Element 25 (ASX:E25) tumbles on latest PFS update

The Element 25 Ltd (ASX: E25) share price crashed by over 10% even as it posted an upbeat update on the ASX and other ASX miners rally.

| More on:
A teacher in front of a classroom chalkboard filled with questionmarks, indicating share market uncertainty

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Element 25 Ltd (ASX: E25) share price crashed even as it posted an upbeat update on the ASX.

Shares in the emerging manganese miner tanked over 10% to $1.31 in the last hour of trade. The sell-off comes despite this being a positive day for miners.

ASX miners leading the S&P/ASX 200 Index (Index:^AXJO) higher today as a surge in the iron ore price and the impending approval of a COVID‐19 vaccine is lifting the sector.

Element 25 share price takes a hit

Element 25 provided an update to its Pre-Feasibility Study (PFS) that was released in May. The miner added "expansion case options" which indicated that its Butcherbird project could be worth as much as $1.1 billion on a pre-tax basis.

This compares to its base case net present value estimate of $583 million (pre-tax) with a mine life of 40 years and an internal rate of return of 337%.

What's more, management highlighted the low capital requirement for the project of $17 million plus another $3.2 million for working capital.

Fast payback and cashflow

The average operating cash flow from Butcherbird is estimated to be $39.6 million a year in the first five years of production under the base case.

This gives the project a simple payback period of six months from first production. That's a very short payback period.

"Beneficial production is scheduled to commence in Q1 2021," said the miner in its ASX statement.

"The base case involves the annual production and sale of 364,000tpa (Yr 1-5 range 300,000-390,000) of lump manganese ore grading 30-35% Mn.

"Mining requires no drill and blast, utilising dozer ripping and mining with loaders or excavators."

No upgrade to Butcherbird resources

However, management made no changes to its reserve estimates. Proven and probable ore reserve still stands at 50.55 million tonnes (Mt) at 10.3% manganese (Mn) containing 5.22Mt Mn.

While the project's Native Vegetation Clearing Permit (NVCP) and Project Management Plan (PMP) have been approved, Element 25 is still waiting for its mining proposal, works approval and water abstraction approvals.

Element 25 share price still near record highs

The big drop in the Element 25 share price may look alarming, but it should be taken into context. The E25 share price surged by nearly 700% since the start of calendar 2020 even with today's loss.

It's unlikely that shareholders would be too worried, especially given the outlook for electric vehicles. Element 25's manganese is meant to be used in batteries.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Brainchip, Findi, Lottery Corp, and REA shares are falling today

These shares are ending the week in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Black Cat, Boss Energy, and Soul Patts shares are falling today

These shares are falling on Thursday. Let's find out why.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Fisher & Paykel Healthcare, IPD, and Predictive Discovery shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A man looks down with fright as he falls towards the ground.
Share Fallers

Why Aspen, Healius, Nufarm, and Propel shares are falling today

These shares are having a tough session on Tuesday. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why Elders, James Hardie, Origin Energy, and SGH shares are falling today

These shares are starting the week in the red. But why?

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why Catalyst Metals, Duratec, Nufarm, and Rio Tinto shares are dropping today

These shares are ending the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dexus, Mayne Pharma, Nufarm, and Treasury Wine shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why James Hardie, Mayne Pharma, Nufarm, and Resimac shares are falling today

These shares are having a tough time on hump day. But why?

Read more »