Walkabout Resources (ASX:WKT) has signed a heads of agreement to engineer, manage and build the Lindi Jumbo process plant at the proposed graphite mine in Tanzania.
The agreement also covers other mine site infrastructure and is with a private mid-sized engineering company, Yantai Jinpeng Mining Machinery Co. Ltd. in China.
The engineering, procurement and construction management (EPCM) service contract will include a deferred payment option by means of a fast-track application already underway.
Significantly, this provides access to funding provided through the Chinese governments’ new US$1 trillion One Belt, One Road initiative.
Trevor Benson, chairman, commented: “This EPCM and deferred payment funding is an optimal outcome for our fast-tracked development strategy. This funding model should significantly reduce the project capital required by the company.”
Funding
The deferred payment option can act as a funding mechanism for the project’s development.
Funding will be for up to 80% of the EPCM package which as per the definitive feasibility study includes the entire process plant and the shared infrastructure package, estimated to be more than 70% of total initial project capital.
Next steps
Detailed engineering and design services work is to commence immediately while the EPCM agreement, a final estimate and funding is progressed.
An initial approval for funding is due by the end of July 2017 following detailed project review.
Unconditional and final approval by the lending authority is due to be granted by end October 2017.
Background
Walkabout is developing the 70% owned Lindi Jumbo Graphite Project under a fast-track project methodology.
In order to mitigate risk, it has been decided that the project will be built under a fully outsourced contracting model.
In order to achieve this, an experienced EPCM service company has been sourced and selected to carry out the process plant and shared services works.
Lindi has a Mineral Resource of 3.24 million tonnes graphite grading 10.9% TGC and Ore Reserve of 809,081 tonnes graphite grading 16.13% TGC.
The project’s definitive feasibility study (DFS) demonstrated:
- Highest grade mineable resource in Tanzania leading to mill feed grade of >17% TGC;
- Lowest unit operating cost of US$292 per tonne in concentrate at mine gate;
- Lowest start-up capital at US$38.7 million;
- Highest ratio of Large, Jumbo and Super Jumbo (+180µm) flakes in concentrate;
- High weighted average basket price ($1,687) due to flake size distribution; and
- The manageable and realistic start up production rate reduces technical and market risk.
Analysis
Walkabout has been showing the market it means business when it comes to fast-tracking Lindi into production.
This EPCM deal that features a funding mechanism continues the positive momentum from the recent series of agreements related to off-take from the project.
The EPCM contractor, Jinpeng, has extensive experience in designing, manufacturing and building graphite flotation facilities in China, and building plants in Africa.
The One Belt, One Road is an enormous worldwide project with many roads, railways, ports and maritime routes making up new and revived trade corridors.
It is a solid advantage for Walkabout to be tapping into this unprecedented infrastructure spending program.
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