Element 25 Ltd (ASX:E25) has entered a entered a non-binding memorandum of understanding (MOU) with OM Materials (S) Pte Ltd, a wholly-owned subsidiary of OM Holdings Limited (ASX:OMH), to supply manganese concentrate products from the Butcherbird Manganese Project.
This represents the first formal milestone between the parties and follows a number of positive discussions over recent weeks since E25 released its manganese concentrate pre-feasibility study for the WA project on May 19, 2020.
“Important milestone”
E25 managing director Justin Brown said: “E25 is very pleased to be able to report this important milestone in what we hope will be a long and mutually beneficial relationship.
“Discussions with OMH and others have highlighted the demand for high-quality, reliable supply of manganese from Australia.”
Key parameters
While the final terms of the offtake agreement are subject to further negotiations, the MOU provides a framework for discussions around the following key parameters:
- Binding offtake of between 50% and 100% of the concentrate produced from the project;
- Pricing mechanisms based on agreed published benchmark pricing;
- An initial term of up to five years; and
- Optimising the logistics solution for the project.
Developing Butcherbird project
E25 has recently completed a pre-feasibility study with respect to developing the deposit to produce manganese concentrate for export to generate early cashflow with a modest capital requirement.
The robust economics and low capital hurdle of less than A$15 million will allow the company to develop the project in a shorter timeframe than would have otherwise been possible.
The first stage of a staged ramp-up for the project has the advantage of potentially providing early cashflow to strengthen the company’s balance sheet and assist in funding of the larger high purity manganese production hub which is the subject of a parallel, complementary workstream.