mining flash note

SP Angel | Prince Frederick House | 35-39 Maddox Street | London | W1S 2PP | United Kingdom SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority. Registered in England No. OC317049. Registered Office: Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.

Mining Flash Note Non-Independent Research A MiFID II compliant note

Keras Resources* KRS LN

BUY

Target 1.04p

10 October 2018

Manganese production in Togo

Keras is an exploration and development company with assets in Togo and W. Australia

In Togo; Keras plans to produce a particularly clean manganese ore with a fully funded, 10,000t bulk sample due to start soon. Much of the equipment is already in place ready for mining with trucks due to take material from Nayega to a deep-water port to the south. Keras is targeting manganese production of 250,000tpa of 38% lump and fines.

Keras also holds 100% of the Kamina Cobalt & Nickel project in Togo.

In Australia; Keras holds 35% of Calidus, a gold exploration company with a JORC resource at Warrawoona of 712,000oz JORC gold grading 2.11 g/t. Calidus’ market capitalisation is around A$38m valuing Keras’ stake at some A$13.3m (£9.4m) or substantially more in the case of a takeover or mine development event.

Keras are currently producing a 10,000t bulk sample of manganese ore starting with a small scale mining operation to de-risk before scaling up to a potential 250,000tpa.

Keras has invested in plant and equipment that would enable them is to start mining 4mt of surface Detrital and Laterite Reserves on a small-scale basis separating manganese nodules and fragments to simply enable the processing of a cleaner Manganese oxide.

The acquired plant has the capacity to produce approximately 6,000tpm of 35% manganese ore to be fed by a small-scale contract mining operation. The $1.76m mining and instillation cost of plant and equipment is being paid for by a major producer of manganese-based alloys to assess the quality of ore for smelting.

Testwork indicates the ore is amenable to pre-concentration by simple screening and scrubbing. Mining and processing of the near surface ores should give sufficient material to de-risk the project and to enable the financing of a larger operation on receipt of full mining permits. DMS testwork indicates recoveries of >90% of the Mn from rejecting 50-60% of the mass feed. Appropriate Process Technologies (APT) based in Joburg will start commissioning of the 20t per hour scrubber plant at the beginning of November.

Togo-based, Carriere Mines Travaux Public (CMTP) are providing the mining & screening equipment for the bulk sampling operation and logistics between Nayega and Port Lomé.

Full scale mining should use the same infrastructure as the bulk sample process enabling a seamless transition into larger scale mining when permits are received.

New generation NMC batteries need sustained production of high-purity Mn sulphate sourced from high-grade Mn ore or Electrolytic Mn Metal. The push to secure battery material is impacting Mn chemical markets driving a rally in prices from the end of 2017.

The full-scale production target of 250,000tpa is based on metallurgical testwork and this will be tightened up during the bulk sample process and therefore is likely to change.

Valuation: we value the manganese business on its current small-scale mining plan at £11.7m or 0.52p/s. Keras’ stake in Calidus is worth A$16.5m or 0.52p/s. The two businesses together indicate a value of 1.04p/s not including any value for the Kamina cobalt and nickel in Togo.

*SP Angel act as Nomad and broker to Keras Resources

Stock Data Ticker KRS LN

Share Price: 0.325p

Market Cap: £7.6m

Price Chart

Research

John Meyer +44 20 3470 0490 [email protected]

Simon Beardsmore +44 20 3470 0484 [email protected]

Sergey Raevskiy +44 20 3470 0474 [email protected]

Sales

Richard Parlons +44 20 3470 0472 [email protected]

Jonathan Williams +44 20 3470 0471 [email protected]

mailto:[email protected]



Keras Resources* October 2018

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Nayega Manganese Project, Togo

Keras holds 85% of the Nayega project

Keras’s Nayega manganese is located in northern Togo 30km from the N1 National Road, which provides direct access to the regionally important deep-water port of Lomé 600km to the south which has in excess of 500,000t per annum back loading capabilities.

The company was awarded the Nayega Research (Exploration) Permits in November 2011 after application in September.

