Here’s an idea. Rather than try and compete against China’s supremacy in all things to do with battery materials, why not join them?
The alternative is to do what the non-China world is doing right now – throw literally billions and billions of taxpayer dollars at trying to create a non-China battery supply chain in the faint hope that China’s dominance can be reined in.
But the reality is that the non-China world will continue to struggle to match the Chinese on capital and operating costs, and an ability to build all types of value-adding processing operations at lightning speed.
And apart from anything else, the Chinese are the biggest consumers of battery materials. So again, why not join them?
That is exactly the strategy that ASX-listed Firebird Metals (ASX:FRB) – trading mid-week at 16.5c for a market cap of $23.5 million – is pursuing in the manganese space. It is hurtling down the road to building a battery grade manganese operation in China inside an established chemical “park”.
Being inside the park comes with major benefits, including the permitting and approvals process. But more than that is the ability to take advantage of the circular economy where the waste from one chemical operation can become an input in the one next door.
Chinese billionaire Zhenhua Pei is on board with the story through the 9.7% stake held by his Canmax Technologies, as is our own Tolga Kumova with a 9.5% stake.
Traditional thinking would be that Firebird would first develop its sizeable Oakover manganese project, 85km east of Newman in the Pilbara. But manganese industry veteran Peter Allen, Firebird’s managing director, has flipped things around.
Oakover remains on a development timeline but in the first instance, the manganese ore requirements for the battery grade plant in China will be supplied from third party sources.
It’s all about capturing the much bigger margins for the battery grade stuff, specifically in Firebird’s case in China, from the production of high purity manganese sulphate monohydrate or HPMSM.
HPMSM goes in to lithium manganese iron phosphate batteries which are a superior form of lithium iron phosphate batteries, with the manganese improving energy density for more distance, putting them in competition with the nickel-based chemistries which are more expensive.
They also have safety benefits over the nickel based versions. Take all that in, and consultants like Benchmark reckon 51% of all battery cathodes will include manganese by 2030. And guess what, China is the largest market for the stuff.
Evolution Capital has just put a 64c a share price target on Firebird. It was derived by assigning 40% of its net present value assessment of the Chinese project, and only 5% of Oakover’s scoping study NPV valuation last year.
“The intense news flow continues with final permitting expected before the end of June 2024 and detailed feasibility studies, engineering assessments and financing arrangements before year end,’’ Evolution said.
A Chinese-style feasibility study in to Firebird’s manganese sulphate ambitions arrived at an estimated capital cost of $US83.5 million for 72,500tpa of production with the stuff selling for around $US1,420/t in China.
Operating cost was put at $608/t, indicating fat margins without taking into account the potential for prices to rise in line with the strong demand outlook.
The study was Chinese style in that it followed the practice there of first doing engineering design, government permitting, and financing assessments before getting too excited. It was completed by Hunan Chemical Engineering Design Institute.
According to Firebird, it is the leading high-purity manganese project design institute globally.
Garimpeiro is not going to debate the claim as he know one thing for sure, there isn’t an equivalent here in Australia, and never will be.
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