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Doug Hadfield
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An investor, researcher and writer for years, Doug is the VP of Operations and Executive Editor at Resource Intelligence and RI Video Solutions. He graduated from the University of British Columbia in 1997 with a Bachelor of Arts degree.
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Resource Intelligence
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Resource Intelligence and RI Video Solutions
  • American Manganese jumps into 2011 on track for PFS & pilot plant 1 comment
    Mar 22, 2011 3:41 AM
     americanmanganeseinc.com • 604.731.1094

    Larry Reaugh
    President & CEO

    American Manganese (TSXV: AMY) is exploring for a metal that although on the radar of few investors, is the fourth most traded metal in the world, manganese. In particular, AMY’s huge deposit of manganese is ideally suited to producing electrolytic manganese, 97% of which is produced by China. Today there are no mines in the US producing this metal, in spite of the fact that it is essential for steel making and is considered a strategic metal by governments around the world. Larry Reaugh was one of the first miners into the molybdenum field, before most investors had ever heard of it. He intends to be at the front of the pack again with his Artillery Peak manganese deposit, the largest in southwestern US.


    Resource Intelligence: Looking at your profile at ResourceIntelligence.com, I can see that the resource size for Artillery Peak is 107 million tonnes inferred and 92 million tonnes indicated. If we hit the Calculate button, we can learn a lot about your potential value. Today, you’re looking at least a 90% recovery rate. In the inferred category, that’s about 8 billion pounds of metal. In the indicated category, that’s about 6 billion pounds. At an EMM price today of $1.70 to $1.80 per pound, the in-situ value of your deposit is remarkable.

    Larry Reaugh: Oh yes, there are massive showings of manganese throughout the property right in cliff faces 100-120 feet thick that have not been drilled and are not included. We don’t know the exact grades of those yet, but we figure the resource could easily double, perhaps triple. Which would make it a world-class deposit. It is a world-class deposit already!

    RI: How big is the property and how much have you explored?

    LR: This is about 19 square kilometres. We’ve only drilled a small fraction of it. What’s so amazing, however, is that not only is there visible manganese over much of the property, there are also many old workings where artisan miners worked during the early 1900s.

    Today, the methods for mining this metal have changed radically. We look for larger deposits, which can be lower grade ores. In fact, we recently announced our biggest success yet in developing the most advanced techniques for producing low-cost EMM.

    Our studies with Kemetco last year confirmed that our new process can extract manganese at greater than 90% efficiency while minimizing water and energy use, and the environmental footprint. There were a couple other benefits, as well: The method uses commercially available equipment, so we’re not reinventing the wheel, only making it a lot cheaper. And also, it solves the universal mining problem of water: We’ll use comparatively little water, and we don’t expect to have any problems acquiring it. And obviously, the lower requirements for energy inputs also go a long way to lowering costs.

    Just a fraction of the 19 sq km project has been drilled

    RI: Your cash costs would be about $0.44 per pound. Right now the electrolytic manganese that you plan to produce sells for more than $1.70 a pound.

    LR: Right. We would produce around somewhere between 100 and 120 million pounds a year, so we believe the potential for a very profitable mine at Artillery Peak is very, very high.

    RI: Prices for manganese ores and electrolytic manganese have seen growth of about 20-26% per year, particularly electrolytic manganese. What does the future hold for manganese?

    LR: You can’t make steel without manganese. In the words of Brian Gilbertson, the CEO of Pallinghurst. “If you don’t have manganese, you can’t make steel. If you cant make steel, the world stops”. 47% of electrolytic manganese is used in specialty steels. 32% is in aluminum alloys and 14% is in electronics and it’s irreplaceable, you have to have that.

    As I’ve said, China controls EMM, supplying and producing 97.44% of the world’s needs of about 2.6 billion pounds annually.

    Manganese is the most critical metal in the United States and yet there is no US production of manganese. China has a 20% export duty on EMM and the US has a 14% import duty. Meanwhile, the US Price for EMM is about $1.80/lb, and the current world price for EMM is about $1.52/lb. This is all exacerbated by the fact that manganese resources are declining in China, especially carbonate ores for production of EMM, forcing Chinese companies to seek production offshore.

