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ELEMENT 25 LIMITED (E25) - Pioneering the Future of Electric Vehicles: Managing Director Justin Brown on the Butcherbird Manganese Project and Strategic Automotive Partnerships

July 31, 2024 • Andrew Musgrave

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Ever wondered how a mineral exploration company is shaping the future of electric vehicles? Join us on ASX Briefs as we host Justin Brown, Managing Director of Element 25 Limited, to uncover the transformative work behind their Butcherbird Manganese Project. Discover how this project is set to revolutionize the production of high-purity manganese sulfate monohydrate, a critical component for lithium-ion batteries, and explore Element 25's strategic role in powering the green transport revolution.

In this engaging episode, Justin sheds light on Element 25's pivotal partnerships with automotive giants General Motors and Stellantis, and their combined financial backing of $150 million. We delve into the intricacies of the Butcherbird Stage 2 expansion, touching on key milestones—from resource infill drilling to detailed engineering and infrastructure design. Don't miss out on Justin's insights into how these strategic steps and partnerships are ensuring a reliable, ethical, and low-carbon supply chain for the electric vehicle market. Get ready to be informed and inspired by Element 25's journey towards sustainable innovation.

Andrew Musgrave:

Welcome to another episode of ASX Briefs, and today I'm speaking with Justin Brown, the Managing Director of Element 25 Limited, a company that is a key player in the exploration and development of mineral properties, focusing on manganese, copper and nickel deposits. The company is renowned for its 100% owned Butcherbird manganese project, a significant asset aimed at producing high purity manganese sulfate monohydrate for lithium ion batteries. Justin, thanks for joining me today and welcome to the podcast.

Justin Brown:

Nice to be with you, Andrew. Thanks for having me.

Andrew Musgrave:

Okay, Justin, can you just provide an overview of Element 25 and, in particular, an update on the Butcherbird Manganese Project?

Justin Brown:

Sure. So, as your listeners may know, Element 25 is a manganese-focused business, hence the name. Manganese is number 25 on the periodic table, and really everything we do is focused around our Butcherbird project, located in the southern Pilbara region of Western Australia, where we have a very large long-life manganese asset, and we're basically developing the business in two parts around that asset. One is the expansion of the manganese mine at Butcherbird to a nominal 1.1 million tonnes per annum, which we published a feasibility study for in January of this year, and that material has two purposes. One is to go into the steel industry to make manganese alloys, which are used to make steel, and then, of course, the downstream processing that we've been developing since 2017 to convert that material into a battery-grade manganese sulfate, and so those two pillars really are what is going to underpin the growth of the business in the coming years.

Andrew Musgrave:

Okay, and the company has partnerships with General Motors and Stellantis for the Louisiana HPMSM project. So can you elaborate on those partnerships and the strategic importance to the company?

Justin Brown:

Yeah, no sure can.

Justin Brown:

So, as I just touched on in the first question, we've been developing a downstream processing solution to take our high quality manganese ore from the Butcherbird mine to a battery grade manganese sulfate product, which is in high demand as the world moves to an electrified transport solution from fossil fuel-driven transport, which we've seen over the past decades.

Justin Brown:

General Motors and Stellantis are two of the leading EV OEMs globally and they're obviously, like everybody, looking to secure supply of critical materials to electrify their production lines and the vehicles obviously they produce, and so what we offer is a cost-competitive, ethical, low-carbon supply of high-quality manganese sulfate for their downstream needs to basically make batteries for their electric vehicles.

Justin Brown:

Another sort of thread to that is that they're looking to reduce dependence on China, where a lot of these critical materials are currently refined, and obviously our plan to build a refinery in the US dovetails nicely with their desire to sort of reduce dependence on China and establish domestic supply and so in turn for that offtake supply that we've offered them. They're both supporting the project financially, with Stellantis making a $50 million US investment in the company at the corporate level to take an 11% shareholding position in the company. GM is offering a $100 million senior debt facility for the project financing of the refinery in the US, and Stellantis also has a second tranche of financing support that they're bringing in with a $15 million prepay. So both very key partnerships for the company going forward.

Andrew Musgrave:

Okay, and if we just look at a bit more detail at the Butcherbird Stage 2 expansion project, what are the key steps and timelines that are coming up in the future?