Permitting has been through a number of iterations resulting in four separate Permits, covering a total of 29,819 Ha at:

Pana Permit (Tône Prefecture)

Tandjoaré Permit (Tandjoaré Prefecture)

Naki-Est Permit (Kpendjal-Ouest Prefecture)

Borgou Permit (Kpendjal Prefecture)

Subsequent to the completion of the exploration activities and internal Feasibility Study, an application was submitted in 2012 to convert 1,397ha of the Naki-Est and Borgou Research Permits into an Exploitation Permit. The team are currently looking into applying for a small-scale mining licence and are seeking approval from the relevant authorities.

Mineral Resources & Reserves

Mineralisation seen at Nayega is considered to be superficial eg <2.6m years old and formed by leaching and residual enrichment in a lateritic weathering environment.

The deposits are made up of eluvial rubble of manganese oxides ranging in size from flakes to cobbles overlying detrital and in-situ manganese ore.



Mineralisation extends over a strike length of 2.2km at widths of up to 500m extending up to 10m below surface blanketed by a veneer of detrital material that averages 0.5m thick.

The orebody is layered reflecting the intensity of weathering comprising an in-situ ore subdivided in to detrital, lateritic, transitional (laterite-saprolite) and saprolitic zones, overlain by a detrital ore.

Detrital ore comprises fragments of hard manganese oxides in a loosely cemented ferruginous clay and goethite matrix.

Lateritic (most weathered) ore consists of bands and nodules of hard manganese oxides with small inclusions of quartz and clay in a gangue of red ferruginous clay and goethite.

Transitional ore has characteristics of both lateritic and saprolitic mineralisation, with bands and nodules of hard manganese oxides trending downwards in to fine grained, platy manganese oxides in a variably goethitic and ferruginous clay matrix.

Saprolitic (least weathered) ore consists of platy, fine grained (typically up to a few millimetres) manganese oxides set in a white clay-quartz gangue.

Keras are looking to process the Detrital and Laterite orebodies and to simply separate manganese nodules and fragments to enable the processing of a cleaner Manganese oxide relatively simply from a processing perspective and should not require the instillation of a Dense Media Separation circuit.

The database for resource estimation consists of information collected from hand-dug pits on the deposit between November of 2011 and April of 2013. A total of 193 pits were dug in three phases, for 768m cumulative total depth.

Location of Pits

Mineral Resource Delineation (Measured in Green)


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Nayega has a JORC (2012) classified resource in the Measured and Indicated categories with the majority of the mineral resource classified as Indicated, with a Measured area outlined where 50m infill pits have been excavated within the northern third of the resource footprint.

The Mineral Resource and Ore Reserve estimation was undertaken independently by Widenbar & Associates in Perth, Australia in accordance with JORC Code, 2012 definitions.

Rock Model NE-SW Long Section

In addition to the Nayega resource, there are three additional satellite deposits in close proximity to the main orebody, namely the T27, T48 and T49 deposits.

Resources have been estimated for the T27 and T48 deposits, both are classified as Inferred Mineral Resources.

The Mineral Resource estimated for Nayega (5% Mn cutoff) is tabulated below.

(MT) MN GRADE (%)

MEASURED 2.00 17.1%

INDICATED 9.00 12.2%

INFERRED 2.97 9.7%

TOTAL 13.97 12.4%



The Ore Reserves generated from the Measured and Indicated Mineral Resources by optimisation studies is tabulated below.

DILUTED (MT) MN GRADE (%)

PROVEN 1.91 16.7%

PROBABL

E

6.57 13.2%

TOTAL 8.48 14.0%

The lithology shows four principal zones. Mining and simple processing of the

upper two should give sufficient material to de-risk the project and to enable the

financing of a larger operation going forward once full mining permits are

received.

Lithology, tonnes and grades

Class Lithology Diluted

(Mt) Mn (%) Fe (%) Al (%) Si (%)

Prove

d Detrital 0.42 17.98 7.93 10.24 40.2

Laterite 0.94 17.37 10.33 12.53 37.4

Transitional 0.55 14.59 8.07 12.76 43.4

Saprolite 0.6 12.25 7.6 9.92 50.4

Sub-total 2.51 15.64 8.78 11.58 42.3

Proba

ble Detrital 1.82 14.64 11.07 12.25 41.4

Laterite 0.84 14.04 9.21 12.52 43.4

Transitional 3.31 12.4 6.68 12.4 49.6

Saprolite - - - - -

Sub-total 5.97 13.31 8.37 12.37 46.2

All Total 8.48 14 8.49 12.14 45.1

The highlighted sections above illustrate the Proved & Probable Reserves.

