Ann: Updated Pre-Feasibility and Expansion Studies, page-48

From mining news:

ELEMENT 25 OUTLINES THREEFOLD EXPANSION OPTION FOR BUTCHERBIRD

Element 25 has just released an optimised prefeasibility study for the Butcherbird mine in the southern Pilbara that increases production for its improved base case scenario, albeit with a slightly higher cost, and outlines the potential for a low-cost doubling or tripling of production within a year, that at most will cost around A$40 million.

Element 25's new base case increased the expected cost by $2.5 million to $17 million, plus $3.2 million of working capital, by pricing in development of a mining camp, but increased throughput from 1.2 million tonnes per annum to 1.3Mtpa.

The base case now delivers a pre-tax real net present value of $583 million, with an internal rate of return of 387% and a 40-year mine life, with higher average annual production of 364,000t grading 33%.

For the first five years, the base case delivers operating cashflow of $39.6 million, with payback expected within six months.

The updated PFS also includes silica and other mineral credits, improves the expected recoveries by 1% to 83%.

Element 25 says the base case offers returns even at conservative pricing assumptions, with a breakeven manganese price of US$4.76/t.

The numbers improve further in both expansion scenarios.

Replicating the circuit for a doubling of production to 682,000tpa would cost $13.4 million, but bumps up NPV to $926 million. While the IRR reduces to 342%, income jumps to $56.2 million, while halving the mine life to 20 years, based on current reserves of 50.55Mt at 10.3% for a recoverable 4.3Mt, although resources exceed 263Mt.


A three-fold expansion would cost $18 million to increase production to 1.02Mtpa, delivering a better IRR of 359%, reduce the mine life to 15 years, while boosting NPV to $1.1 billion and cashflow to $81.5 million.


A decision to move to either 2.6Mtpa or 3.9Mtpa is expected after Butcherbird has been in operation for just a few months, once the mine has bedded down and proven its performance, and Element 25 can assess demand for its product in the market.

The ability to use economies of scale could reduce costs from $4.55/t to as low as $3.73/t.

Expanded mining could then begin in late 2021.
Direct shipping ore operations are still expected to start in early 2021, pending final government approvals and a final investment decision.

Element 25 recently raised $12 million, and says it should be fully funded for its base case, based on currently cashflow forecasts.

Manganese miner and trader OM Holdings has signed a binding term sheet for 365,000tpa over five years, the full production for Butcherbird stage one.

Shares in Element 25 dropped 7.5% to $1.35, valuing the company $178 million. The company was trading below 20c prior to May.