Commissioning for Growth

0:08 All right, well, hello, everyone, and welcome to the Element 25 Live Investment Summit today, hosted by 6. We are joined today by Managing Director, Justin Brown. Justin is gonna walk us through a company presentation and after that we will be accepting questions live. So as a reminder, you can submit your questions at any time on the Q&A panel on the right-hand side of your screen. And as always, the summit is being recorded and will be posted online afterwards on six.com. Welcome everyone to this quick update on activities for Element 25. For those new to the story, LN25's core focus is on developing a world-class manganese business at our 100% own Butcherbood project located in Western Australia.

0:57 The key point of this update is to sort of just make you aware that we've gone into operation, we're commissioning and ramping up to full-scale production on stage 1 of our development plans. And stage 1 is 1 step in a much longer journey, which will take us to high purity manganese for electric vehicles as well. And I'll talk to you about that a little bit through the presentation. So we've had a pretty exciting 12 months. We've taken our project from pre-feasibility study to commissioning in under a year, which is pretty amazing for a project in Western Australia. We're situated just south of the town of Newman, which is a big iron ore mining centre in Western Australia. We sit on the Bicheman Highway, about 130 kilometres south of Newman, where we've defined a massive manganese resource, currently sitting at over 260 million tonnes in joint resources.

1:55 We've drilled out a portion of that to provide the maiden reserve for the current development. And I guess the key point there is that this thing will go for a very, very long time, because we're virtually unconstrained by the resource size. Great infrastructure with a bitumen-hyaluronic gas pipeline. And we sort of don't suffer from the tearing distance that many Western Australian resource projects can suffer from in the sense that those features obviously give us pretty good energy and logistic solutions to take our products to market. So I guess manganese is sort of topical at the moment because it is one of the key new inputs into electric vehicle battery cathodes. We're starting with a very low capital cost concentrate production business that will take our material into the steel industry, which is the traditional terminal market for manganese over the last sort of a couple of years of the industrial revolution.

2:53 All steel has manganese, so you need this, you need manganese to make steel. It's always been used in batteries, but it's now becoming a key input into batteries with the, I guess, the ambitions of the car industry, particularly to move to electrified vehicle fleet. And to do this, they need a lot of metal for their batteries, and manganese is one of the key inputs in that. So we are getting up and running cheaply with our concentrate business. We then have very strong ambitions to move into the battery cathode business by making high purity manganese sulphate and that will come as this year sort of plays out, at least feasibility and metallurgical studies will be completed to meet the market in a couple of years' time when that surge in demand is forecast to hit.

3:43 Zooming into the project itself, we have a granted mining lease, which covers about 100 million tonnes of the global resource. We have drilled out about 56 million tonnes to provide a 42 year mine life on a stage 1 development. This just sort of scratches the surface really. We can easily drill out more material to add mine life as time goes forward and we fully intend to do so. You can see there the solid gray line which transects the deposits is the bitumen highway that goes straight up to Utah Point at Port Hedland, which is the bulk loading facility that will take our material onto the ships. And the gas pipeline in the dotted gray line is an important energy source for us down the track as we expand. We're not currently tapping into that because the relatively small scale of the stage 1 operation doesn't require it, but that will become an important source of cheap energy as we grow the project.

4:45 One of the key things about Butcherboot is the sheer simplicity of it. It's an outcropping, flat-lying, laterally extensive deposit. It's a super gene deposit. It's an oxide deposit. It's got virtually no strip. It sits above the water table for at least the 30 odd years of mine life and it's free digging with 0 drill and blast required to extract the material. And the reason we can easily process this material is because it's actually got very well defined layers of manganese, high-grade manganese ore with interlayered clays. We effectively wash the clays out and we're left with a very desirable, low impurity, high silica, medium-grade manganese concentrate, which the market is very much willing to purchase from us at pretty good prices. So that's why we can get this project going and why we'll be such a meaningful player in the manganese market for many years to come. Just contextually, the bulk of manganese is consumed in Southeast Asia, mainly China.