Management are looking at the mining of some 4Mt of Detrital and Laterite reserves to provide sufficient manganese for sale from a small scale and simple mining and processing operation when the required permits are granted.


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Metallurgical Testwork

The metallurgical testwork conducted on the Nayega ore show that a simple scrubbing, screening and dense media separating (DMS) circuit will be required to upgrade the mineral reserve.

The testwork indicates that all types of ore require standard ‘wet’ scrubbing to assist with manganese liberation from phases of waste material and importantly the scrubbed material shows an affinity to pre-concentration by simple screening.

The testwork indicates that recoveries of over 90% of the Mn are achieved whilst rejecting 50 to 60% of the mass feed. The screening produces an oversize fraction (+25mm) which is transferred directly to an ore stockpile.

-25/mm +1mm screened material will be conveyed from the scrubber product screen to the DMS.

The average feed grade to the DMS will be approximately 32.5% Mn post screening. DRA Pacific undertook DMS simulations and proposed to use a density cut-point of approximately 3.1 to achieve the desired 38% Mn product.

Mining & Capital & Infrastructure

Initial studies targeted all lithologies which would be mined sequentially. The mining sequence consists of extracting the Detrital and Laterite reserves from the northern area of shell 32 (north of road reserve) before moving onto the area south of the road reserve.

Once the Detrital and Laterite mining areas are depleted the remaining Transitional and Saprolite reserve would be extracted in the same sequence. Direction for both mining fronts is from the south-east to the north-west corner.

Drainage: The primary reason for this sequence involves water drainage in a south-easterly direction to keep working faces dry.

The plan is to mine the T27 and T48 deposits in parallel with the saprolite and transitional material of the main pit to provide lump product and spread out the Inferred Resource component.

The project is readily scalable with a larger scale operating simply mining in the same sequence but also processing the smaller, -10+1mm, fraction of manganese

Full scale mining should use the same infrastructure as the bulk sample process enabling a seamless transition into larger scale mining when permits are received.

Infrastructure: (water supply)

Keras has a pump station with a 6.2km pipeline from a borehole drilled in May 2014. The borehole can supply a sustainable flow rate of >30m3 per hour and is sufficient to run a full scale commercial operation pumping at a <25m3 per hour assuming Scrubber plant demand at 20m3 per hour on a two shift cycle to allow night shift pumping to ensure the plant has sufficient raw water feed.

Keras will also install surge capacity at the borehole and at the front end of the scrubber to ensure consistent flow rates during processing with a 6,000 m3 PVC lined earth dam already excavated next to the plant site giving an extra 20 days of buffer capacity in the event of a pipeline failure or underperformance from the



borehole. Water will also be recovered from tailings which will be deposited into the mined out void; and a 20tph scrubber plant with front-end feeder and ancillary conveyors;

CMTP ‘Carriere Mines Travaux Public’ with project manager Graham Stacey, will be providing all mining and screening equipment and is responsible for all administrative and support infrastructure for the mining operation. The CMTP fleet includes the following kit:

New Holland E385C excavator

Volvo E480DL excavator

SDLG L956F Wheel Loader

2 x SWZ10 tipper trucks (~25t capacity)

Warrior mobile scalping screen (75mm and 10m decks with flexibility to change out the decks should we wish to refine our product size specification;

1 x 75kVA Diesel generator

Infrastructure

1 x Store (Converted 20ft container)

1 x Workshop (Converted 20ft container)

1 x Change house with showers (Converted 40ft container)

1 x Admin block (converted refrigerated truck that has been reconfigured into an air-conditioned office (x2) and kitchen)

Production: This machinery has the capacity to produce approximately 6,000tpm of 35% Mn ore and is already funded.

The production target is based on metallurgical testwork and this will be tightened up during the bulk sample process.

