American Manganese Developing a
www.americanmanganeseinc.com
Strategic Product for U.S. Steel Mills
Larry Reaugh
President & CEO
With its recent name change from
Roche Deboule Minerals, American
Manganese Inc. now clearly states the
business in which it expects to truly
make its name. Manganese is another
one of those metals that most people
may have heard about but probably
couldn’t distinguish from magnesium.
Without manganese, however, not
much could be built or made in the
modern world, and that’s the opportu-
nity that makes American Manganese
(AMY) such an interesting investment
story. Sitting on over 10 billion pounds
worth of indicated and inferred man-
ganese—currently trading at $1.31/
lb in Arizona—gives the company the
largest known low-grade deposit of
manganese in the United States, accord-
ing to the US Bureau of Mines, and the
largest potential source of the metal
outside of China. We spoke with Larry
Reaugh, AMY’s president, to get the big
picture on how his company could play
a very important role in re-establishing
domestic production of this key metal,
which the US now has to rely on foreign
sources for its supply.
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based on the 2007/8 drilling, as well as prior
esource Intelligence: Going from Roche De-
boule to American Manganese is an inter- drilling and surface and underground sampling
esting name transition, Larry. What’s thefrom reports in the extensive data base compiled
story behind that? in 1983 by Jim Lake of Hazen Research, who
completed development work on the production
Larry Reaugh: Roche Deboule is the name of a of electrolytic manganese metal using sulfur-
rather well-known Iron-Oxide-Copper-Gold ous acid leaching. The second 43-101 indicates
(IOCG) property in B.C. which we still own. It a manganese resource in excess of 100 million
was the core holding of AMY before we decided tonnes, with 1,068,307,976 lbs of indicated
to make a strategic contained manganese
change in the direc- and 9,661,091,721
tion of the company
and pursue a com- “Any way you look at it, lbs of inferred con-
tained manganese.
modity we thought
would have a greater
at only 3,500 TPD this RI: Based on that,
demand in the com- should be a very profit- where do you go
ing years. from here?
able operation.”
RI: So how did you LR: Obviously, the
decide to get into the ~President & CEO Larry Reaugh key to any successful
manganese business? mining operation is
being able to produce
LR: In 2006-2007 metals at a profit over a long period of time. The
I started looking around at the types of metals key to being able to do it at Artillery Peak is a
which appeared to be in short supply, at least here combination of a large resource which is mine-
in North America, and realized that there was no able at a low cost as well as a method of recover-
domestic production of manganese anymore. ing the metal at a low cost. The mining part will
You can’t make steel without it and it turns out be a simple and low cost open pit operation fol-
that China controls over 97% of the world’s elec-
trolytic manganese supply - and they are looking
lowed by use of a hammer mill to break up the
ore prior to vat leaching using sulfurous acid,
for more for themselves. Not a good situation for which we would produce on site from sulfur. A
the US and other nations which need to rely on metallurgical lab called Kemetco reports a proof
essentially one supplier. of concept on the sulfurous acid method of ex-
RI: How did you manage to acquire all these key traction. The report proves a process based on
manganese properties and was there any or much the early work of the U.S. Bureau of Mines over
competition to do so? several decades, and further development work
by James L. Lake, Vice President of Hazen Re-
LR: Based on our research, in 2007 we determined search at the time, as well as Kemetco Labs‘. The
that the Artillery Peak manganese properties in process work has been successful in producing
Mohave County, Arizona, which encompass Electrolytic Manganese Metal from the samples
historical open-pit and underground mines that of Artillery Peak.
produced manganese from 1928 to 1955, were
available for acquisition. So we purchased 90 un-
patented lode claims and also began assembling
the patented claims in the area. Soon after that
we started a 5000 meter diamond drilling pro-
gram and continued to pick up more claims. By
October 2008 we had completed the assembly of
virtually all the manganese camp at Artillery Peak
which now consists of 112 patented claims and
254 unpatented, covering 12 sq miles.
