By now, mining investors involved with “battery metals” are familiar with the primary inputs in the lithium-ion batteries that are part of the Electric Vehicle Revolution. Currently, the leading battery chemistry for the critical cathode component of these batteries is an “NMC” formulation, representing nickel,
manganese, and cobalt (manganese is also an integral component of LMO batteries).
Cobalt has already caught the eye of many mining investors, having had a spectacular run-up in price in 2017. Some mining investors are also already taking notice of the nickel market, as inventory levels have fallen sharply.
To date, far fewer investors have been looking closely at the other NMC metal: manganese. Why? At
a superficial level, mining investors may not identify a strong investment opportunity here. Manganese is the fifth most abundant element in the Earth’s crust, so there is “lots of manganese” in the world. However, the manganese industry is increasingly becoming a story about two separate markets.
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Two “markets” for manganese
At one end of the industry are the traditional applications for manganese: in steel-making, as an alloy in copper and aluminum production, as well as in a number of low-tech, chemically-based applications. For such uses, any grade of manganese will suffice.
At the other, higher-tech end of the manganese market, end users require a high-purity form of manganese, known as either electrolytic manganese metal (EMM) or electrolytic manganese dioxide (EMD), depending on the precise production process being used. This is where the complexity enters this equation – and
opportunity knocks for mining investors.
One of the (new) principal uses for EMM is in the battery metals industry. As the Electric Vehicle Revolution continues to unfold, steadily rising demand for this high-purity EMM is a given going forward.
This leaves supply. How and where is the world getting its supply of EMM? The vast majority of this supply is currently produced in China. Here is where the
strongly bullish fundamentals for this part of the manganese industry are becoming increasingly apparent.
EMM demand is guaranteed to continue to strengthen. Under normal circumstances, this would automatically trigger a commensurate increase in supply to meet this demand. In fact, there is a high degree of probability that China’s supply of EMM could either start to
shrink, or (at best) remain flat.
The issue here is a lack of (naturally occurring) high-grade manganese ore. Much of China’s EMM production is derived from lower grade manganese ore that is subsequently concentrated/purified. This is accomplished through literally burning off impurities from this ore.
It’s a dirty, highly pollutive process. And the lower the grade of manganese ore used as an input, the worse the pollution byproducts that are generated. Investors who keep tabs on China’s economy (and its economic policies) will already be aware that there is a
nation-wide campaign orchestrated by China’s central government to ratchet down industrial pollution – as environmental issues in several areas approach crisis levels.
China is clearly signaling that is no longer willing to sacrifice its own environment simply to capture maximum market share, in various metals markets. Already, reports are surfacing in the manganese industry of the worst offenders for pollution being shut down. Where does this leave the manganese market?
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Moore Stephens International Limited, a global accountancy and consultancy network based in London has produced an
in-depth analysis of the manganese market, published in July 2018. That report leads with the question:
Manganese. Is It The Forgotten Battery Mineral?
This analysis provides a wealth of interesting data for mining investors seeking to position themselves for this metals opportunity, including:
- By 2040; 55% of all new car sales are projected to be electric vehicles (versus 1.3% currently)
- Manganese ore supply deficit in China “has widened year on year” going back to 2001
In most metals markets, a projected demand CAGR of 5.1% could be met through increasing the supply without a lot of strain on the supply chain. This does not appear to be the case with the manganese market, especially the higher end EMD supply.
With a supply deficit for manganese ore in China and serious pollution concerns putting downward pressure on China’s supply of EMD and EMM, meeting this growing demand will have to take place outside of China. The only way to fill this supply gap – without simply exporting these pollution issues to other nations – is through significantly ramping up the supply of manganese with
the right mineralogical profile that requires minimal, cost effective, purification.
This is easier said than done, even with the price of manganese having (quietly) doubled, since bottoming in 2016. For mining investors looking for a means to capitalize on these powerful dynamics in the manganese market, one company that offers numerous attractive qualities for investors is
Giyani Metals Corp. (
TSX: V.WDG,
OTCQB: CATPF,
Forum).
This junior mining company was in the news on
January 28, 2019 when it announced a “convertible loan facility” and offtake agreement with Traxys Africa Trading (Pty) Ltd., that is
providing US$1 million in debt financing. To appreciate the significance of this news requires taking a closer look at Giyani, a junior mining company with (at present) a market cap of only $10 million.
