While steep growth in demand for Electric Vehicles (EVs) has highlighted the need for more lithium supplies, it’s an impending supply shortage involving fellow-battery metal manganese that’s being dangerously overlooked.
For the last few years, many analysts and investors have understandably focused a lot of attention on the widely known materials in the world’s most widespread rechargeable batteries—namely lithium, and sometimes also cobalt. However, it’s the third (and equally as important) ingredient, manganese, that has somehow quietly slipped from the radar, and possibly at the market’s peril.
While lithium companies have slowly become household names over the last few years, there’s a good chance there will be more attention towards companies with significant manganes interests in the near future as supply curves shift, including Ferroglobe PLC (NASDAQ: GSM), Glencore PLC (LSE: GLEN), Altair Resources (TSX.V: AVX), and Maxtech Ventures (CSE: MVT) (OTC: MTEHF).
The market has already seen the sharp rise in prices for both lithium and cobalt in recent years. Cobalt prices have doubled in the last year, while obviously (as Goldman Sachs pointed out) lithium prices have risen dramatically and continue to increase currently.
Manganese has many factors pushing its demand to new heights, beyond just EVs. With battery production rising, as well as an increase in its demand for use in steel production, China raised its imports of manganese 96% in the past year.
And it can’t be ignored that two major EV manufacturers both use manganese-based batteries in their vehicles—including the world’s best-selling electric car, the Nissan Leaf.
Large producers of manganese are now on notice, but it’s one smaller mining company that’s getting attention for its savvy entry into manganese; Maxtech Ventures (CSE: MVT) (OTC: MTEHF), which could easily be the next near-term producer of manganese in Brazil, and possibly also Morocco.
INTERNATIONAL BATTERY DEMAND BOOST
While primarily used in steelmaking (which accounts for approximately 90% of global manganese demand), one of the biggest drivers for the rise in the metal’s demand is coming from lithium-ion and other battery technology manufacturing—and in particular, electric cars.
And this push is coming from all over the world.
In China, sales of EVs are soaring, with recent September sales rolling in with an 80% increase year over year, and already annual sales are up 48% YoY as well.
Meanwhile, American EV manufacturers are moving beyond their borders to try and also crack into the Chinese market, as last month, Elon Musk’s Tesla Motors were announced to officially be the first foreign EV maker to sell in China.
The difficulty for American manufacturers is the unfortunate current scenario, where the United States is 100% reliant on manganese imports from other countries. There is no current US manganese production, and holds no officially compliant manganese reserves.
Europe isn’t letting its foot off the pedal neither.
As part of the European Commission’s ambitious Horizon 2020 program, so far €350 million (more than USD $413 million) has been allocated to creating a sustainable battery industry in Europe.
That’s not counting the UK, which alone has also dangled a carrot for companies to bolster research, innovation, and scaling up batteries for production in the UK, under the government’s “Faraday Challenge”—worth £246 million (USD $320 million).
This comes after it has been reported that UK electric vehicle registration has increased by more than 1,800% since 2011.
With such massive investments being made around the globe, all to be injected into the manufacturing of more batteries, the draw on the materials needed for those to be made will be massive.
THE WILD MANGANESE RIDE OF 2016
According to the USGS, last year the world produced 8.6% less manganese than in 2015. Meanwhile, in the largest manganese consumption market of China, the production/consumption gap has been consistently widening since 2001.
As a result, manganese saw a significant price increase from 2016, followed by a temporary correction. This came as China ramped up its imports of manganese ore 96%. The increase in demand was met with an initial supply response coming from one-off destocking by producers, primarily from Gabon.
However, growth in supply dropped in the subsequent quarters after the price increase. In the aftermath, manganese ore prices remained high due to closures of Chinese domestic mines, following an environmental clampdown, and persistent low port stocks.
The elevated prices for manganese will undoubtedly stimulate further supply growth, in the wake of production the recently witnessed production drops.
There is still no manganese production in the United States, which strikes as odd, given its status as a strategic metal ever since its classification in 1987.
Given its ability to powerfully strengthen steel, and its utility not only in batteries, but in weapons manufacturing, and in infrastructure like buildings and rail lines, it’s still surprising that a domestic push for manganese development has yet to come inside the United States.
But while prices have risen significantly for the metal, manganese production fell in 2016 due to the quiet closures and cuts implemented in Australia, South Africa, Gabon, and China.
Somewhere, other producers and opportunity seekers are going to pick up the slack.
