viewElement 25 Ltd

Element 25 Butcherbird Manganese Project on track for commissioning this quarter

The recently updated PFS has highlighted the growth potential of the project with compelling base case and expansion case economics.

Element 25 Ltd - Element 25 Butcherbird project scheduled for commissioning in Q1 2021
Civil works are substantially complete with process plant construction underway

Element 25 Ltd (ASX:E25) (FRA:QFP) is moving towards the delivery of a low capital cost, early cashflow stage 1 operation exporting manganese concentrate from its Butcherbird Manganese Project in WA at a time of strong manganese prices and positive market fundamentals.

Construction of the processing plant has commenced and site infrastructure works including processing plant, offices, roads, civil engineering and borefield are on schedule for commissioning in the current quarter.

Notably, an updated pre-feasibility study (PFS) published in December 2020 returned outstanding economics for the Stage 1 base case and highlighted the significant economic potential of expanding the production profile beyond Stage 1.

PFS highlights growth potential

The updated PFS includes changes in the macro-economic inputs and other design parameters and includes the results of two options studies which examined the expansion of production at the project.

Results confirmed that robust economics are maintained and improved for the base case and the expansion options offer the company opportunities to substantially improve the economics of the project.

The expansion cases in the PFS assume that production will be increased to either 2x or 3x the plant throughput rates of the base case, commencing at the start of the second year of production.

This results in better utilisation of the large resource/reserve base underpinning the project. Economies of scale result in better equipment utilisation and operating efficiencies which improve project economics.

The initial 5-year of production in the base case utilises 92% measured resources and 8% indicated resources and the 40-year Life of Mine scenario for the base case utilises 27% measured resources, 68% indicated resources and 5% inferred resources.

Stage 1 of project delivery is on schedule for completion in the first quarter of 2021.

Base case and expansion case economics.

Delivery and mobilisation of equipment

All principal mechanical equipment including the crusher, log washer, wet and dry screens and ore sorters have landed in Fremantle, Western Australia, and cleared customs.

The consolidation and mobilisation of equipment to site has commenced with a number of key process plant items already on site, including screens, administration blocks and associated infrastructure and services - which have been installed and are operational.

Construction and operations crews are now working from site and the mobilisation and delivery to site of the remaining key equipment is underway.

Kumarina accommodation facilities

During the December quarter, the company entered into an agreement with Refuel Australia for the provision of camp management services at their Kumarina Roadhouse facility about 30 kilometres south of the project.

E25 subsequently installed a 40-man camp at Kumarina, where the construction workforce is being accommodated.

Refuel will provide ongoing room servicing and messing through construction and into operations and a separate agreement is also in place for Refuel to supply diesel for the project at competitive rates.

Operational workforce

The company has appointed an experienced resident manager in Sven Tegeler who is overseeing operational readiness preparations as well as coordinating the recruitment and training of the operations team.

Tegeler will be a critical part of the construction and commissioning team and will then transition to a site management role to oversee operations of the operations.

Key contractors appointed

The company has appointed Iron Mining Contracting Pty Ltd (IMC) as preferred mining contractor for the project. IMC is completing the required civil earthworks including access roads, the Tailings Storage Facility (TSF) and the processing plant site.

On completion of the civil work program, IMC will transition to mining and provide material to feed the processing plant.

Great Energy has been appointed to provide site power for an initial contract period of four years with buyout and extension provisions.

Civilcon is undertaking a range of site civil works in preparation for the installation of the processing plant and associated infrastructure.

The company is also well advanced in finalising contracts in relation to haulage and port access.

Project development timeline.

OM offtake agreement

Key commercial terms have been agreed under a non-binding term sheet to sell 100% of the manganese ore produced (up to 365,000 tonnes per annum) from the first stage of the project development to OM Materials Pte Ltd, a wholly-owned subsidiary of ASX-listed company OM Holdings Limited (ASX:OMH) under a take-or-pay offtake arrangement.

The Term Sheet contemplates an exclusivity period to allow the negotiation and finalisation of detailed terms to be documented in a formal offtake agreement.

Semeru offtake and financing

In addition, key commercial terms have also been agreed under a non-binding term sheet to sell 50% of the manganese ore produced from the second stage of the project development to Semeru Energy Limited, headquartered in Singapore.

The Semeru term sheet provides for a minimum allocation of 175,000 tonnes per annum and a maximum allocation of 200,000 tonnes per annum and contemplates a 5-year term with provisions for renewal subject to the satisfactory performance by Semeru against agreed KPIs - the details which will be negotiated and documented in definitive agreements, still to be drafted.

Notably, as part of the offtake arrangements, Semeru will provide USD$5 million in project finance to fund the company’s expansion plans.

Quick facts: Element 25 Ltd

Price: 1.6 AUD

Market: ASX
Market Cap: $212.22 m

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