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Many Stockhouse investors are already familiar with this Company. We first introduced Giyani Metals to the Stockhouse audience in a full-length
feature article from April 3, 2018. That article alerted investors to the superb fundamentals for the Company’s flagship Kanye Manganese Project, situated in Botswana.
- Very high grades (up to 73.4% manganese oxide (MnO))
- New resource estimate: 1.1 million tonnes @ 31.2% MnO
- Extremely mining-friendly geology
- Excellent infrastructure access, close to power grid
- Microscopic cap-ex to move to production
- Existing stockpiles of high-grade manganese
Botswana may not be a familiar jurisdiction to many mining investors, but it is a great destination to find (and produce) manganese. Along with South Africa, Botswana hosts the Transvaal Supergroup. This geological formation accounts for more than 75% of the planet’s known manganese reserves.
Botswana is arguably the best jurisdiction in Africa in which to do business. It is the home of Africa’s longest continuous multi-party democracy, with a stable political environment. In
February 2018, Botswana was cited as “the least corrupt country in Africa” for
the 22nd year in a row. The citation came from Transparency International’s Corruption Perception Index.
With lots of manganese to be found in the Transvaal Supergroup, why Giyani Metals? Perhaps this is a question that mining investors would prefer to pose to Traxys?
Traxys is a metals trading house that is not only contracting for the manganese offtake from the Kanye Project, it is advancing the funds necessary to get this high-grade manganese flowing. Experienced mining investors will note the unique terms of this deal.
For starters, both junior mining companies and their shareholders will be well aware of the difficulty in getting
any debt financing for operations. Typically, all funding for the junior mining industry is equity financing. And at the depression-level valuations that presently exist in many mining sectors, this equates to punishing dilution for shareholders.
Secondly, “offtake agreements” with junior mining companies are typically just that: a simple contract for the purchase of mine production.
Getting to production (in terms of financing) is something that the junior miner must accomplish on its own.
Here, Traxys has also obtained first right of refusal to provide
additional debt financing on all manganese production from K.Hill (one of the manganese-rich zones in the Kanye Project) – in exchange for the offtake. So how was Giyani able to negotiate this sweet deal with Traxys?
We went right to the source. In a conference call with Stockhouse Editorial, CEO Robin Birchall connected the dots.
“Traxys was one of very few companies in the space that realized the importance of manganese for the battery electric vehicle market and the great potential it represented for the early movers. We share this fundamental vision and this deal is a culmination of a one year of dialogue where Giyani has consistently demonstrated excellence in planning and execution and gradually convinced Traxys that we are the right battery-grade manganese company to partner with."
So this experienced trading company is already very interested in positioning itself to be a significant supplier of EMM for the battery metals industry. That should be a strong signal to investors that now is the time that
they should also be doing their “positioning” in manganese. Why, specifically, Giyani Metals?
Investors can reference the fundamentals already listed above. And with this high-grade mineralization occurring at surface, Giyani has literally only been “scratching the surface” with respect to the overall mineralization potential on this massive,
8,135 square kilometer land package (roughly equal to the size of Puerto Rico).
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Strong local/regional support for Giyani
On
January 17, 2019; the Company announced completion of an “environmental management plan” for its Lobatse manganese prospect, just one of Kanye’s manganese-rich zones. The significance here is that there are some legacy remedial issues for which Giyani has assumed responsibility. However,
revenues from on-site manganese stockpiles could more than cover these remediation costs.
Naturally, the resident population in this area wants to see this remediation completed. This means that there is strong support from both the regional government and local population to see Giyani successfully move forward on operations.
An “early-stage” valuation, with near-term production
This is still an early-stage mining opportunity, with enormous blue sky potential. But this is a Company that (because of the extremely friendly geology) can move quickly to production. And it boasts an experienced partner that is so bullish on Project (and sector) fundamentals that it is
advancing debt financing to move forward on production.
Because of these strong Project fundamentals, this is a Company that can reward its shareholders by advancing operations with
very low dilution, which also dramatically reduces investment/project risk. For Traxys Africa Trading, Giyani is seen as an ideal partner for positioning in an emerging battery metals market. Experienced mining investors may simply see a “no-brainer” investment opportunity.
giyanimetals.com
FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.