Mkango & CoTec Update

0:07 Hi everyone, welcome to Kotek and Mekango's live summit today, hosted by 6. I'm pleased to introduce Kotek's president and CEO, Julian Treger, who is on the call with us and audio only, as well as Mekango CEO and co-founder William Dawes. Julian and Will are gonna be going over their latest news and Will's gonna then be going through a presentation, but after we're gonna be entering into a live Q&A session where you can ask any question that you like and you're free to submit those questions in the Q&A chat found on the right-hand side of your screen. If you'd like to get in touch with the team, feel free to fill out the survey that's linked at the top of the chat. And as always, this event is being recorded and it's going to be available on six.com in the coming days. So look out for that if you want to refresh. Without further ado, Julian, I'm gonna pass things over to you just so that you can provide a bit of a state of the world. Thank you very much, Cam, and welcome all of those who are tuning in for this exciting presentation about Kotex partnership with Magneto.

1:05 As those who follow Kotex will have seen we've made a number of really interesting announcements over the past couple of days and indeed today we announced our intention to convert our stock in Macango into a stake in Magneto. And as well as obviously we are progressing the joint vendor expand into the US and we're super excited about this. We think it addresses a lot of strategic issues that the US in particular is facing regarding the processing of rare earths and the mining of rare earths, allows more security for the US in this area. And Will will talk further about our plans for this business. But we believe this business could be worth a lot of money, both for the Mekango shareholders and particularly obviously for Kotech.

2:15 And we see it as a way to generate income within a couple of years, much more rapidly than you would see for a traditional mining business. So this is a great focus for us. It's a great development. And I'll hand over now to Will to describe in more detail the opportunity around Magneta. Will.

2:40 Great, thanks Julian. Thanks everyone for joining. So hopefully, you can see the presentation on screen now. So we first invested in HyperMag in 2020. We've seen the company go from strength to strength.

3:06 And this transaction is really a natural progression. We've got an international footprint, we're developing operations in the UK, in Germany, and now the US. And, you know, as a result of this transaction, we'll have a fantastic platform to scale up and for further international growth, together with Kotec, now Mekango and Kotec, we're listed companies. So that really provides, you know, HyperMAG with the, with access to capital and the resources to really accelerate that sort of transition to production. The HyperMAG team are very much, will continue to, you know, be a strong key part of the group and we're looking forward to working with them very closely as we scale up.

4:01 So really, Magneto now, we're very well positioned in the sector. We'll have the increased 100% interest in HyperMag, an 80% increase in HyperMag Germany, increasing to 90% with the exercise of the convertible we announced previously, and also an interest in Makango Rare Earths UK, which is developing a sort of complementary chemical processing route to HyperMAC. So really what this transaction does for the group, We have an enhanced platform for growth. As I mentioned before, we're scaling up in the UK, Germany, very strong focus on the US as well and we're looking at other jurisdictions.

4:48 And really fundamental to the business is accessing the patented technology, which has been developed at the University of Birmingham and licensed to HyperMag, which is the hydrogen processing and magnet scrap. And what that enables is the liberation and extraction of magnets embedded in scrap. And then HyperMag also has the capability to remanufacture that material back into magnets with a very reduced carbon footprint. So really exciting technology underpinned by a huge amount of R&D, around 100 million over the last sort of 15 years, across a whole range of projects and with various project partners.

5:35 So that really underpins the scale up and the international rollout of the business. And what that means is that we have a near-term production pipeline, not only in the UK, but also in Germany and also the US. And to that end, we are forming a JV, Magneto and Kotec to roll out the technology. We've started that process, we've been to the US, we're having ongoing discussions with the US government, also potential customers, we're seeing very strong interest in the potential products we can produce. And really that's leveraging that capability and that centre of excellence, in the UK, University of Birmingham and and HyperMag.

6:21 So we we're developing an extending part existing partnerships. And we're looking at the development of a recycling facilities also looking at chemical processing and also shortly magnet manufacturing as well. So the opportunity here in the rare earth sector, you know, huge growth coming through over in coming years, really driven by the electric revolution. You know, a rare earth permanent magnet is still the most efficient way to drive, you know, electric vehicle. There is a trade off. You know, if you use alternatives, there's a trade off with with performance and range and which means you need a bigger battery, which makes the car more expensive.

