According to recent reports, Element 25 Ltd is striving to achieve a low capital cost and cash flow first early operation, a process of exporting manganese concentrate from its Butcherbird manganese project in Washington State at a strong manganese price and good market fundamentals. Construction of the processing plant has begun, including on-site infrastructure projects for processing plants, offices, roads, civil engineering and well fields are scheduled for commissioning this quarter.
Previously, the updated pre-feasibility study (PFS), released in December 2020, highlighted the enormous economic potential, and Element 25 adjusted various economic inputs and design parameters related to planned Butcherbird open-pit mining and mineral processing operations, resulting in higher free cash flow, higher net present value and higher internal rate of return of the project.
The planned start-up of production for Butcherbird mining and mineral processing operations continues in the first quarter of 2021. It is estimated that the overall maintenance operating cost for the first five years of Butcherbird manganese production averaged $2.91 per dry tonne of US per dry tonne FOB Hedland, thanks to Element 25's comprehensive tendering process for mining and ore transportation contracts. The new figures show that low-cost operations will remain unchanged throughout the manganese price cycle, the company said.
In addition, the company recently entered into an on-demand agreement to supply all manganese lump concentrates produced at Butcherbird (for the first five years or covering the "first phase" operation) to OM Materials, a subsidiary of OM Holdings, a Singapore-listed integrated company listed in ASX.
The extended case assumes that the annual factory throughput is twice and three times that of the basic case the expected mine life is correspondingly reduced and the corresponding project economy is significantly improved. Under an expansion programme of 20 years of mining life, annual production of 2.6 million tonnes of ore and 590000 tonnes of manganese concentrate, the cash flow from Butcherbird's pre-tax operations jumped to $60.2 million a year, the net present value increased to an eye-catching $926 million, while the internal rate of return fell slightly to 342 per cent.
The company has also evaluated an expansion plan that includes the production of 3.9 million tons of ore per year over the 15-year life of the mine and 852000 tons of manganese concentrate per year. Based on this ranking, Butcherbird has a pre-tax operating cash flow of $78.8 million a year, a net present value of $1.13 billion and an internal rate of return of 359 per cent.
Element 25 said that the updated PFS confirmed Butcherbird's proven and estimated ore reserves of 50.55 million tons, with a grade of 10.3% manganese, containing 4.27 million tons of recoverable manganese. Most manganese ores are used to produce manganese alloys, which are mainly used in the iron and steel industry to strengthen steel. According to the company, the proportion of manganese ore used to produce high-value electrolytic manganese metal is small, while the market growth of silicon-manganese alloys is the most obvious. The company said it may develop electrolytic manganese metal and high-purity manganese sulfate plants in Butcherbird to produce battery-grade manganese, which will be the subject of separate research in the future.
