Smart investors watch for trends and invest accordingly. Some notice trends headed downward and they get out to protect their gains. Others see trends headed upwards and they get in early to earn profits. Smart investors should be paying attention to Larry Reaugh, who has not only identified a compelling and potentially profitable trend for investors, he and his company are doing something about it in a big, big way.
Manganese is a little-known but highly-sought-after metal used in a variety of industrial applications, including the manufacturing of steel. For many years, China has been a leader in manganese production, exporting the metal to steel manufacturers worldwide. But that is changing. China’s economic boom, and the infrastructure demands that come with it, require China to use the manganese it producers and to even become a manganese importer.
Larry Reaugh, President and CEO of American Manganese Inc. (TSX-V: AMY),
Recently, we talked to Larry Reaugh, President and CEO of American Manganese Inc. (TSX-V: AMY), a manganese company with a major project in Arizona. We’ve spoken to Mr. Reaugh in the past, not just about manganese but about something he calls “the three M’s”. The three M’s are three key metals – molybdenum, manganese, and magnesium – that are going to increase in demand in the near future. Right now, Mr. Reaugh’s American Manganese Inc. is addressing that demand.
Their Artillery Peak project in Arizona is the largest low-grade deposit of manganese in the US. “There were several deposits that were tested by the US Bureau of Mines between 1940 and 1980 using the sulphuric acid process, and Artillery Peak stood out”, said Mr. Reaugh. And when American Manganese acquired the land, they went about preparing it for mining.
“We completed our [initial] drill program in early summer 2010,” said Mr. Reaugh, “and we have a 43-101 resource. We have a 45% increase in resources, and our ‘Indicated’ resource has jumped up to almost 6.7 billion pounds and our ‘Inferred’ resource has jumped up to almost 9 billion pounds. That’s over 15 billion pounds of metal and we’ve only touched about 20% of the property.”
But Mr. Reaugh and his team have been busy because they have not only been exploring and developing their property, they have also been working on an efficient patent-pending process to reclaim and produce the metal.
It’s a low-cost method of getting manganese out of the ground while using energy-efficient and water-efficient green technology that has been developed by Kemetco Research, and with the metallurgists at American Manganese. Mr. Reaugh explained further: “The process [extracts the manganese from the ore] in a closed circuit. We can reclaim up to 85% of the water and we end up with dry tailings at the end of the process. Then we go back to the pit and get more ore and put down dry tailings behind us as we move ahead in the pit.”
“The next step is to take the patent-pending process and develop a pilot plant so we have continuous reclamation and production of the metal. We’re currently getting prices from three different firms, as well as getting prices on a pre-feasibility study. The pilot plant should start in mid-January, and it could be three to five months before we get the results.”
And what’s on the horizon for American Manganese after that? “Next year we expect to be back doing a lot more drilling. We have enough money to move ahead with the pilot plant testing and we’ll be raising money in the new year to bring in the pre-feasibility and later in the year to do some drilling,” said Mr. Reaugh.
Taking Artillery Peak Bulk Samples
That sounds good – a clear plan with an in-demand metal and an efficient, low-cost process. “When you look at our preliminary economic valuation, we are the lowest cost producer in the world. That’s something that people haven’t begun to understand yet,” said Mr. Reaugh. And it gets even better, as he pointed out: “Another profit centre for us would be to licence the technology of our patented process.”
So, if an investor is interested in American Manganese, what are the challenges they can expect the company to be facing? Mr. Reaugh was very straightforward about what he sees as the biggest challenge: “Our biggest challenge has always been getting the North American investor to learn about manganese and how crucial it is. I think that awareness is coming to the forefront.”
Here’s why Mr. Reaugh thinks that manganese should be more important to the average investor: “China supplies about 98% of all the manganese in the world and recently it has become apparent that they are running out of ores from which they get manganese. So China is probably going to start restricting the export of manganese because they’re going to need it for themselves. They’re going off-shore to produce. China’s costs are about $1 per pound and with 20% export duty they have to get $1.20 per pound. Those concerns have been driving the price of manganese to about $1.50 on the world markets and close to $1.80 in the US, with a 14% import duty.”
This isn’t the first time Mr. Reaugh has seen this. He explained: “China was the major producer of molybdenum starting in the 1980’s and they dumped the metal, suppressing the prices around the world. Now it’s a protected metal so they’re going to become an importer of molybdenum and won’t be exporting anymore. And you’re going to see the same thing happen in a more dramatic fashion in the manganese market because they totally control that market.”
As a result, Mr. Reaugh is bullish about manganese: “The metal is just on the horizon. Next year, you’ll see a lot of interest in manganese projects,” he concludes.
REFERENCES
American Manganese Inc.
2A 15782 Marine Drive
White Rock, BC CANADA
V4B 1E6
604.531.9639
http://www.americanmanganeseinc.com/