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Welcome to our five-part article series on American Manganese Inc. (TSX.V: AMY; Pink Sheets: AMYZF; Frankfurt: 2AM), where our consultant, Peter Bell, leads an in-depth interview with Larry Reaugh, President and CEO of the company. We will be releasing the other aspects of this interview in the coming weeks until you have them all; stay tuned!
American Manganese Inc. (TSX.V: AMY) is a diversified specialty and critical metal company focused on capitalizing on its patented intellectual property through low cost production or recovery of electrolytic manganese products throughout the world, and recycling of spent electric vehicle lithium ion rechargeable batteries.
Larry Reaugh: Have you seen what's happened to cobalt in the last week?
Peter Bell: No, has the price been rocketing?
Larry Reaugh: The price is $81,500 a tonne, but that’s not what I am referring to.
The DRC has enacted new laws for mining where there is going to be a 10% royalty charge on cobalt. That's a royalty charge is right off the top line. They don’t get to cover the mining, processing, or shipping costs or anything. They get that right off the top.
They've also included a super royalty. If you're getting prices that are 25% above the level in your pre-feasibility study, then they tax an extra 50% of profits.
What’s worse is that companies who are already operating in the DRC under 10-year mining licenses have been canceled. They thought they wouldn't have been touched by any increase in royalties, but that is not the case.
The DRC has made it much more difficult for them to produce any more cobalt – nobody’s going to put in a new cobalt mine under that regime. The companies who have existing mines can continue to mine as long as they're making money, but they'll shut them down as soon as they start losing money.
Peter Bell: Wow. I see that it’s a big story. It seems to be described as a “surprise” across the board, but is it really surprising that the DRC pulled a move like that?
Larry Reaugh: No, it's not surprising to somebody like me. I don’t think it should be a surprise to any of those companies working in the third world, either.
Peter, I went through this right here in BC when we got a socialist government in 1973 who brought in super royalties. There was an exodus of mining companies from the province at the time. I had just got into the drill business and had three drills building. Right in the midst of that, the government came out with this bill and I lost 90% of my contracts immediately. It was a struggle to pay off my bills and everything for the next 6-8 years. After that, I sold the drills and came down to Vancouver to run public companies. Following that exodus of mining companies from British Columbia, they never returned for 30 years.
Peter Bell: Any disruptions to DRC are a big deal for cobalt markets since most of it is a by-product from mines producing other metals.
Larry Reaugh: Right. 97-98% of cobalt comes as a by-product. There are companies that are mainly producing cobalt, but they are usually very small deposits. You may see up to 5% of global production from these cobalt-primary deposits, but it's not going to solve the supply problems.
Peter Bell: I’ve seen that around 50% of cobalt refining is located in China, but what are the proportions of global production from different sources around the world? What is the amount coming out of the Congo, say?
Larry Reaugh: The Congo is about 55% of the market. And the Chinese have bought a cobalt mine in the DRC from Freeport. They bought the mine and refinery, and they are refining the cobalt for use in batteries!
China controls about 70% of all the cobalt through the refining and the delivery of cobalt. They have some production in China itself, but that is not particularly great. The Chinese are way ahead of us in the West when it comes to thinking ahead.
Peter Bell: Even with all the noise on Capitol Hill from Lisa Murkowski and others in the Senate committees? It seems like that's been a perennial issue there. A lot talk, but nothing significant has really happened yet.
Larry Reaugh: Well, it looks like it's going to happen now as Mr. Trump has stuck his foot in the arena. He has said that they are going to start developing mines in the US to become less dependent on China and others, which requires for them to ease up on regulations. Right now, it takes 10-12 years to get a mine into production in the US – 10 to 12 years. Unbelievable! In other jurisdictions in the world, it takes 2 years. Even here in Canada, it takes 5-6 years. That's why the mainland US doesn’t get a big share of exploration dollars, globally.
Peter Bell: Well, they do have the consumer base and that ties in with the recycling market you’re going after.
Larry Reaugh: Right. They should be jumping all over the recycling! They should be jumping all over us to get the manganese out of the 2-3% grades at Artillery Peak.
The USA doesn't have any production of manganese and if we get into a war, then manganese will become highly critical – if not the most critical metal because you can't make steel without it!
This is not in any way investment advice nor any sort of stock recommendation. Please do your own due diligence and talk to a qualified investment advisor.
The contents of this article are for informational purposes only. Nothing in this article, in any way whatsoever, should be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy, hold or sell any security. Note the inherent risks when investing in microcap stocks. Prior to making any investment decision, we recommend that you seek outside advice from a qualified and registered investment advisor.
American Manganese Inc. is a paid marketing client of Stockpools Inc. and one or more of the owners does own shares in American Manganese Inc.