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Australia-listed mineral sands specialist Mineral Commodities (ASX: MRC) has reported that it has succeeded in its application for an Integrated Environmental Authorisation (IEA) for the further development of its mineral sands operation at Tormin, in South Africa (400km north of Cape Town).

MRC said that it expects the Department of Mineral Resources in South Africa to finalise the granting of its Section 102 application shortly, allowing it to extend its beach mining activities on its property at Tormin.

One of the highest grade mineral sands operations in the world

Tormin is one of the highest grade mineral sands operations in the world. The extension would allow MRC to work a much longer stretch of beach, and allow more time for other areas to be replenished. The northern beaches on the site would add a further 23 kilometres of beach the company can mine, plus scope for an additional mineral separation plant.

MRC has been mining a range of different minerals at its South Africa facility since 2014, including zircon, rutile, ilmenite and garnets. Unlike conventional mines, mineral sands operations are replenished by the sea. Productivity is influenced by how much of the beach zone can be accessed and mined effectively. Previously mined stretches can be left ‘fallow’ to allow the waves to replenish them.

A diversified battery materials operation

It should be noted that MRC is a diversified mining operation, and beyond its Tormin project, also has the highest grade flake graphite operation in the world, sited at Skaland in Norway, and is also in the process of developing a very high grade graphite mine at Munglinup in Australia.

MRC is very focused on the battery materials market, in anticipation of more demand as the world starts turning towards electric vehicles. It is developing production facilities outside China and Africa that can be positioned to help with the processing of materials required for batteries.

As at the end of December last year MRC had a cash balance of USD 8.1m and was carrying USD 7.8m in debt. The MRC share price had dropped from AUD 0.30 to 0.15 from the middle of February, reflecting we believe the overall negative sentiment around coronavirus and the anticipated slow down in the global economy. The stock has been at AUD 0.3 before, back in 2018.

Designed to fuel the electric vehicle boom

What’s our take? MRC looks like a mining company that is almost pre-designed to take advantage of the anticipated phase out of petrol-driven vehicles in the European Union and elsewhere in the developed world over the next couple of decades. It is aiming to serve a market in which 11 European countries have taken regulatory action to phase out vehicles using internal combustion engines – for example, Germany plans to stop taking registration of petrol-driven cars in 2030. That’s just 10 years from now.

This is a longer term mining project (Munglinup is still in development), but it is obviously being positioned to take advantage of a projected upswing in demand for battery materials in the next 10 years.

We have seen the share price swing between 0.15 and 0.3 in the space of six months. MRC is targeted at a space in the economy – electric vehicles – which is still quite small at the moment and while growth may not be as swift as initially forecast, MRC is well-positioned to meet new demand from the battery manufacturing market in the years to come.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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