Capex - The bulk sample project cost including 15% contingency totals US$1.76m

Capex USD USD/t

saleable USD/DMT

U

Mining contractor mobilisation & setup earthworks 41,091 4.1 0.1

Water supply system incl. borehole pump & overland system 75,669 7.6 0.2

Water storage dam 15,500 1.6 0

Scrubber plant incl. peripherals, shipping, import costs 318,001 31.8 0.9

150kVA diesel generator 29,310 2.9 0.1

Community costs incl. land compensation 6,409 0.6 0

Sub-total capex 485,981 49 1

Capex contingency (15%) 72,897.09 7.3 0.2

Total capex (i.e. once-off setup costs) 558,878 56 1.65


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Operating costs

Opex USD USD/t

saleable USD/DMT

U

Owner's fixed costs incl. proj mgt, site supervision, insurance 90,165 9 0.3

Mining contractor earthmoving (CMTP) 254,104 25.4 0.7

Plant operation incl. feed, labour, consumables, water supply 81,418 8.1 0.2

Product load & haul: Nayega to Lome 354,545 35.5 1

Lome stockpile, load & haul to Lome bulk wharf 90,909 9.1 0.3

Laboratory costs 27,927 2.8 0.1

Port costs incl. customs, taxes etc 64,471 6.4 0.2

Sub-total opex 963,539 96.4 2.8

Opex contingency (15%) 144,530.9

0 14.5 0.43

Total opex 1,108,070 110.8 3.3

Exploration: Ogaro prospect identified at Nayega

Keras recently reported that it has identified a new zone of manganese mineralisation covering some 8ha at the Ogaro prospect, located approximately 5km east-south-east of the main Nayega project area.

As part of the assessment the team gathered samples from channel sampling of 14 pits which included intercepts, all on surface, of 1.76m grading an average of 18.6% manganese, 2.05m at 15.8% and 2.00m at 16.2%.

The company notes that “Mineralisation … appears to have been closed off to the south-east but is open in all other directions” with further pitting planned to “confirm tonnage and grade and to test for extensions to identified mineralisation”.

The identification of a new area of relatively high grade manganese mineralisation close to

Nayega is significant as it helps to raise the scale of the resource making it more interesting

to long-term offtakers who are generally looking for long-term, stable sources of consistent

quality in their suppliers.

Small scale mining, bulk sample program

Keras Resources reports that it has received the necessary approvals for a metallurgical

bulk-sampling program at its Nayega Manganese Project in Togo.

Mining of a 10,000 tonnes bulk-sampling program at Nayega is underway with simple

processing using a mobile screening plant and installed scrubber plant with the sample

being paid for by a major manganese alloy producer.

The program is to include the processing of 10,000 tonnes of beneficiated manganese ore

at the facilities of a major producer of manganese-based alloys to assess the suitability of

the ore in their Manganese smelting facilities.

Togo-based, Carriere Mines Travaux Public (CMTP) are providing the mining and screening equipment for the bulk sampling operation and have organising logistics between Nayega and Port Lome.



The mobile screening unit required for the upgrading of the bulk sample should now be at Nayega in preparation for the washing and scrubbing of the Detrital and Lateritic material in mid-November before trucking to port and onward shipping in January 2019.

CMTP operates two mines in Togo along with a logistics business for freight into Burkina Faso, Niger and Mali and are seen as an important partner in the development of the manganese mining business in Togo.

The plant contract has been awarded to a Johannesburg based mining equipment manufacturer, Appropriate Process Technologies (APT) which will start commissioning of the 20t per hour scrubber plant at the beginning of November.

Kamina Cobalt & Nickel Project, Togo

The Kamina Project in Togo is an early stage exploration project that is prospective for and

has previously delineated cobalt and nickel mineralisation.

Kamina consists of five separate exploration licenses, Kamina I to Kamina V, covering

854.3sqkm. Rock chips grade at 0.82% Ni and 0.19% Co, with highs of 1.4% Ni and 0.25% Co

Exploration is targeting sulphide Ni/Co mineralisation as indicated by some very interesting

tock chip samples.


