https://tsxgold.com/american-manganese-economic-domestic-electrolytic-manganese
“The reason that Artillery Peak is important and that the grade is notas important is whether or not you can cheaply extract the manganeseoxide ore and put it into the salable EMM product.”
We’ve written much recently on the criticality of specific metals with a“technology” or “clean tech” focus such as lithium and vanadium. Todayare taking a slight detour and want to discuss another metal that mayhave the same clean tech focus and is equally critical from thestandpoint of US import dependence. Here are some details:
- Generic manganese is the fourth largest traded metal behind iron, aluminum, and copper
- There is no North American production of manganese ore.
- 10 kilograms (22 pounds) of manganese ore is mined to make one tonneof high grade steel. This proportionate manganese consumption is risingover time.
- The total market for manganese is 30 billion lbs. per year and has grown at 8% per year.
- The global manganese market is expected to grow to 44 billion pounds by 2015ii.
- China controls over 98.4% of the world supply of electrolytic manganese (EMM).
- The market for EMM is 2.6 billion lbs. / year. It is growing at 26% / year.
We’re referring to manganese – a metal without which you cannotmanufacture steel. One caveat in order – there is plenty of high grademanganese in the world. It is however becoming a critical metal toAmericans as China is “hoovering” all the manganese it can buy. We aresoon to be presented, in the US, with the same situation that hasdeveloped in the rare earth sector. As China expands we believe she willreduce exports of electrolytic manganese.
EMM's is a premium manganese product. Its greatest uses are theupgrading of specialty steel (47%), and the manufacture of aluminumalloys (32%) and electronics (14%). Flakes of pure EMM are shown below.
Will manganese become a critical metal? For the US in the future – yes.
Of course, as the infrastructure build-out in emerging marketscontinues apace, carbon and stainless steel is a critical component. Thechart below shows the trends in global steel production since 2003.Notwithstanding a dip in 2009, the trend is clear which makes acompelling case for a steady and reliable supply of critical elements insteelmaking – specifically manganese. Without manganese as a componentsteel would shatter.
I include a list of the top ten steel-producing countries globally (inmillions of tonnes) along with the percentage change in steel productionbetween 2009 and 2010. You can see that as the world emerged from theGreat Recession of 2008, steel production has increased with Chinaleading the way and the US registering the largest percentage gain.
So with global steel production on the upswing, demand for manganesewill remain robust. The question becomes one of finding the bestDiscovery opportunities to take advantage this trend. There is no NorthAmerican manganese production. We are aware of only three deposits, twolower grade, in the US (Arizona) and one in Canada.
We believe that American Manganese (AMY: TSX-V) is a DiscoveryIncubator company worth your analysis. We confirmed this after a recentsite visit to the property northwest of Phoenix. AMY owns a 100%position in Artillery Peak, a past-producing manganese mine nearWikieup, AZ. The resource was explored and mined between 1928 and 1955and was in operation during World War II to create a strategic stockpileof manganese for the US war effort. Post war production subsequentlyceased due to low grades.
Remember our Discovery Investing credo, “You find a mine where there has been a mine.”
AMY has developed a NI 43-101 compliant resource and a PreliminaryEconomic Assessment published on the deposit as well. The resourceconsists of the following:
TONNES GRADE % Manganese lbs. (Millions)
—————————————————————————————
Indicated 92,823,925 3.27 6.686
Inferred 107,211,073 3.76 8.881
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To understand the size of this open pittable deposit, we took thepicture below. It shows AMY’s Artillery Peak Project Manager standingnext to one pit wall of the 12 square mile deposit.
This resource is a big, low grade Manganese oxide deposit and as AMYcontinues to drill on the property, it expands. This is exactly what youwant to see when you consider that the US currently has no domesticproduction of manganese or a strategic stockpile.
AMY is headed by CEO Larry Reaugh, a 46 year veteran of the miningindustry with designs of having a mine that produces 50,000 tpy ofelectrolytic manganese (EMM) beginning in 2014. At present demand forEMM is 2.96 billion pounds so Artillery Peak, would be producingapproximately 1/3 % of total global EMM demand.
The PEA Indicated 92,823,925 tonnes of ore at a grade of 3.27%containing 6.686 billion pounds Inferred 107,211,073 tonnes at a gradeof 3.76% containing 8.881 billion pounds. The 17 year mine life willaccount for ~ 13% of the deposit’s resources.
The estimated operating cost per pound is
.44 while electrolyticmanganese sells for approximately $1.87/lb., a healthy margin indeed.Additionally, the projected capital expenditure of USD $90 MM isreasonable given the size of and history surrounding this valuableresource. We’ve said it before when reviewing other projects and AMY’scosts bear repeating this: the lowest cost producer in an industryalmost always wins. AMY has an opportunity to be this lowest-costproducer.
Manganese ore from Artillery Peak.
The next time you cross a bridge or are on a train, think about thefact that without this mineral, the steel used to support the bridge orthe train tracks guiding the train is unavailable and moderninfrastructure cannot be built.