7:10 So it is the best way for an electric vehicle to drive an electric vehicle. Also, growth coming through in clean energy, wind power, and these numbers are based on autonomous intelligence leading to shortages and a deficit in supply and demand for neodymium prasodymium. And they are key constituents of rare earth permanent magnets. But what this also means is a growth in neodymium boron, i.e. The rare earth magnets embedded in end of life products. So that would be electronics, electric vehicles, other sources, huge growth in that sort of source. And that's really a lot of that material ends up in landfill or just gets lost during this shredding process. It gets oxidized or contaminated.

8:03 And that's really, and it's very difficult to get a rare earth magnet that's been, that's embedded in a component. It's very difficult to get that out and recover it in an energy efficient way. So that means less than 5% of rare earths are currently recycled from end of life products. You compare that to other sectors such as PGMs and it's a much higher number. So HyperMag and the technology license from University of Birmingham has, creates the opportunity to unlock that supply chain and increase the proportion of recycled material entering the supply chain. Also, really generating, I guess, new domestic sources of raw materials, which is key for jurisdictions, you know, EU, UK, US, other jurisdictions.

8:54 So there's a huge opportunity here. In terms of Maganito itself, we've gradually been sort of restructuring the business, consolidating our recycling interests under Maganito with the support of Kotec. Currently Maganito 90% Mekanga, 10% Kotec. Kotec have recently just announced their intention to increase their stake to 20% via conversion of a convertible. That's great news. We're very much looking forward to working with Kotec as we support the growth of Magneto and HYPERMAG. It was founded by experts, so HYPERMAG was founded by experts in magnetic materials, hydrogen technologies, in particular the late Professor Rex Harris, who'd been working in this field for many years, also Professor Alan Walton, who's head of the Magnetic Materials Group, the University of Birmingham, Dave Kennedy,

9:58 who was originally founded Lescom and Metals, John Speight, huge amount of industry experience, including in the US as well. So, you know, the founding shareholders developed, you know, set up HyperMag, licensed the technology from the University of Birmingham, and really that was the beginning. So we supplied the initial capital to to advance HyperMag and over the last few years great you know huge amount of progress has been made in terms of scaling up the technologies. You know a pilot plant was commissioned yes last year at University of Birmingham The team has grown. Also a German subsidiary was set up, HyperMag Germany. That's been run by Professor Carlo Burkhardt.

10:46 And that really forms the basis for the expansion into Germany as well. And we will be setting up a new joint venture in the US with Kotech to roll out the technology into the US. And that process is underway. So we're restructuring, further restructuring as part of this transaction and that will facilitate access to capital and really facilitate that sort of growth strategy in the coming years. Comparison of advantages, as I mentioned before, it's very difficult to get an embedded magnet out of an assembly in an energy efficient way. The HPMS technology, which uses hydrogen, addresses, you know, addresses that sort of barrier to entry, as it were, first of all, how to extract the magnet.

11:42 So hydrogen reacts with the magnet, forms the powder, and it also demagnetises it. And that enables you to recover that powder. And then that powder can go into various routes. It can go into in the shortest loop process, most energy efficient process. You remake a sintered magnet, 88% less energy than conventional miter magnet. That's hugely attractive for customers, for example, in the electric vehicle space, other consumers. Or it can go for remelting to make an alloy, or it can go into a chemical process. So within the group, we'll have the capability to make maglets, to make the alloys and to do the chemical route as well, and process a whole different range of scrap, maximize the flexibility to process this material.

12:37 We're also developing a chemical process, piloting that, also it ties the energy part, that's complementary to what HyperMag are doing. And having access to that technology to liberate the magnet also delivers a competitive advantage for the chemical processing as route as well. Most chemical processes, recycle material, they're focused on separated magnets or swarf, but it's challenging to chemically process an embedded magnet. So HyperMax technology addresses that, So as a group it gives us huge flexibility to process a range of scrap. Also access to expertise.