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Calidus Resources Limited (Gold in Australia)

(Keras can increase is interest to 48% and currently holds 36% of Calidus Resources

Limited. The move to 48% is triggered by the completion of a pre-feasibility)

Keras currently hold 458m shares with additional 265m new shares due to be granted by

Calidus when the gold project PFS is published. All Keras’ shares in Calidus are in escrow for

two years with the lock up expiring on 23 June 2019.

Calidus Resources market capitalisation is around A$38m valuing Keras’ stake at some

A$13.3m or more in the case of a takeover or mine development event.

High-grade gold at Calidus’ Copenhagen Deposit

Resources:

Klondyke 654,000oz of gold grading 2.06g/t

Copenhagen at 36,000oz grading 6.1g/t

Fieldings Gully 22,000oz at 1.65g/t.

PFS due in first half next year

Recent drilling results from the Copenhagen Deposit highlight additional shallow, thick high-grade gold mineralisation which extends a further 100m below the current resource and forms part of Keras Resources’ Warrawoona Gold Project, located in the Pilbara of Western Australia.

Results from a recent 8-hole step-out and infill reverse circulation drilling program intersected high-grade gold at Copenhagen which is approximately 10km west of the Klondyke resource, which aims to expand the current resource to underpin a pre-feasibility study in 2019.

The results provide indication for the scale of mineralisation, with a weighted average 11.1g/t Au, and results awaiting at Coronation. RC drilling with two rigs is also continuing at both Klondyke East and St. Georges and diamond core drilling is underway beneath the current Klondyke pit targeting an interpreted +1km long high-grade zone.

A new gold bearing structure at Warrawoona

Keras Resources reports that wide spaced reverse-circulation drilling by Calidus on the St Georges shear structure within its Warrawoona gold project in the Pilbara region of Western Australia has identified a 1km long, steeply southward-dipping, gold bearing structure running parallel to the existing Klondyke resource.

The St George shear is located approximately 150m north of the Klondyke structure which already has a JORC compliant indicated resource estimate of 9.9mt at an average grade of 2.06g/t gold for 654,000ozs contained and where infill and extension drilling aimed at expanding the resource “in order to support a pre-feasibility study in 2019” is underway. The drilling on the St Georges structure has encountered gold mineralisation from surface and among the results highlighted today are:

o 8m grading 3.9g/t gold from surface in hole 18SGRC008, with the first meter from surface grading 11.3g/t

o 11m grading 1.53g/t gold from 28m in hole 18SGRC012; and

o 6m grading 2.27g/t gold from 88m in hole 18SGRC013. The company also reports results from earlier drilling the area including



o 6m grading 9.93g/t gold from 90m in hole KBP010 and

o 4m grading 6.08g/t gold from a depth of 88m in hole W97_10 and another 4m wide intersection averaging 3.01g/t gold from 72m depth in hole W97_12 which suggests previous exploration activity in 1997

In addition, recent drilling at Klondyke East has returned assays including:

o 7m grading 1.83g/t gold from 29m in hole 18KLRC0144;

o 5m grading 2.49g/t gold from 50m in hole 18SGRC0132; and

o 8m grading 1.12g/t gold from 55m in hole 18SGRC0139

The discovery of a parallel gold bearing structure at Warrawoona opens up further possibilities to enhance and expand the resources of the Klondyke structure through further exploration of the new St George structure.

Drilling results from the Coronation Prospect defined a high-grade strike of 250m adjacent to the previously announced wide higher grade intersections of 10m at 3.31g/t.

Among highlighted intersections are:

10m at 3.84g/t from 27m;

8m at 2.22g/t from 71m.The plan is to continue with a resource drill out program with a

goal to establish shallow high grade deposit.

At the Klondyke target deep diamond drilling intersected high grade mineralisation 150m

down dip from previous drilling to 370m including 2m at 6.01g/t from 421m approximately

350m below surface in hole 18KLDD010.

Visible gold in drill core is seen from a depth of 480m in hole 18KLDD008 though this section of the core reported a lower than expected gold grade of 0.18g/t due to the coarse gold nature of the deposit.

The depth extension at Klondyke and the infill drilling at Coronation provide encouragement for possible expansion of the existing 712,000oz JORC gold resource which grades 2.11 g/t as exploration proceeds. The resource underpins a planned Pre-Feasibility Study due next year.