    Now take all this into consideration and look at our cash costs of about $0.44 per pound, based on our last technical report. I think investors have really started to take note of these facts, and that’s reflected in our increased volume of the past months and our share price, which has doubled in the same time frame.

    Some undrilled manganese showings have visible mineralization of over 100ft.

    RI: What is your development plan for 2011?

    LR: First, we and the team at Kemetco will complete our pilot plant, which we expect to prove the viability of our patent pending, hydro-metallurgical process for treating low grade manganese resources. This is essential to making us one of the lowest cost producers of manganese in the world.

    The testing program is designed to confirm the process operating conditions on a continuous bench scale basis, and will provide us with the technical data necessary for an initial process scale-up for treating about 3,500 tpd. That, in turn, will produce about 140 tonnes per day of high purity electrolytic manganese.

    The results from the pilot plant are necessary for the preparation of a preliminary engineering feasibility study, which we have scheduled for completion by the end of 2011.

    RI: You’ve had a good eye for finding success with strategic metals in the past. You were in the molybdenum sector before the “great molybdenum bull” got started. Are you confident that the same thing could happen with manganese?

    LR: Same, but much greater. Here we’re talking about EMM. Total molybdenum is only 35-45% out of China. But you’ve seen what’s happened in the markets recently when the Chinese government talked about quotas on molybdenum. And you saw Thompson Creek and General Moly and a lot of the juniors all got a big boost in price on that. Manganese is much more critical than molybdenum is today.

    RI: In the last 12 months, you’ve had a lot of news. You’ve had new resources, and tons of drilling. Earlier in the year you hired a new COO, which should signal a move toward a production decision to investors, shouldn’t it?

    LR: Definitely. The COO is responsible for pulling together the pre-feasibility, feasibility and lining out the environmental work that has to be done to get the permits and adhering to a time line that we set up here a couple of years ago, to get in production.

    RI: When would you like to see American Manganese in production?

    LR: We’re fast tracking this project. We’re on schedule to finish the prefeasibility study by the end of 2011. At this pace we should be able to be in production by early 2014.

    RI: How much does AMY have in the bank now?

    LR: With the latest announcement on our $5 million dollar bought deal financing, roughly $10 million dollars..

    RI: You’re quite close to being able to make a production decision here. What are your capital costs anticipated to be to build a mine and plant here?

    LR: It’s estimated to be $90 million, which could be paid back at a $1.10/lb manganese in 1.7 years. In other words, with a mine in place, we could pay all the debt requirements back in less than a year at the current price of EMM. So, the economies of scale work very well for us… The reason mining Artillery Peak would be so cheap is – people always look at me strangely when I say that – is because there’s no crushing, no secondary crushing, no grinding, and no floatation. The mineral is so soft that we can actually break it down with a hammermill and the sulfurous acid leaching works on one to two inch material. You don’t have to grind it down to fine size, which means less capital outlay. So mother nature has really dealt Artillery Peak a fine hand in many ways.

    RI: Larry, when you get to production who would your competition be?

    LR: This time, none. There’s no production of manganese in the United States, there’s no production of manganese in Canada. Even though it’s one of the most critical metals on the list to the United States for disruption of supply.

    Investor Highlights:

    • Stage: Advanced
    • Market cap: $63 million
    • Share price: Up 492% in 12 months
    • Share price: $0.77 as of February 21, 2011
    • Commodity: Electrolytic Manganese Metal
    • Production planned: Q2 2014
    • Mine life: 17 years (15% of resource)

    Highlights:

    • Manganese is a strategic metal to the U.S. – no North American production
    • Manganese fundamentals very strong: manganese has no substitution
    • 43-101 compliant resource grew 45% in 2010
    • 43-101 Preliminary Economic Evaluation: Base Case ($1.10 US/lb RDAM)
    • Artillery Peak cash costs: $0.44/lb; EMM price: $1.81/lb
    • Highly Experienced Management Group
    • Patent pending hydro-metallurgical production method
    • Minimal environmental footprint
    • Production expected by early 2014
    • Electrolytic Manganese Metal production controlled by China
    Disclosure: No Positions

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  • Please note that the phone number is incorrect for American Manganese Inc. It should read 604 531 9639
    22 Mar 2011, 03:53 PM Reply Like
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