5:47 The bulk of the production is halfway across the world in Africa, a little bit in Brazil and Eastern Europe. So a reliable supply of high quality manganese concentrate in a jurisdiction like Australia is very much sought after by the market. And we've enjoyed really strong appetite from an off-take perspective, having locked in a five-year take or pay off-take agreement with IM Holdings, who have smelting facilities in Malaysia. And they're very keen to see this material come into the market. Key point really in terms of points of difference from the last update is that we are in production. So last time I spoke to you guys, we had pretty much ticked all the boxes from a funding, permitting and construction perspective. We'd started dry commissioning and we're now putting ore through the plant and we're ramping up to name plate. We've got a nominal 3 months ramp up to get to our name plate production capacity of 365,000 tonnes of concentrate a year. We're about to move to 24-7 operations and we are very much working on stage 2 expansion. So as I said before, this stage 1 is a start-up. We don't expect to stop there at all. We've just recently done a capital raising, which puts us in a fully funded position to expand to stage 2, which will dramatically expand production.

7:11 And beyond that, we fully intend to get to the high purity manganese market through manganese sulphate and potentially other chemical manganese products, because as I said, this resource is massive. So I guess the bird's eye view of the state of play on site, you can see some of the key features there. It's a really, really simple operation. We basically mine this material and we use water as the only reagent. We take it through a very simple attrition scrubbing process where we screen out quite a lot of the fine material, then we put it through what's called a log washer, which is a attrition scrubbing sort of piece of kit. And then we use optical all-sorters to separate any remaining gang from the black manganese. And you can see, I guess, most obvious feature there is the ROM stocks.

8:04 And I understand I've got some tools here I can use. But if I sort of show you the ROM stocks over here, you've got, it's not working out very well. You've got the red sort of clay material and then the black manganese concentrate, which is what goes to market. So you can see basically we're separating the clays from the interlayered black manganese bands and that's the part that has the economic value. Access road goes out about 1 kilometre to the Great Northern Highway, which is an all year round bitumen highway that goes up to Port Hedland, where we export the material from. The economics are obviously very compelling. Most of you would have seen this analysis before. This is from the pre-feasibility study we published in May of 2020.

8:55 And look, compelling, outstanding, very low capital costs, very high internal rates of return and MPVs. And then if we take that, and really, I guess the goal there was to minimise the capital requirement. We were a sub $20 million company at the time, maximise the IRRs and MPV return, but then very quickly go to stage 2, which is a further expansion of production to take us to 1 million tonnes of concentrate per year. We can get north of billion dollar NPV. And again, we haven't pushed the button on ordering only time items yet, but we're not gonna be too far away from doing that. And we fully expect to be able to get the stage 2 on production inside 12 months, as we did for stage 1, keeping in mind that a lot of the permitting and stuff is in place that just needs minor adjustments to get it through the regulators.

9:41 We're fully funded with a recent capital raising, no meaningful impediment to getting this expansion up and running as we sit here today. So expect to see more news on that in coming weeks and months. So a little bit of market context. This Stage 1 material, as I said, is a low impurity, high silica, medium grade concentrate. It is perfectly suited to make silica manganese, which is an alloy that is very important to steel manufacturers. If you look at the different columns there, you'll see there's a number of alloy products that go into steel. The tallest towers there are the silicon manganese columns, that is the growth market that has dominated over the last 20 years and that is continuing to be the case.

10:27 So our material fits perfectly into the highest growth segment of a growing market. So that underpins demand quite nicely for us. And again, we're very close to the markets that consume the bulk of this material, which is Southeast Asia, as against an African oil source, for example. And so we're very nicely positioned. Where we really want to get to though, and this is, I guess, the exciting part of the future growth story for Element 25. Everyone now, I've sort of cobbled together these graphs from various locations on the internet. You, I'm sure, can go and find another 20 or 30 of these with slightly different flavors, but what everybody agrees on is that the world is going to electrify the vehicle fleet and Europe has certainly fully committed, China's fully committed, The US is making some pretty strong moves in that direction, and eventually other countries will follow as well. And if you do some really simple maths on it, you need a lot of metal to make up the batteries that make these vehicles run.