Geochemical results from Warrawoona

The Warrawoona syncline is one of the largest greenstone-hosted goldfields in the East Pilbara hosting. Calidus’ gold deposits comprise quartz lodes within three main regional shear zones, the Klondyke shear zone, the Copenhagen shear zone and the Fielding’s Find shear zone.”

Follow-up exploration will focus on a large RC resource drilling programme across Klondyke Main, Klondyke East, and Copenhagen prospects and the creation of detailed 3D geological models for Klondyke and Copenhagen and the continuation of baseline flora and fauna studies.

On successful completion of the PFS at Warrawoona, an additional 265m performance shares of Calidus owned by Keras will be converted into ordinary shares of Calidus.

Calidus’ is positive about the ability of Warrawoona to host a potentially significant gold operation mining from multiple deposits."


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Manganese

Price Outlook Manganese is not exchange-traded so prices are established by negotiations

between buyers and sellers. Negotiations occur in line with the beginning of

the Japanese fiscal year in April, with settlement prices worldwide following the

Japanese manufacturing stance (source: Consensus Economics). The price is

typically set upon a benchmark ore manganese content for major production

and deliver hubs.

Manganese ore price

Source: CRU

Dominated by stainless steel demand, the price of manganese closely tracks global economic

sentiment. Manganese ferroalloy use in turn reflects global economic growth resulting from

the broad application across construction, transportation and machinery industries. This is

most evident during 2008 with a coincident global economic crisis depressing prices of

manganese ore as a result of falling stainless steel production. Following the price rout, prices

have stabilised at an equilibrium price higher than the historical average, while the outlook

remains strong for both the stainless steel industry and growing rechargeable battery

requirements. Long-term price estimates suggest manganese ore will be ~$5.6/t (source: CRU),

while the 2018 YTD average is $6.2/t (38% South Africa FOB) according to Asian Metals Inc.

South Africa manganese ore 38% FOB

Source: Asian Metals Inc



Manganese Demand

Metallurgical Driven by traditional steel industry consumption, manganese is the fourth most widely used

metal in the world. The metal is essential to the production of iron and steel due to physical

properties of sulphur-fixing, deoxidising and alloying properties, with the removal of excess

oxygen, sulphur and phosphorus improving the metals malleability.

Approximately 90% of the world’s manganese production drives steelmaking, industries

essential for construction and automotives. Most ore consumption relating to the steel

industry was either directly in pig-iron manufacture or indirectly through upgrading the ore

to ferroalloys. The intermediate formation of ferromanganese, containing up to 80%

manganese, for steel manufacture requires the mixture of MnO2 and Fe2O3 oxides with

carbon to produce an effective deoxidiser.

Incorporating manganese into steel improves the workability at high temperatures, forming

a high-melting sulphide while preventing the formation of a liquid iron sulphide at grain

boundaries. If steel doesn’t incorporate manganese, it will have reduced properties

including tensile strength, ductility, toughness, weldability, polishability, and machinability.

Approximately, 10kg’s of manganese alloys are consumed in the manufacture of 1t of

carbon steel (source: BHK Mining Corp).

Global stainless steel consumption and demand index development (2012-2019e)

Source: International Stainless Steel Forum

The International Stainless Steel Forum are forecasting sustained global growth of all

products on both consumption and demand indexes. Stainless steel producer, Outokumpu,

maintain the same robust outlook, with global growth forecast to continue at 3% CAGR

through 2019. While positive for manganese, growth is expected to be driven by 300- and

400-series stainless steel, typically containing ~1% manganese rather than 200-series

stainless which contains 6-15% manganese.

Relatively small quantities of manganese are used for alloying with non-ferrous metals,

chiefly in the aluminium industry as manganese-aluminium briquettes containing typical

purities of 75% and 85% manganese (source: USGS). The addition of approximately 1.5%

manganese plays an important alloying role, increasing the corrosion resistance through

grains that absorb impurities which would otherwise lead to galvanic corrosion (source:

Metal Suppliers Online). The corrosion-resistant aluminium alloys 3004 and 3104 (0.8% to


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1.5% manganese) are used in the manufacture of beverage cans. Other uses also include

aircraft, automobiles, cookware, radiators and roofing (source: Roskill).

