Shares in Element 25 (ASX:E25), a prominent manganese miner and explorer, experienced a significant surge of 23% on Monday following the announcement of a momentous supply contract with the renowned US car manufacturer, General Motors (GM).
The contract, anticipated to be a multi-million dollar agreement, marks a substantial milestone in a project with an estimated cost of nearly $300 million.
Element 25 informed the Australian Securities Exchange (ASX) that it would supply manganese sulphate to General Motors as the automaker strives to secure a stable supply of battery minerals for its North American electric vehicle (EV) production.
Although the share price later tapered to an 8% increase in mid-afternoon trading on the ASX, the initial bounce reflected the market’s recognition of the significance of this deal.
Justin Brown, the Managing Director of Element 25, expressed enthusiasm about the collaboration, stating, “Together, we are creating a resilient and sustainable North American supply chain that will help introduce millions of customers to the performance and environmental benefits of EVs.”
Manganese has rapidly emerged as a key battery mineral capable of significantly reducing battery costs by replacing or minimizing the use of more expensive materials such as nickel and cobalt.
Specifically, manganese is a crucial component in lithium iron phosphate (LFP) batteries, which are gaining traction as the preferred battery type for industry leaders like Tesla, Hyundai, and Toyota. This shift towards LFP batteries not only contributes to the environmental and geopolitical concerns surrounding battery production but also narrows the performance gap with other widely-used materials.
According to Reuters, the increasing popularity of LFP batteries, notably championed by Tesla, has sparked a surge of interest, with over $14 billion committed by domestic and international manufacturers to establish new production facilities in the United States.
This recent agreement between General Motors and Element 25 represents GM’s second foray into securing Australian battery minerals. Last October, the automotive giant announced an equity stake in Queensland Pacific Metals to ensure a fresh supply of nickel and cobalt for battery cells.
Under the terms of the contract, GM will purchase up to 32,500 tonnes of manganese sulphate annually from Element 25 over a seven-year period. The supply will originate from a new facility to be constructed in Louisiana and sourced from Element 25’s Butcherbird mine in Western Australia’s Pilbara region.
To support the construction of the battery-grade manganese sulphate facility, General Motors will provide Element 25 with an $85 million loan. The overall investment in the facility is projected to reach approximately $290 million, with completion expected in 2025.
GM’s ambitious plans involve producing 400,000 EVs in North America from 2022 to mid-2024, with a target of scaling up capacity to one million units annually in the region by 2025.
With this latest agreement, Element 25 secures a prominent position in the supply chain of battery minerals for General Motors’ expanding EV production, further enhancing the company’s growth prospects in the burgeoning electric vehicle industry.