13:24 The University of Birmingham is a centre of excellence for magnetic materials. Similarly, University of Fort Syme and we are extending that sort of capability into the US as well. A huge amount of funding has gone into developing this technology through a whole range of projects and with a number of project partners and high profile partners around 100 million of R&D and we're now at the commercialization stage. There's various live projects we're involved in which I'll come on to with some very strong partners in the sector. Near-term production profile, so the technology was piloted at the University of Birmingham last year, so that was commissioned.

14:15 The next step is commissioning of a scaled up plant later this year. That project where Hikromag is the key industrial partner, it's a 4.3 million pound project, 100% funded by Driving the Electric revolution, minimum capacity of around 100 tons a year of neodymium boron. The next stage in the rollout is commissioning the plant in Germany. That's a 6.1 million euro project, 60% funded by the European Regional Development Fund and the local ministry commissioning next year. Then we have Makango Rare Earths UK, also a subsidiary of Maganito, which is developing a pilot plant for the complementary chemical route for magnet recycling.

15:05 And we're also looking at sort of other new technologies as well, which would complement what we're doing there. It's a £1.1 million budget, 70% funded by Driving Electric Revolution, Fantastic set of partners in that project as well, including HyperMag and the University of Birmingham. And then in terms of the strategy with Kotec, We've kicked off that process. We've been in the US very recently. We're completing scoping studies, looking at what are the optimal sites? What does a business look like in the US? And we're looking at various components of that scope, recycling, production of alloys and importantly production of magnets as well. The ability to produce magnets with a low carbon footprint is very attractive to customers and there's limited expertise in magnet making outside

16:05 Asia and we could so we can leverage off that sort of capability that's been developed within HyperMag and the University of Birmingham. In terms of the projects There's a number of live projects underway, which is really focused on processing a different forms of scrap processing, a whole range, you know, fantastic partners, EMR, ILS, Bentley Motors, Bowers & Wilkins, GKN, Jaguar Land Rover, and some very large sort of European projects as well, the Resilience Project, and also Sus MagPro as well. So A lot of collaborative research has gone into de-risking this technology. And as I mentioned before, we're at the commercialization stage and very much moving the technology forward in combination with a range of partners in the sector.

17:09 So what is the technology itself? First of all, the challenge is if you have a rare earth magnet embedded in a hard disk drive. So that would be, and that's a voice call assembly there. That's a rare earth magnet in there. If you send that into a shredder, you're gonna lose the magnet. It also increases costs downstream as well. If you're shredding material with magnets in, increased maintenance costs. So there is a strong rationale to separate that from a downstream perspective, i.e. A maintenance perspective but also we're interested in recovering that magnet, that neodymium aurum magnet in there. Similarly for in the automotive, if you shred a magnet or assembly with a magnet, you're going to lose it. It's going to oxidize and it's going to stick to past the shredder and you're going to lose it. Alternatively, it'll end up in landfill. So what the HBMS technology developed by HyperMag does, it enables the recovery of that magnet prior to going into the downstream process. So when you react hydrogen with the magnet, so as long as hydrogen has access to the magnet, it will decrepitate and form a powder, demagnetises and you can recover that powder and remake a magnet.

18:32 So unfortunately I can't run this video but let me just run to the next one. So this technology initially at the University of Birmingham, this was, this is the 1st HVMS reactor. That's actually a washing machine drum, which proved ideal for the sort of bench scale initial work. So you have hard disk drives loaded into the drum with the magnets in there, drum rotates, access to hydrogen, then you form some powder and you collect the powder. So this was the first sort of proof of concept and the bench scale work which proved the technology. And then moving on to the scale up, this is the pilot reactor, pilot vessel that is being commissioned to the University of Birmingham. So significantly larger.

19:27 And it's around 50 to 100 kilograms of batch for the pilot reactor. And the next scale up is at Thys the Energy Park. That'll be 400 kilograms of batch. So effectively that's commercial scale and that's equivalent to around 100 tons a year of neodymium boron, which is basically magnet material, what goes into make a cinder magnet. And then in Germany, we're looking to scale up in Germany, similar sort of concept to Ties the Energy Park, and then we'll be rolling out into the US in parallel. So just a little bit on the chemical processing. So this is the supply chain. So obviously there's the mining side of things and so on extraction. So Mekanga Resources is involved in this part of the supply chain. We have a project at the feasibility stage in Malawi and currently advancing discussions on the mining development agreement and finalizing that with the government of Malawi.