RI: So what work have you done there since you
acquired the property?
LR: The drilling results on the small portion of
the property we first tested showed significant
manganese over thick intersections. Based on
that drilling program we received our first 43-
101 compliant estimate in June 2008 followed
by a second 43-101 in April 2009. That one was
See page 96 for Disclosure, Disclaimers & Info on Mineral Resource and Reserves
American Manganese Inc.
- Continued
RI: Can you explain the process a little more?
LR: Once the material has been reduced to minus
25mm, it is turned into a slurry in stirred tanks
where it is leached when sulfur dioxide gas is in-
jected through the pulp. That produces the sul-
furous acid solution and in less that 30 hours,
over 90% of the manganese breaks down phys-
ically and goes into solution. The leached pulp
is then settled using flocculents and we end up
with a pregnant solution containing manganese
sulphate and dithionate. This is then evaporated
to make crystals which are calcined at (250°C) to
eliminate the dithionate and recycle the sulfur di-
oxide gas back to the leaching stage. The manga-
nese sulphate is then purified to remove traces of
any base metals, such as calcium, before being fed
into the electrolysis stage. We can actually pro-
duce some of our own electrical power by using
the intense heat which is produced when sulphur
is burned to produce sulfur dioxide. The waste
heat can also be used to speed up the crystalliza-
tion and filtration of the leached pulp.
RI: So what are the economics of your proposed
operation?
Free Revolutionary Online Investment Calculators and all 43-101 data with sources and project values www.resourceintelligence.net
www.americanmanganeseinc.com
LR: In August 2009 we received a NI43-101Pre-
liminary Economic Assessment of the viability of
exploiting the reported Artillery Peak resource.
The positive conclusion of the report is that we
should be able to produce electrolytic manganese
metal at a calculated cash production cost of 44
cents per lb. The mining and processing costs at
90% recovery and 2.5:1 stripping ratio should
come in at $0.15 per pound and the costs of
electrowinning are estimated at $0.29 per pound.
The total “all in” cost is calculated at 63 cents per
lb with a total capital expenditure calculated at
$90,000,000. That would be for a 3500 tonne
per day operation which would yield around
50,000 tonnes of electrolytic manganese per year.
In the process we would be the lowest cost pro-
ducer in the world.
RI: 3500 TPD doesn’t seem like that large an oper-
ation by most open pit standards these days.
LR: Bear in mind that the capital cost is only $90
million, and using a resource figure of only 21.24
million tonnes at 4.48% manganese, we have a
mine life of 17 years. Using base case figures and
a manganese price of US$1.10, we have a pay
back period of only 1.73 years and an internal
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604.531.9639
rate of return of 60%. Even if our operating costs
were to be 20% higher than projected, the pay-
back period would only go to 2.04 years and the
IRR would still be 50%. If manganese sold 10%
higher, under the base case cost scenario, pay-
back would be in 1.45 years and the IRR would
be 72%. So any way you look at it, at only 3500
TPD this should be a very profitable operation.
Plus, we can always expand production if the de-
mand is there.
RI: In summary, why should investors be consid-
ering American Manganese as an attractive in-
vestment at this time?
LR: We think that American Manganese presents
a unique opportunity to participate in a com-
pany which could be the lowest cost producer of
electrolytic manganese in the world and will be
providing a valuable commodity to US markets
which is not available domestically at this time.
If we can produce 110,000,000 lbs of manganese
per year and make just $0.47 per lb profit, we
should have some very happy shareholders.
Milestones:
• Begin drilling 191 reverse cir-
culation drill holes totaling an
estimated 15,885 metres
starting the end of February
• Increase the existing NI-43-101
resource at Artillery Peak by
50% to 100% from current lev-
els and move current resources
from indicated and inferred to
measured and indicated
• Raise additional capital as
needed to move on to a
Feasibility Study
• Begin production in early to
mid-2013
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