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Here’s what you need to know about investing in manganese

The battery metal has garnered increased attention in recent years, but what’s behind its meteoric rise?

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Manganese could help fuel the up-and-coming new energy vehicle era. Source: CHUTTERSNAP/Unsplash.

It’s the battery metal no one used to know about, but when Elon Musk touted manganese’s properties at Tesla Inc (NASDAQ:TSLA)’s 2020 Battery Day, everything changed.

Manganese has myriad implications, but it has recently been propelled to fame because of its implications for the burgeoning electric vehicle (EV) industry.

That’s because the strategic metal could change the game when it comes to manufacturing batteries that power the vehicles of the future.

With the rise of leaner, greener transportation poised to fuel demand for the versatile element, it’s no wonder public companies are leaning into manganese production.

So what’s the investment case for this EV metal, and which ASX-listers are determined to become part of the manganese supply chain?

Manganese is a strategic metal predominantly used in steelmaking. Source: Element 25.

What is manganese?

Categorised by the periodic table symbol ‘Mn’, manganese is a brittle, silvery metal that’s essential to iron and steel production.

As one of earth’s most abundant metals, it’s produced across the globe — everywhere from major producer South Africa to China to our own shores, where around 3 million tonnes are generated every year.

The material has long been used in the steelmaking process, which currently accounts for roughly 90% of annual manganese consumption.

It’s also an essential, low-cost component found in stainless steel.

In recent years, however, manganese has also been considered for a different application: the burgeoning high-capacity battery market.

Speaking to manganese’s suitability in 2020, Argonne National Laboratory physicist Jason Croy said: “The demand for energy storage is too great for one technology to fulfill it, so we’re looking for environmentally friendly, safe, inexpensive alternatives.”

“Manganese is a good option for that.”

Manganese can be used to create high-capacity batteries. Source: Science in HD/Unsplash.

Where does Battery Day fit in?

Manganese is far from a new resource, but it garnered further popularity last year during one key event: EV titan Tesla’s Battery Day.

Chief executive officer and business magnate Elon Musk took to the stage in September to announce the American vehicle manufacturer would generate its own batteries from a manganese and nickel hybrid in a bid to phase out contentious metals like cobalt.

“It’s relatively straightforward to do a cathode that’s two-thirds nickel and one-third manganese, which will allow us to make 50 per cent more cell volume with the same amount of nickel,” Musk said at the time.

Tesla is a household name when it comes to manufacturing electric vehicles. Source: Anthony A/Unsplash.

The proposal opened the door for prospective manganese suppliers to fuel the Tesla fleet and sent shares soaring.

ASX-lister Euro Manganese Inc (ASX:EMN, TSX-V:EMN, OTCQX:EUMNF) climbed 40.7% on the back of the Battery Day news, while Element 25 Ltd (ASX:E25)’s shares hit a nine-year high of 92 cents.

The bull run has continued for the manganese stock, which is currently trading at $2.10 apiece just under a year later.

Phasing out “the blood diamond of batteries”

A big part of manganese’s appeal is its accessibility. But if you want to discuss why the strategic metal is fast becoming an element of interest in the EV world, you need to talk about another resource that’s tied to battery manufacturing.

Cobalt, which has previously been described as “the blood diamond of the battery world”, is currently a big part of the battery world, but it’s expensive to produce and linked to dangerous working practices.

Cobalt mining is forecast to drop off in the coming years. Source: Element 25.

Around 60% of the world’s cobalt comes from the Democratic Republic of the Congo, a region so entrenched in resource that it’s considered one of the world’s most mineral-rich countries.

But social and political conflict in the African nation, as well as child slavery and environmental issues tied to cobalt’s production, have seen battery makers shy away from the contentious resource in recent years.

At present, a typical electric car might include between 10 and 20 pounds of cobalt, which can be extremely expensive to procure.

We’re still a fair way out from phasing out cobalt in battery applications, but manganese is slowly but surely enjoying a bigger share in the high-capacity battery market.

Cobalt is expensive to mine and in limited supply. Source: Mika Baumeister/Unsplash.

How will growing demand impact manganese value?

The EV market may be one of the more prominent up-and-coming sectors for this strategic mineral, but it’s just one area where manganese continues to have an impact.

Advisory firm Moore Stephens tabled a report on manganese in 2018, dubbing the element “the forgotten battery metal”.