20:28 We have a project to do rarer separation in Poland that's working with Group Rizzotti. So, HyperMagnet and the recycling is really at the far end of the supply chain. So we are liberating, extracting magnets from components and then remaking magnets in the shortest loop process, short loop magnet recycling, or we're remelting to make alloys. There'll be some material that can't go back into the short loop route and we'll send that back for chemical processing. So really, with position across the supply chain, there will be synergies between what we're doing on the primary side of things in Malawi and Poland. And with HyperMag, with HyperMag, we'll be developing capacity, magnet making capacity, and ultimately it could come together as a fully integrated supply chain. So there's a lot of synergies there as well.

21:26 And so just moving on, this is where the scale up is happening in the UK, and this will be sort of replicated in terms of the setup, you know, elsewhere. So this is Thaes the Energy Park, really exciting developments happening in this part of Birmingham. This site owned by Webster and Horsfall, in fact it was an industrial site, it's where the first transatlantic cable was made. So this site is now being repurposed, redeveloped as a real sort of center for clean energy. So there's hydrogen production on site, there's a biomass plant, HyperMag is developing the pilot line there. The university has built a sort of business innovation center, state-of-the-art labs, fantastic center of excellence and development for the UK.

22:17 So that is where we're scaling up this year. So in terms of the development timeline, just to summarise, the technology has been piloted, pilot plant was commissioned last year at the University of Birmingham. The scaled up plants will be commissioned later this year. The chemical process will be commissioned later this year as well. That's the pilot plant, also at Tarsier Energy Park. And then next year, we're looking to commission the plant in Germany. In parallel with all that, we are looking to accelerate development in the US together with our partners, Kotec. So I think in summary, that is the plan. I'm very happy to answer any questions.

23:07 And yeah, thank you very much for listening. Thanks so much, Will. And just as a reminder to everyone in the audience, if you would like to participate in the Q&A session that we're now entering, feel free to fill out or rather submit any question to the Q&A chat found on the right hand side of your screen. To start though, we have a couple of questions that have come in. First question is this Will, who owned the 58% interest that has been acquired? So the founding shareholders of HyperMag are experts in magnetic materials. As I mentioned before, the late Rex Harris has been developing this, had developed this technology over many years at the University of Birmingham. Alan Walton, Professor Alan Walton, who's head of the Magnetic Materials Group and also founding director of HyperMag.

24:00 Dave Kennedy, who set up Lescomer Metals and John Spade, you know, huge amount of industry experience. So they're the sort of founding shareholders. They and they'll continue to work and support with support the group as we roll out internationally. Okay, great. Another question we have is, what's the investment plan at the Sile Energy Park over the next few years? So it ties the initial investment. It's 4.3 million pound investment by driving the electric revolution. However, what we're looking at the UK is a very much more sort of scaled up development, really expanding HPMS, the front end of the process, looking to scale that up on a modular basis.

24:52 And we're currently looking at what the scope of the downstream developments would look like in terms of alloy making and sintered magnet making as well. So we've got big bank plants for the UK and really building on that center of excellence around Birmingham at the University and ties the energy park with HyperMAC. What's the progress with the MDA? So I think that's with reference to the mine development agreement in Malawi. What I would say is those discussions are progressing well and we're looking to finalize it as soon as possible. Everyone in Malawi, all the stakeholders want it to happen.

25:42 We're looking for a win-win situation, and we're advancing those discussions and you know as soon as we have news we'll update the market. Fair enough. Another question that we received is have you identified any offtake partners once in production? I would say that we are getting very strong interest in potential products. The potential to supply a magnet outside the conventional production bases, whether it's in the US or the UK or in the EU. And a magnet with a low carbon footprint is a very attractive proposition for many customers in this sector.