11:29 So Almost all of the chemistries that go into these EV batteries have manganese as a key input into the cathode. You can see that central graph there. There's a whole bunch of different manganese chemistries there. The bulk of them consume manganese. The hockey stick growth curves that you can see top right and bottom right are going to change slightly depending on whose analysis you look at, but they all agree that you're going to need a lot of batteries, and to make a lot of batteries you need a lot of metal. Traditionally, the metals have been a combination of nickel, manganese and cobalt. If you look at nickel and cobalt specifically, the forward-looking supply projections of most analysts show that you cannot get enough of these metals to make the batteries needed for these electric vehicles.

12:15 Cobalt is clearly the case. This is compounded by the fact that most of the cobalt comes from jurisdictions with serious ethical and environmental concerns around them. The car makers are definitely making moves to move away from cobalt for those very reasons, the supply availability, but also the ethical considerations. Nickel's not quite as black and white, and I think we've seen nickel stick around in batteries for a while, but even nickel will struggle to produce the volume of metal that you need for the number of batteries that are gonna need to be put into these cars. And so you're starting to see the commentary from key players in the industry about the fact that manganese is the solution in most cases, and you'll see a gradual move, I think, or an accelerated move to high manganese cathodes from most of the battery makers around the world over the next sort of 3 to 5 years.

13:06 And the first one of those to move was Volkswagen. Well, first one was actually Tesla. Tesla came out last year with an announcement about a higher manganese cathode. VW was more emphatic and said that the bulk of their vehicles are going to use a very high manganese content in their cathode material for the bulk of their vehicles. So the very high performance cars will probably still use a nickel cobalt chemistry but it'll be a very small number. The biggest by far number of or volume of material will be these high manganese cathodes. And so that's how the car industry has to go. They know that, they're making moves in that direction. That puts us in a really nice position to tap into that demand. And we are getting a lot of inquiries from that segment. And I think you'll see, again, a lot of news flow in the next few weeks and months around that.

13:53 We've done, I guess, important to point out, we've done the bulk of the metallurgical work that we need to take our concentrate material, which is exactly the stuff that comes out of the ground in stage 1 and stage 2. And we can leach that incredibly efficiently. We have a flow sheet that extracts about 95% of the manganese in about 30 minutes at ambient temperatures and pressures. And we also understand that we need to go to low carbon in terms of our environmental sort of footprint. We are already in a very tightly managed ethical environmentally regulated jurisdiction which is really attractive to these terminal users of these high purity manganese products. But we need to go further than that. And I think carbon accounting is going to become a really important part of the future. We understand the levers that we need to pull to decarbonise.

14:46 And we've got a roadmap to get there over the next 3 to 5 years. As I sort of touched on just before, our flow sheet is very well advanced. The top 3 sort of parts of that flow sheet, there are the almost, well, they are the stage 1 production flow sheet. So we basically take a low cost ore, which is free dig at surface, very low cost. We crush it, we scrub it with just water as a reagent. So incredibly simple process that produces our medium grade concentrate. That concentrate is exactly what goes into our room temperature, atmospheric pressure leach, which is as described, so efficient and low cost. We then have to do some purification and then We can either take that solution to a crystalliser to make battery-grade manganese sulphate for the batteries, but we've also done quite a lot of work on an electrolytic process to make manganese metal. So both of those options are available to us. I think the most likely, almost certainly the next stage of development within manganese sulfate, because demand is coming to meet us on that front. But we have potential to take it further than that over time as we continue to grow this business to a genuine world-class manganese player.

