Ann: Quarterly Activities Report, page-110

I think the market has forgotten that this is a mining start up.
I’m sure that most mining operations around the world are not profitable from day one.
Or in their first three months of operation.

The market is looking at the $5 million outflow for the three months in the September quarterly and assuming that this will be the same for the next three months.
And then the next three months.

And I think it’s wrong to make that assumption.

The company is still trying to optimise the plant.
But the plant is working and OMH are paying E25 for their ore.

It’s important to note that as a start up operation it would have had various teething issues and a lot has gone against E25 in the last three months:

Stop start operations with many hours and days lost to plant issues.
Shipping costs were 3X to 4X higher than budgeted for.
Staffing challenges were also abnormal due to Western Australia’s border closure due to Covid and the mining boom in the state.
Increased trucking costs.
Logistical issues sourcing spare parts due to shipping issues.

Only being down $5m in any normal mining business would be seen as a miracle.

It’s important to note that the company has zero debt, so is not in any danger.
It still has $29 million in the bank.
It probably has 20,000 tonnes of Mn ore sitting near Port Hedland.
There is no capital raising coming any time soon.
Daily operation should get up to 1,000 tpd. (current quarter was about 600 tpd)
They are using bigger trucks for haulage.
They are moving to larger ships for export.

Also note that E25 is set to receive a price premium for its ore because of low impurities. There is a ‘commercial in-confidence’ agreement of what this impurity is but E25 has stated that the premium received equates to US$0.65(A$0.93)/dmtu.
This will add $30 to each tonne shipped each year or approximately $10 million each year in revenues.OMH must now have proven the ore deserves this premium based on how it is behaving in their furnaces.

E25 have made a technical breakthrough on their unique ore that we can only assume will feed into their current patent.
The company will have a battery Mn PFS out in 2022 but will expedite a scoping study before this.
I can imagine a planned 50,000 tonne per annum operation which will grow and expand over the coming years.Which will equate to additional revenues of $100 million per annum.
Although manganese is not scarce, sources of ore that can be cheaply and cleanly converted into high purity battery grade manganese sulphate are very rare.
The fact that E25 is sitting on a virtually unrecognised monster sized, globally significant source of Manganese sulphate that will help power the future of humanity as we head into the green revolution is a boon for growth orientated shareholders.

E25 is debt free and as they scale up and economies of scale kick in and the world’s costs start to normalise not only will E25 become extremely cash flow positive it will certainly attract the attention of a bigger E.V battery producer or car manufacturer.
The Butcherbird project has a +200 year mine life and is sitting in Western Australia.
Either this company is getting taken over or it’s going to produce high purity manganese for global car and steel making giants for decades to come.