At the time, battery consumption of electrolytic manganese dioxide (EMD) was predicted to be the fastest-growing segment of manganese production, with a compound annual growth rate (CAGR) of 5.1% from 2015 to 2022.

But agricultural verticals will also push demand for high purity manganese, with the micronutrient market poised to reach $12.2 billion in value by 2027.

And the sector that accounts for the vast majority of manganese consumption — the global steel market — is primed to reach US$9.63 billion that same year.

Moore Stephens reported: “With steel demand being a sustained driver of baseline manganese pricing and demand, there is no question that manganese has a role to play.

“This could mean increasing demand for higher grade manganese products, resulting in increased profits for high-grade manganese producers.

“This increased competition for high-grade ores could result in two classes of ore being created on the market: the first being lower-grade ores that would still be suitable for ferroalloy and steel production, the second class being the higher-grade deposits which would be utilised within both steel and high purity manganese products.

“The latter could see high-grade deposits suitable for battery cathodes being caught in a price run as steel and battery producers look to create a competitive marketplace for the ores, both deriving utility from the higher grade.”

Comparison of common metals used in battery cathodes (2018). Source: Moore Stephens.

Rise of the green fleet

Looking ahead, manganese is poised to play an even bigger role in an industry that is yet to see its peak: the new energy vehicle market.

Speaking to Australia’s EV market, St Baker Energy Innovation Fund CEO Rodger Whitby said the country was yet to get ahead of the curve.

“I think we've had a very slow start and we’re going to have a very fast finish.

“So even though 2030 is only eight years away, most of the world's auto manufacturers have their plans in place for new models and so Australia will inherit that.

“The rest of the world has done the heavy lifting, but I think by 2030, it will be rare that you'll be able to buy an internal combustion engine vehicle.

“New cars will all be electric. And five or seven years after that, probably the vast majority of cars on the road will be electric.”

Turning to the global market, worldwide EV sales are predicted to grow from 2.5 million in 2020 to 11.2 million in 2025 before reaching 31.1 million by 2030, bolstered by a 29% compound annual growth rate, according to a Deloitte Insights report.

The rise doesn’t stop there: New Energy Finance posits 58% of vehicles will be electric or hybrid-powered by 2040, with passenger sales piqued to hit 54 million in the same year.

Based on the EV boom, it's expected these leaner, greener vehicles would capture 32 per cent of the total market share for new car sales roughly a decade from now.

However, in order to fuel the rise in EV demand, battery minerals must be in ready supply.

It’s because of this that EV leaders like Tesla, Volkswagen, Stellantis and BASF are moving to high manganese battery formulations to power their creations.

In fact, the proportion of batteries that require high-purity manganese is forecast to grow from 50% to 60% in 2023, with market forecasts for the battery mineral increasingly bullish.

Who are some of the ASX players involved?

As the world prepares for an influx of electric vehicles over the coming decade, a series of ASX-listed companies are eager to capitalise on the growing demand for the strategic mineral.

Euro Manganese is one such player, poised to fuel demand in Europe from its Chvaletice project in the Czech Republic.

The company’s manganese asset, situated roughly 415 kilometres from where Tesla is building the world’s largest EV and battery plant, is expected to be Europe’s only primary producer of high-purity manganese and the only one in the world doing so by recycling waste.

Chvaletice Manganese Project location. Source: Euro Manganese.

Chvaletice’s move to production involves no drilling, blasting, crushing or milling, with no new mining waste or tailings linked to the manganese operation.

More than 98% of the project’s current resource lies in the measured category, while extensive metallurgical testing and engineering is already complete.

Ultimately, EMN hopes to power the EV revolution with “a manganese resource unlike any other”.

Another ASX-lister that’s pursuing a future in battery metal supply is Element 25, Australia’s newest manganese producer.

The company manages the Butcherbird asset in Western Australia, a multi-stage project that makes up the country’s largest onshore manganese resource.

Butcherbird’s first manganese ore shipment departed Port Hedland in July. Source: Element 25.

For now, E25 is working on stage one of its operation: supplying 365,000 tonnes of manganese concentrate per annum over a 40-year mine life.

But in stage two, the manganese player hopes to provide high-purity concentrate to convert to manganese sulphate for the new energy vehicle market.

As the demand for manganese continues to firm up around the globe, these ASX-listed companies are determined to get ahead of the curve.

In the next part of this manganese series, Proactive will speak to leaders at these companies and provide a closer look at their operations and future plans.

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