NOTHING is immune in this global economic environment, but some commodities are more resilient than others.
Manganese is one of the metals that stands to survive the downturn with only modest damage -- provided the quality of the manganese is high. It has been reported out of China that 50 per cent of capacity has been closed down, affecting mainly the smaller (and, one expects, the lower grade) mines.
Up to 90 per cent of manganese goes into steel production so it is not surprising that demand and prices have been falling. The metal is priced in dry tonne units -- calculated on the grade -- but for our purposes it is fetching around $US625 a tonne. This is not bad when you consider that, in the days when the former Consolidated Minerals started the Woodie Woodie mine, they were getting around $150 or so a tonne.
Apart from Woodie Woodie, there are only two other mines here -- Bootu Creek, operated by OM Holdings (OMH) and Groote Eylandt, owned by BHP Billiton (BHP) and Anglo American. Unlike iron ore, there is not a proliferation of manganese mines in the world. It is no wonder that a high-powered Chinese delegation arrived in Gabon on Thursday: this small nation of 1.5 million, ruled over by President Bongo, has a fourth of the world's known manganese.
A research note on OM Holdings from Greg Chessell at Euroz Securities makes the point that, while manganese prices will feel the impact of the slowdown, there has been under-investment and there is much low-grade material. "This will leave the high-grade manganese ore relatively insulated, compared with other commodities," he added.
Spitfire Resources (SPI), which listed last December, has just begun more drilling at its Woodie Woodie South project in the East Pilbara. Apart from the manganese, Spitfire has two other factors going for it. It had $6 million in the bank at September 30 and has also picked up tenements in Tasmania which contain thermal coal -- another commodity expected to be one of the better performers in the year ahead.
Another play to keep an eye on is Shaw River Resources (SRR), which began life as largely a gold explorer but is now focused on manganese, having picked up a large ground position in the Pilbara. Among its holdings is the Baramine project, 80km northwest of the Woodie Woodie mine, where more than 100 manganese occurrences have been identified.
AQD Price at posting:
14.0¢ Sentiment: Hold Disclosure: Held