China controls between 97.5% and 98.4% of the world’s electrolyticmanganese (depending on particular EMM product). She produces 1.14million tonnes of EMM per year. Once again the US is on the wrong end ofthe supply chain for this important commodity. AMY could begin with theArtillery Peak soft, oxidized (friable) ore, smelt it intosilico-manganese, high carbon ferro-manganese and low/medium carbonferro-manganese. However we believe they will move to the Kemetcohydrometallurgical technique they are now in the patent process on.
As Helen O’Malley indicates in her interview with the Gold Report (May 2010) demand is increasing and supply tight and that,
“prices have come up quite a bit from the middle of 2009.However, they are still about 40%-50% below the peak levels of 2008;while there has been some recovery, they're still long way offpre-crisis levels.”
Electrolytic manganese metal is the most valuable and highest purityproduct. EMM is the high value product that AMY will make byelectrolysis through bench testing of a new process designed by KemetcoResearch Inciv. This process was originally developed by the US Bureauof Mines. AMY has filed for patent protection on this process whichappears to be environmentally friendly.
EMM is the processed commodity that China controls. An independentPreliminary Economic Analysis (PEA) for AMY estimates their cash cost ofEMM production will be
.44–
.45/ lb. All in cost was estimated at$.63 per pound.
In China, electrolytic manganese costs $1/lb. plus shipping costs, andthen you have the 20% export tax and a 14% U.S. import tax. Moreimportant, China’s reserves are being depleted. The manganese ore isbecoming more refractory and we expect that China will once again beginreducing exports of EMM. This will make lower grade (3% to 7%) domesticmanganese oxide deposits valuable and perhaps manganese a US criticalmetal.
It is also important to note the US Government filed anti-dumpingcomplaints in 2008 against China and Australia over their illegaldumping of manganese into the US market. Once again we have allowedother countries to control our natural resource value chain and IPdevelopment.
In addition to EMM, there are a number of new technologies surroundinglithium-ion batteries and manganese (in the cathode) which have thepotential to increase energy storage dramatically and help bringelectric vehicles into the mainstream faster than is currentlyprojectedv. Energy storage from renewable sources such as wind and solarcan also be increased and add to grid-level storage capacity. Theelectrolytic manganese AMY is planning on producing is a solution forthis battery technology. The battery technology marketplace is now thehighest growth rate “end use” for manganese productvity.
The issues surrounding the strategic nature of many metals and theirsubsequent supply chain issues are increasing in importance. Fukushimamakes this point very well. This makes finding an economic, stable andsteady supply of manganese more important.
Based on an independent preliminary economic assessment, the ArtilleryPeak project could become the world's lowest-cost producer of EMM andsignificant to our domestic economy for a number of reasons. Of coursewe must see the scale up of AMY’s proprietary process to create EMM fromthe oxide ore. Under all these circumstances American Manganese’Artillery Peak qualifies as a world class potential provider of EMM tothe American economy.
The material herein is for informational purposes only and is notintended to and does not constitute the rendering of investment adviceor the solicitation of an offer to buy securities. The foregoingdiscussion contains forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995 (The Act). Inparticular when used in the preceding discussion the words “plan,”confident that, believe, scheduled, expect, or intend to, and similarconditional expressions are intended to identify forward-lookingstatements subject to the safe harbor created by the ACT. Suchstatements are subject to certain risks and uncertainties and actualresults could differ materially from those expressed in any of theforward looking statements. Such risks and uncertainties include, butare not limited to future events and financial performance of thecompany which are inherently uncertain and actual events and / orresults may differ materially. In addition we may review investmentsthat are not registered in the U.S. We cannot attest to nor certify thecorrectness of any information in this note. Please consult yourfinancial advisor and perform your own due diligence before consideringany companies mentioned in this informational bulletin. We own shares inAmerican Manganese and serve as a paid Adviser to AMY.
i Manganese - CRU's Helen O'Malley Speaks Manganese, The Gold Report, May , 2010.
ii Global Industry Analysts Report on Global MN Demand Feb 7, 2011.
iii Electrolytic Manganese metal is the main material for producingTrimagananese tetroxide. And for it's high quality and little impurity,it's also an important alloy element for producing stainless steel,high-strength low-alloy steel, Alumino-Managanese alloy. ElectrolyticManganese metal is an indispensable raw material for welding rod,ferrite, permanent magnet alloy element, and manganic salt for medicaland chemical plants. The newly-developed decreasing vibration alloy alsoneeds Electrolytic Manganese metal.
iv The Recovery Of Manganese From Low Grade Resources: Bench Scale Metallurgical Test Program Completed,
Norman Chow, P. Eng., Anca Nacu, PhD, Doug Warkentin, P.Eng.,IgorAksenov, Hoe Teh, P. Eng. Kemetco Research Inc.#445 - 5600 Parkwood Way,Richmond, BC V6V 2M2 CANADA
v Loveday, Eric (23 April 2010). "Hitachi develops new manganese cathode, could double life of li-ion batteries". https://green.autoblog.com/2010/04/23/hitachi-develops-new-manganese-cath....
vi Global Industry Analysts Report on Global MN Demand Feb 7, 2011.