Element 25 Ltd (ASX:E25) remains focused on its long-term goal of producing ethical manganese products for world markets in 2021 and beyond, with hopes to become a globally relevant manganese producer, as stated in a letter to stakeholders today.
Managing director Justin Brown said the company made significant strides to stay on track with its Butcherbird production timeline start of Q1 2021 while also finalising the agreement with offtake partners, covering 100% of the manganese ore produced from the first stage of the Butcherbird project over an initial five-year term, with a conditional provision to extend this for a further five years.
Commissioning on-track for Q1
He said: “An updated prea-feasibility study (PFS) was published in December 2020, highlighting a revised base case post-tax NPV of A$421M, with a real IRR of 387% at a mine life of 40 years.
“We highlighted the significant economic potential of expanding the production profile beyond our base scenario by modelling 2x and 3x production volume scenarios over the base case.
“The 2x expansion case yields a pre-tax NPV of A$652M with a real IRR of 342%, and the 3x expansion case yields a pre-tax NPV of A$798M with a real IRR of 359%.
“On the operational end, construction of the processing plant has commenced and site infrastructure, including processing plant, offices, roads, and civil engineering, are on schedule for commissioning in Q1 of 2021.”
Project development timeline
Element 25 has entered into an agreement with Refuel Australia for the provision of camp management services at their Kumarina Roadhouse (Kumarina) facility, around 30 kilometres south of the Project.
The company has 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.
A separate agreement is also in place for Refuel to supply diesel for the project at competitive rates.
The consolidation and mobilisation of equipment to site has commenced with several 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.
Mobilisation and delivery to the site of the remaining key equipment are underway.
The Works Approval and Mining Proposal have been approved by the relevant state government departments.
Permission has been obtained from the State Mining Engineer allowing construction and mining operations to commence.
The Water Abstraction Licence remains pending for operations.
Product offtake update
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 (OMS), a wholly owned subsidiary of ASX listed company OM Holdings Limited (ASX:OMH) under a take-or-pay offtake arrangement.
The term sheete contemplates an exclusivity period to allow the negotiation and finalisation of detailed terms to be documented in a formal offtake agreement.
Element 25 is now in the final stages of drafting the formal documents - an update will be provided to the market once these agreements have been executed.
In addition to the terms agreed with OMS, 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 (Semeru), a company headquartered in Singapore.
The Semeru term sheet provides an exclusivity period until June 30 2021 during which the parties expect to finalise the definitive agreements.