16:02 So I guess what I've tried to capture here is a sort of a five-year plan, I suppose. We've delivered stage 1, we've generated revenues from that. Stage 2 will be an expansion of that. Both have outstanding economics and relatively small capital requirements. And we're fully funded for both of those. Obviously Stage 1 is now done. And then Stage 3, which is sort of the holy grail, to give you some context around that, in Stage 1 and Stage 2, if we take a concentrate product and we sell that into the steel industry, we get something like $5 US per unit of manganese, which is in, in when I say units, I mean per percent content of manganese. If we take that down a hydrometallurgical leaching pathway to make high purity manganese for batteries, we get almost a tenfold uplift on the revenue side. So there's really strong economic drivers to take this material through the downstream processing pathway to produce these much higher value, high purity manganese products and we fully intend to do that.

17:02 We have the resource to do it, we have the flow sheet to do it, and we've got a clear vision and clear appetite to get there. And then obviously stage 4, which I think is gonna be a growing requirement in these end users of these materials is to have supply chain transparency. So they need to know where these materials come from. It's gonna have to have a pathway to 0 carbon because carbon accounting is gonna become a more important part of business as we go forward. And again, the ethical environmental regulation is really important to these guys as well. So we can tick all those boxes and we're well on our way to do that. So that's E25. Expect to see a lot more news and thank you very much for listening this morning. Great, Thank you so much, Justin.

17:48 We've got a lot of questions here, but if you haven't asked a question yet, please feel free to do that now. But so I think investors understand that Butcher Beard is a very large deposit. Can you provide some context around how scalable this operation might be? Yeah, happy to. So 263 million tonnes, we've drilled out about 56 million tonnes for our maiden reserve. That's a 42 year mine life. By applying some really simple maths, you can easily multiply that to well north of a 100 year mine life on our Stage 1. So, by comparison to most mines, we are almost unconstrained in terms of resource size. So we can grow this from Stage 1 to Stage 2, to high purity, to manganese metal, and even other chemical manganese products over time.

18:36 So we don't really need to think in terms of optimising resource, we have virtually infinite resources in the context of the time scales we're looking at. Great, thank you. So David is asking, when are you expecting your first shipment? So it'll be most likely in May. We're just working with the port and our offtake partners to book ships and things at the moment. So, you know, we're in production. As I said, we're in a commissioning ramp up stage. So we haven't been at full scale nameplate yet. We're about to go to 24 7 operations, which will obviously accelerate production. And we would be planning, we're currently planning to get our first shipping away in May. Okay, great. Tony is saying, I know it's early on in the process, but are you able to tell us what kind of percentage recoveries you are achieving? Yeah, well, no, I can't give you an up-to-date number, but we have about an 80, I think it was 83% recovery in the PFS.

19:31 Important to point out here that recovery is not the key economic driver for us. The 2 things that have the most impact on economics are the grade and the logistics costs. So, yes, recovery does have an impact on economics, but it's by far not the most important one. But yeah, that's the PFS sort of nameplate. But if we could sacrifice a little bit of recovery for higher grade, we would do that because that would be a downward sort of pressure on overall costs of production. Got it. Leon is wondering what are the lead times for the long lead time items required for stage 2? So they were 16 to 20 weeks for stage 1. It's not 100 percent clear yet on what impact sort of COVID is having on the logistics supply chain. There are some impacts on shipping costs and things because of the congestion in the shipping market. So I couldn't guarantee that it would be the same.

20:27 But, you know, we are ordering off the shelf sort of bits of kit here. There's no custom build. So it's really, you know, we just need to get out in the queue in the factories. And, you know, I don't think it'll be wildly different. So how do the current manganese prices in Australian dollars compare to the ones used in the PFS? So not massively different. I mean, we've suffered a little bit from the rise in the Aussie dollar compared to the numbers used in the PFS, but in saying that the price of manganese over the last few months has been pretty robust as well in US dollar terms. So we haven't suffered a lot on that front because the higher manganese prices offset the Aussie appreciation. Right now, because of the added shipping costs on the material coming from South Africa, we are seeing upward pressure on manganese prices, but it does bounce around.