Justin Brown:

Yeah, so, having published the feasibility study in January, we've been pretty much foot to the floor on executing the expansion project and part of that has been the resource infill drilling program that we completed and announced the completion of that in the most recent quarterly report. That'll lead to a reserve upgrade which will obviously underpin more on the mine life even longer than what was in the feasibility study. Alongside that, we're doing detailed engineering on the process plant design. Obviously, alongside that we also do the various non-process infrastructure design, like the tails dam, the camp, the infrastructure, the road infrastructure, the offices, et cetera. Obviously, a key part of the execution of that plan is to finance it.

Justin Brown:

We have a capital requirement published in the feasibility study of around $50 million Aussie dollars and to fund that we're talking to NAIF. We passed their strategic assessment phase earlier this year and we're in detailed due diligence with them. Obviously, we're talking to potential equity finance partners as well as prepay through offtake arrangements and royalty arrangements. That might also be part of that solution. So all of that will lead to, hopefully, a final investment decision in the coming months and then we'll build that project and look to commission in the first half of 2025.

Andrew Musgrave:

Okay, and just looking at the funding side of things, there has been a recent share purchase plan, so what are the strategic uses of those funds?

Justin Brown:

Yeah, I mean really the SPP was to give investors an opportunity to enter or re-enter the market at what we saw as a very cheap price, given the recent downturn in overall market conditions. So we would prefer to obviously offer that to shareholders than to external parties. That's really just working capital financing to get us through to a final investment decision with the more complete funding solution offered by NAIF and the other sort of tools that I talked about in the previous question. So just modest bridging funding really until we get a final investment package for the execution of the expansion plan.

Andrew Musgrave:

Okay, and at a more macro level, how do the current market conditions, particularly for the manganese ore, price fluctuations and geopolitical factors, how do they influence the company's strategic decisions?

Justin Brown:

We're always keeping a weather eye on the overall sort of macro conditions that are prevailing in the industry, and that obviously applies to both the steel demand but also the battery demand, two quite separate segments of the manganese industry. Recently, on the broader manganese ore supply side, we had the outage of Groote Eylandt. That was a big impact on the supply side, which has seen a commensurate sort of uptick in price. Really, though, our job is to build a long-term sustainable business, so we take a fairly conservative approach and use moon market pricing for ore, and that's the cash flows that we've forecast in the feasibility study really use that type of approach, and obviously we want to be as low down the cost curve as we can. So, really, it's about being cost competitive against the sort of dominant suppliers out of South Africa and West Africa and ensuring that we can generate positive cash flows for all parts of the manganese price cycle.

Justin Brown:

I think, when it comes to the battery side of life, it's a little different. Obviously, there's some pretty significant geopolitical factors at play there, where China has traditionally dominated the downstream refining. Really, what we're looking to do is position ourselves as an alternative to Chinese supply, where we can provide cost-competitive but more ethically sourced, lower-carbon supplies of these critical raw materials to the battery industry, and I think that's going to become even more important, not just as the OEMs shift their vehicle production from fossil-fuel-powered drivetrains to electric drivetrains. But also manganese it may not be common knowledge to some of your listeners, but it's becoming a much more dominant cathode material because it is one of those metals that is in the unique position to solve both the supply and cost issues that are plaguing the OEMs as they look to electrify. So Australian manganese into US, European and Asian markets looks to be a strong pillar of growth for the company, and we think the macro environment is ideally positioned for that.

Andrew Musgrave:

All right, and if we just wrap things up, what are some of the key milestones that companies looking to achieve in the next 12 to 18 months?

Justin Brown:

Yeah, I mean, as I sort of touched on in the previous questions. I mean, really the two streams that we're focusing hard on are the expansion of the mine to the 1.1 million tonne nameplate. Obviously, the financing that goes with that, the detailed engineering and the final investment decision, will be key milestones that investors should look forward to. And similarly on the downstream process and we've done a lot of work on site selection, engineering and project financing and we should look to move towards a final investment decision on that refinery construction project as well before the year end or early in 2025. So those two threads should both yield a number of milestones for investors to look forward to in the next three to six months.

Andrew Musgrave:

Okay, Justin. Well, thanks for your time today. It's been great to get an update on where the company's at, and we look forward to further updates from Element 25 in the upcoming months.

Justin Brown:

Thanks, Andrew. It's a pleasure and look forward to talking again soon.

Andrew Musgrave:

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.