MAXTECH VENTURES ANSWERS THE CALL
The field of pure-play manganese companies is still very limited, but it’s Vancouver-based Maxtech Ventures, a Canadian-based junior with a massive Brazilian manganese asset that’s standing out amongst its peers.
Spanning an impressive 540,000 hectares, Maxtech’s flagship project located in the Brazilian state of Mato Grosse is expected to become one of the highest-grade, lowest-cost manganese operations on the planet.
Already the company’s target is a projected 11,500 tonnes of manganese—with the expectation of ramping up to a full production of 80,000 tonnes per annum by 2020.
For context, the price of pure manganese has risen to roughly US$2,800 per tonne, which is nearly double the price it fetched in 2015.
And while the world’s battery markets seem to be clamoring over the waning supplies of manganese that are out there, Maxtech might not even have to go far to off-take its product.
Another important use of manganese is in the formulation of fertlizers, which are in short supply in the soy-producing giant nation of Brazil. Demand for high-purity manganese in Brazil is expected to increase by 4.8% CAGR, which translates to an additional demand of 227,000 tonnes just for use in fertilizers.
To better shore up its prospects, Maxtech has already entered into an agreement with Maringá Ferro-Liga S.A., a subsidiary of Grupo Maringá (the second largest manganese ferroalloy producer in South America). The partnership will better allow for joint evaluation, exploration, and potential acquisition of additional manganese assets in Brazil.
The allure of selling its manganese only domestically in Brazil may be an obstacle for the battery makers of the world, as high-purity manganese for fertilizer use comes with a potential 25-30% pricing premium.
Maxtech also recently announced it is moving forward in evaluating several advanced-stage manganese assets in Morocco. All the while, the company is seeking further global off-take partners to complete a full-scake vertical manganese operation platform in the region, and has taken on a Switzerland-based group to assist in developing a European capital markets strategy.
As Maxtech and its partners work swiftly towards the cash flow stage in Brazil, tapping into the fertilizer market, the company is still striving to grow its resource capacity to further supply the growing power cell and storage markets on the world market.
POTENTIAL COMPARABLES
Ferroglobe PLC (NASDAQ: GSM)
Ferroglobe PLC operates in the silicon and specialty metals industry in the United States, Europe, and internationally. The company offers silicon metals that are used in personal care items, construction-related products, health care products, and electronics, as well as used in the manufacture of silicone chemicals; silicomanganese, which is used as deoxidizing agent in the steel manufacturing process; and ferromanganese that is used as a deoxidizing, desulphurizing, and degassing agent in the removal of nitrogen and other harmful elements from steel. It also provides ferrosilicon products that are used to produce stainless steel, carbon steel, and various other steel alloys, as well as to manufacture electrodes and aluminum; silico calcium, which is used in the deoxidation and desulfurization of liquid steel, and production of coatings for cast iron pipes, as well as in the welding process of powder metal; nodularizers and inoculants, which are used in the production of iron; and silica fume. The company was formerly known as VeloNewco Limited. Ferroglobe PLC was incorporated in 2015 and is headquartered in London, the United Kingdom. Ferroglobe PLC is a subsidiary of Grupo Villar Mir, S.A.
Glencore PLC (LSE: GLEN)
Glencore plc engages in the production, refinement, processing, storage, transport, and marketing of commodities worldwide. It operates in three segments: Metals and Minerals, Energy Products, and Agricultural Products. The Metals and Minerals segment is involved in smelting, refining, mining, processing, and storing zinc, copper, lead, alumina, aluminum, ferroalloys, nickel, cobalt, and iron ore. The company was formerly known as Glencore Xstrata plc and changed its name to Glencore plc in May 2014. Glencore plc was founded in 1974 and is headquartered in Baar, Switzerland.
Altar Resources Inc. (TSX.V: AVX)
Altair Resources Inc. is a company engaged in the acquisition, exploration and development of mineral properties, with a primary focus on zinc. The company holds a 100% interest in the past-producing Pan American and Prince mines and the Caselton concentrator in the Pioche district, Nevada. Its secondary phase for Pioche is to target manganese, which is a valuable by-product that has not been historically recovered from operations as leach technology was not available when the mines were in prior operation. The company is led by an experienced management team and is based out of Vancouver, BC.
For a more in-depth look into MVT you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/11/19/manganese-the-third-electric-vehicle-metal-no-one-is-talking-about-3-2-2-2/
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