Investing in Manganese

iStock_000005754677XSmall2Manganese is the 12th most abundant metal on earth, and the world’s 4th most consumed metal by weight. Currently there is no domestic supplier of manganese in the US, although there are mines currently being developed. For those looking to invest and capitalize on Manganese it is essential to understand the differences in the manganese markets. From manganese ore to the various ferromanganese alloys, understanding the uses of the metal will help investors capitalize on the dynamic manganese market.

Currently, about 90 percent of manganese is used in the production of steel. It is used to harden steel alloys, and for its ability to prevent oxidization of steel. The other 10 percent is used for dry-cell batteries, aluminum alloys, and various chemical applications. Recently, Hitachi Ltd. developed a version of a Lithium-Ion battery with manganese, which reportedly doubles the output, and doubles the life of a standard Lithium-Ion battery. This new battery could be a pivotal factor for reducing the cost of many renewable energy sources, electric cars and numerous other electronic applications. If used as the standard battery, the prospects for manganese are very exciting.

Manganese Ore and Mining

“Current estimates of world manganese reserves including low grade ore, reach several billion tons. But if only high grade ores (defined as having more than 44% Mn content) are considered then reserves are in the range of 680 million tons of ore, essentially situated in the southern hemisphere, with Australia, Brazil, Gabon and South Africa, supplying over 90% of the international market,” according to the International Manganese Institute. China dominates the low grade Mn ore market at over 90 percent of low grade ore (containing <30% Mn).

Presently, there are two manganese projects underway in the United States. The U.S. government has listed manganese as a vital strategic metal for its uses in military hardware and steel production. U.S. consumers of the metal have been subjected to high prices for Mn imports due to tariffs.

American Manganese Inc [CVE:AMY][PINK:AMYZF] is currently developing its Artillery Peak project in Arizona. The property is recognized as the largest Mn reserve in the US with over 10 billion pounds of Mn indicated and inferred.

Recently the company applied for a patent on a proprietary process to produce electrolytic-manganese. “The overall process, based on a unique application of commercially available process equipment is deemed to be very robust, energy efficient, uses minimal water and in addition to production of electrolytic manganese metal,” according to a press release.

The other project is held by Wildcat Silver Corp. [TSX.V:WS] and is also located in Arizona. The ‘Hardshell Property’ in Arizona has “410,000 tonnes of manganese in the indicated category and 3,413,000 tonnes in inferred,” notes the company in a press release. The property also includes significant amounts silver, zinc and lead.

Ferromanganese alloys

“In steelmaking, manganese is usually added in the form of a ferroalloy. This includes three grades of ferromanganese (FeMn) – one standard (high-carbon – HC) grade containing 65-79% Mn and 7% carbon, and two refined grades with medium-carbon (MC) and low-carbon (LC) – and silicomanganese (SiMn), which contains 60-77% Mn and around 2% carbon. Cost, the type of steel being made and the process being used usually determine which ferroalloy is used,” writes Tom Vulcan of Hard Asset Investor.

High Carbon Ferromanganese

“Standard (or high carbon) ferromanganese, which is to manganese what pig iron is to iron, is a very commonly used alloy. It contains more than 76% of manganese and about 7% carbon, and can be produced either in the blast furnace or in the electric furnace. Production world-wide was about 4.8 million mt in 2008,” according to the International Manganese Institute, or IMI.

Silico-Manganese

“The standard grade contains 14-16% Si, 65-68% Mn, with about 2% carbon. Lower carbon levels result when the silicon content is increased. Special grades with up to 30% Si are produced for use in the manufacture of stainless steel. World production of SiMn was about 8 million mt in 2008,” says the IMI.

The price of manganese and its various alloys are tied to steel production and demand. Any investor looking to capitalize on the manganese market should always have a watchful eye on worldwide steel demand. The outlook for steel is hopeful because of emerging economies, mainly in China and India.

“Global steel demand will escalate 10.7% during 2010, and 5.2% for 2011 on the back of strong demand growth from China and India, as per the World Steel Association,” reports The Street. This is due to the rapid urbanization of the two largest population centers in the world. Also, increasing auto sales in the two countries will be a major driver for the steel market.