26:31 So we are being approached on an ongoing basis to supply magnets. And so and hence we're looking to scale up and accelerate the ramp up as soon as possible. So yeah we are getting very strong interest in the products. Okay, great. Another question, what is the status of the potential joint owned US subsidiary? I think we see the US market as having a huge amount of potential. We have kicked off that process. We are looking at potential sites, a number of potential sites. And we're engaging with suppliers of scrap containing magnets.

27:17 And we are also in discussions with potential customers. So we've had a number of meetings with US government and it's all progressing well. So we're very excited about that opportunity. And I think, you know, with the team we've got, with, you know, with HyperMag, Kotec, and Manganito and Makango team, I think we're all very fired up about doing more in the US. Awesome, OK. Rob is wondering, along with some congratulations, but he's wondering if there's any plans to raise funding to scale up other non-US plants. It's his understanding that US plant funding is covered by Kotec and perhaps by US grants, if you could just elaborate or dive into that.

28:07 Yes, so in terms of funding, yes, we have the partnership with Kotec in the US. In terms of UK developments, the development of Tisley is funded by driving the electric revolution. HyperMag is the industrial partner, the main industrial partner for that site and development by the University of Birmingham. In terms of Germany, that is 60% funded by EU funding and also by the local ministry. And the balance of that will be funded by the placing that we completed, completed recent earlier in the year.

28:53 So, so yes, we are we are funded to funded to production. Great. Finn is wondering, how does the quality of a finished recycled magnet from the HPMS process compare to recycled magnets from a chemical process or other comparable companies like Novi and Magnetics? I think it's, I think generally when you, you know, if you're, if you're developing a chemical process, you're going to go back to oxides. But the trade-off for that is you use a lot more reagents, a lot more energy to go back to oxides. The benefit of the HPMS and the short loop recycling route is that you use a lot less energy and it's a lot shorter loop.

29:45 So apart from the HPMS process there's various post-processing routes that we are developing that will upgrade the quality of those recycled magnets. And really, one of the reasons for, I mentioned earlier about having the flexibility to process different scrap sources, is that we can, whatever the type of scrap that comes in, we can process that material. So some material will not be suitable for short loop magnet recycling, and it may need to go for remelting, or it may need to go for chemical processing. The most attractive route for us is a short loop route, because it has the lowest energy input and we'd be producing something that an OEM or a customer would actually buy. So generally, they wouldn't be buying rare earth oxides because you still need to go through a few more routes to get to a natural magnet.

30:47 So there is a trade-off. There can be a trade-off with quality, but you can offset that drop in quality by various post-processing methods that we've developed. Very related question, and I think it's fair if you've covered it just to note that, but Robert's just wondering how much loss of magnet strength, if any, do you expect from the HPMS process? I think what, certainly based on some of the work that has been completed to date, with, you know, some of the post-processing I mentioned, you can produce a magnet with very minimal loss of performance from a recycled.

31:36 So it can be minimal. Right. Rob's also wondering is SUSMAGpro a separate entity? No, that is a grant funded project. SusmagPro is the University of Birmingham is a participant in SusmagPro. So that's a big EU-funded project with sort of multiple partners in the in the sector and you know, highly, you know, successful project and and has I think, you know, contributed a huge amount to advancement of the process. All right, well, look, Will, Julian, that was a great presentation, a great update, an awesome and engaged Q&A session. I wanna thank you guys for both coming on today.

32:27 Of course, I also wanna thank everyone of our attendees, especially those who've asked questions. If you have any other questions feel free to keep submitting them. We'll pass them on to the team after the fact. But we'll Julian I'd like to pass things over to you guys. If you have any closing remarks for the audience. Perhaps Julian maybe you can go ahead. Well yeah I mean that was a great. Yeah that was a great presentation. Well And I think it illustrates how exciting this whole story is and how you're really moving forward on many fronts and what the potential in the US is. So thanks very much. And we look forward to working with you and bringing the success of this business to our shareholders and sharing it with your shareholders as well.

33:14 Thanks, Julian. Likewise, very much looking forward to working with you. I think we've got a fantastic opportunity in the US and elsewhere so full steam ahead. You