Demand for manganese in metallurgical applications is expected to remain robust, with

minor substitution risk due to its enhancing properties to the manufacture of steel and

aluminium alloys.

Non-Metallurgical

Manganese is also consumed in minor quantities across chemical industries, although

volumes are significantly smaller spread across a diverse range of sectors (source: Eramet):

Energy, production of alkaline batteries and accumulators;

Agriculture, manufacture of fertilizers and animal feedstuff;

Fine chemicals, in surface treatments for metals and pigments;

Electronics, for high-tech components

The most significant and rapidly growing deployment of manganese is in surging

rechargeable lithium-ion batteries, expected to climb +6.1% CAGR through 2020 (source:

American Manganese). The use of manganese oxide as the cathode material results in the

lithiated manganese dioxide battery which has enhanced battery performance:

Improved capacity;

Rapid power discharge allowing for improved charging performance;

Higher energy density;

Higher charge cycle improving the battery life

Improvements to battery usability has encouraged a number of automotive manufacturers

to favour manganese oxide compositions. Tesla has recently signed a 5-year exclusive

partnership with a key NMC (Nickel-Manganese-Cobalt) chemistry researcher, tasked with

minimising the cost of batteries. 3M have developed a patented cathode based on the work

by head Dr. Dahn and LG Chem using a formula already supplied to Chevrolet and Nissan.

The dominance of NMC compositions, with Roskill favouring NMC532 chemistry to reduce

cobalt content, relies on sustained production of high-purity manganese sulphate sourced

from high-grade Mn ore or Electrolytic Manganese Metal (EMM) (source: International

Manganese Institute). The push to secure battery-ready material is impacting Mn chemical

markets and driving a rally in prices from the end of 2017.

Mn chemicals price index in China market

Source: International Manganese Institute



The global market relies heavily on Chinese supply of appropriate manganese metal, which

supplies 97.5% (China supply YTD of 819,500t vs 20,600t for the rest of world). During 2018,

prices have been supported as the nation consolidates its domestic supply. The closure of

capacity at Wuilang Manganese, Ningxia Tianyuan and other producers due to

environmental inspections has driven a -3% yoy fall in China supply through June 2018

(source: International Manganese Institute).

Manganese Supply

Manganese ore Land-based manganese resources are typically large but irregularly distributed, with South

Africa and Ukraine dominating global identified resources with 78% and 10% respectively

(source: USGS).

Global manganese ore production (2017)

Source: USGS

During 2017, supply from South Africa, China, Australia, Gabon and Brazil provided 80% of

global output. Dominating worldwide stainless steel and battery manufacture, the majority

of trade exports flow into China. However ever-stringent environmental legislation across

the Asian nation is resulting in broad closure of producing facilities, creating a supply

opportunity for other producers.

Many of global large producers are mature with large reserves, with limited reserves added

to their inventories. This is reflected in falling worldwide manganese ore production from

peaking in 2018 (source: Statistica).


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Worldwide manganese ore mine production volume (2012-2022e)

Source: Statistica

Global production is dominated by a number of majors, with top global miner South 32

operating significant facilities across South Africa and Australia, while ERAMET, the world’s

second-largest producer, operates the lowest cost Moanda mine in Gabon and Vale

produce in Brazil.


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Frederick House, 35-39 Maddox Street, London W1S 2PP.

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The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where

investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value,

either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and

policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own

financial objectives, resources and appetite for risk.

This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or

indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the

original contents may have been altered or comments may have been added. SP Angel is not responsible for any such amendments.

Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or

recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is

for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial

Conduct Authority (“FCA”).

Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from

time to time add to, or dispose of, any such investment(s).

SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These

include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure

that recipients and persons wishing to access the research receive/are able to access the research at the same time.

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address

is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SP Angel Corporate Finance LLP is authorised and regulated by the Financial

Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

Recommendations are based on a 12 month horizon as follows:

Buy - Expected return >15%

Hold - Expected return range -15% to +15%

Sell - Expected return < 15%

** SP Angel acts as Broker to this Company

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