21:18 But we're there or thereabouts at the moment. OK, Richard is asking regarding manganese sulfide for EV batteries, which is the what is the appropriate current global production and what is the projected demand by 2030? Yeah, so good question. Look, it's not a super transparent market, but we're probably talking about 150,000 tons at the moment, but by 2030, we would fully expect that to be north of 1 million tons. We are talking incredibly strong demand through the growth of EVs, but also due to the fact that the manganese content of these batteries is going up, not down. So I think that's even, you know, the saying 1 million tons is probably conservative. So we have a question here asking, what is the biggest challenge so far in terms of production been?

22:12 Look, it's actually been pretty good. We haven't had any major failures, equipment failures or anything. I think getting through all the permitting and stuff was challenging. WA is very tightly regulated these days, but we managed to get through all that. We haven't hit any major brick walls in terms of production yet. I'm sure we'll have our moments in coming months, but so far we've had a pretty good run. Lachlan is saying, great job so far on high purity manganese sulfide production. Is the leaching process at all proprietary or does it have other barriers to entry that would prevent other manganese producers from doing the same? And then he says, exciting times ahead. Yeah, look, it is optimised for our material. I think, you know, I can't say that it's, we will, we have got a patent application in for it, and I think it's going to be, have limited application to other ores, but not saying it's completely unique for our material, but I think the constraints around sulphate production are more around jurisdictional issues, logistics issues, getting access to reagents and importantly having access to very leachable manganese, which we have. So I don't know completely the answer to that question, but I think I don't know of any other ore material that leaches as efficiently or as quickly or cheaply as our material. Most producers use manganese carbonate with a sulfuric acid leach, which is much slower and more costly.

23:43 The South African producers that leach manganese use a roast reduction, which is more energy intensive and more costly. And so I think we're in a really good position on that front. Great. Ash is asking, when do you expect the PFS for high purity products to be complete and released? As quickly as possible, Ash. I won't put a date on it yet, but as quickly as possible. Great. All right. Well, Leanne is saying, great presentation, Justin. Stage 3 is clearly the sweet spot for Element 25. What is the timeline to stage 3, and what do you expect to be your biggest obstacles? So we've got, I like to say our flow sheet is 95% complete. We've got a little bit more work to do in the lab to just optimize that and perfect that.

24:28 That'll be something that's done in conjunction with the end users of the sulfate material. These battery manufacturers have quite stringent, sort of chemical constraints that the impurity levels need to be quite low for certain elements. And we need to work with them to perfect that spec, optimize the flow sheet to meet that spec, and then obviously qualify the product for use in their processes. So there is a bit more work to do on that front. I think once we've got that bedded down and the product qualified with the end users, we can move through a construction that's probably a 12 to 18 month production timeline. We're not using anything particularly exotic in terms of equipment. Most of it is, as my metallurgist likes to say, pots and pans. You know, we're talking about tanks and agitators and filter presses and thickeners and things like that. So these are all bits of kit that have been widely used in minerals processing for a long time. So nothing, there's no major roadblock in getting that up and running quite quickly.

25:25 Great. So what was the rationale behind the timing of the CR this year to fund stage 2 and the battery manganese PFS? Look, I think the opportunity was presented by a couple of sort of financial sort of groups and you would have seen Blackwood capital took the lead on the capital raising, there was investor appetite, the share price was quite good. What it meant was we then could go in a capital unconstrained way to implementing stage 2 and doing the detail work we need on the high purity manganese flow sheet. Prior to that, we had raised enough for stage 1. We were going to have to rely on cash flow from stage 1 in the absence of a capital raising to fund further development of the flow sheet and to then fund stage 2 via further equity or debt. This capital raising presented itself as an opportunity to kind of deconstrain ourselves in terms of the fast tracking that that high purity manganese development, which is really where we want to get to as quickly as we can. So it was timely.

