cash flows will be transformational in growing the company and generating long-term shareholder value,” he said.
The Butcherbird project straddles the Great Northern Highway and the Goldfields gas pipeline.
OM Holdings ups stake in Bryah Basin JV
Earlier this month, OM Holdings also expanded its relationship with another emerging manganese company, Bryah Resources (ASX: BYH).
After earning 20% in a Bryah Basin manganese joint venture by spending $500,000, the Singapore company committed itself to a further $500,000, which would increase its holding in the project to 30%.
The Bryah Basin project is located north of Meekatharra, WA. Byrah Resources’ tenements and manganese mineral rights cover 880sq km over parts of the western Bryah Basin, which also hosts a number of historical manganese workings, the largest being the Horseshoe South Manganese mine.
Manganese is the fourth most used metal in terms of tonnage after iron, aluminium and copper and 90% of all manganese consumed annually goes into steel as an alloying agent.
As Geoscience Australia notes, no satisfactory substitute for manganese has been identified which combines a relatively low price with outstanding technical benefits such as the ability to combine with sulphur and the powerful de-oxidation capacity.