26:28 You know, the markets were willing to provide the funding. We took it opportunistically, and I think it was the right decision. Right. Harry is asking, what would be the free cashflow per year from phase 1? When you have everything tuned in and humming along? Yeah, so the PFS, which, you know, We don't see any reason to deviate too far from that. Had a cash flows of about 30 million Aussie. And we've probably pushed our costs down a little bit since the PFS, and we'll continue to try and do that on a fairly continuous basis. But that was the number that we published and we're not seeing wild deviations from that. Great, thank you. So Craig is asking, are there any plans to get more analyst coverage given the NPV of stage 2 is $1.1 billion?

27:19 Is this likely to commence within a year? That seems to be a great underappreciation. Yeah, I mean, I don't have control what the analysts write up. I can go out and pay for analyst coverage, and we are talking to various groups on that. But analysts sort of are independent. They pick it up as they choose to. I'm obviously talking to a lot of analysts and I would like to think we'll get coverage, but I can't make any promises on that front. Great. Adam is saying now with stage 2 being fast-tracked, when would you expect to start paying dividends? Oh, look, there hasn't been any formal discussion of dividends in the boardroom yet. I think we have such an aggressive growth path. You're most likely for the next 2 or 3 years at least to see the cash flows thrown back into the business to develop the high purity manganese because we really want to get there and become a key global player in that space as quickly as we can.

28:11 The dividend side of things will probably come after that, I would expect. I'm not ruling it out, but we haven't really been actively talking about dividends just yet. Great. Thank you. Tony is asking, are you able to tell us whether the mineral content of recoveries to date are broadly in line with the PFS? Look, it's a bit early, Tony. I mean, we haven't, we've only been sort of going for a couple of weeks. So give us some time. There's, as I said to you before, there's a trade-off between recovery grade and overall cost of production. So we're optimising that and we're pulling a few levers to try and tweak all of that stuff. But once again, I just emphasise that recovery is not the key driver on cost for us. So it's not something we're fixated on. We're more fixated on throughput and grade, to be honest, because they're much more impactful on revenues.

29:01 Perfect. All right. Well, last question here from Francis. Justin, can you give us an idea of the MagniSulfate cost curve at present and where we might lie on it? Yeah, very, very pointed question, Francis. I am limited what I can say because obviously the ASX limitations on selected disclosure to investors, but what I can say is we've got a very well-developed operating cost model and we are very much towards the bottom end of the global cost curve on manganese sulphate production based on what we know today. And the current sort of prevailing manganese sulfate prices around about $1,300 a tonne. We are much well below that by a fair margin. That sort of price is driven by the cost of conversion of current producers to either take manganese metal through to manganese sulfate or to leach the carbonate ores into a manganese sulfate and then purify it. Most of them are quite inefficient plants, use batch processing techniques from different oil sources that they have to continually optimise. Ours is a much simpler, cleaner, more efficient process and consequently we have a much lower cost. So we don't have any concerns about being at the bottom end of that cost curve.

30:14 Great. I think I actually want to close out on 1 other question. What news can investors look forward to in the coming months for Element 25? Yeah, look, I think you're going to see some pretty active sort of news flow. I think you'll see reports on the ramp up, meaning nameplate, meaning spec, revenues on sale of the product to our off-take partners' own holdings, initiation of the metallurgical test work to finalise the flow sheet development for the high purity manganese, and then ultimately that'll culminate in a pre-feasibility and then full feasibility study of the manganese sulphate development, and then obviously beyond that, funding for that and start of construction and ultimately over the next couple of years you know commissioning of that you know high value, high purity, you know high revenue operation. Absolutely, well thank you so much Justin for taking us through your presentation and all these amazing questions.

31:05 And thank you everyone for joining us today and asking all these great questions. If you think of another question after the summit, we will be sending out a short survey and the Element 25 team will be happy to follow up with you directly. And of course, there is more information on their website, element25.com.au. And as I said earlier, this summit is being recorded and will be available to watch afterwards on six.com. So pass it back to you, Justin, for the final word. Yeah, I'd like to say thanks for tuning in and listening to everyone that attended today. We'll do more of these as we go forward and look forward to bringing you