Walkabout Resources Ltd (ASX:WKT) has passed a construction milestone for the Lindi Jumbo Graphite Project in Tanzania by executing an Engineering, Procurement and Construction contract with Yantai Jinpeng Mining and Machinery Co Ltd.
Through its subsidiary Lindi Jumbo Limited, Walkabout has also chosen to exercise an option to upgrade the scope of the processing plant.
Walkabout is developing the high-grade graphite project in southeast Tanzania to capitalise on forecast market conditions for large and jumbo flake graphite products.
The company, through Lindi Jumbo Limited, owns 100% of the Lindi mining licence and 70% of adjacent tenements with an option to fully acquire the rest.
Conditions precedent
Execution of the second material contract is part of the Conditions Precedent (CP) for the company to drawdown US$20 million in debt facility by CRDB Bank in Tanzania.
Walkabout Resources CEO Andrew Cunningham said, “The formal signing of the EPC contract is another major milestone for the project as we work towards satisfying all of the CPs towards the drawdown of the debt and keeping the project development to schedule.
“Construction progress on-site and in China has been impressive and I look forward to the delivery of the plant equipment to Tanzania and further development on-site over the coming months.”
The project capital expenditure has been substantially de-risked with this contract being at a fixed price. More than two-thirds of the project works have now been contracted out.
EPC contract
The EPC contract sum in total is US$11.9 million. US$500,000 of this has been paid as a part of the early start program and a further US$1.6 million was paid on mobilisation. The contract allows for additional separable portions for power, mobile equipment, and shipping.
Lindi Jumbo has indicated it will source the mobile equipment from Jinpeng for US$600,000 which includes a telehandler, front-end loaders and mobile crane. Mine power is subject to a separate contracting process with alternate vendors.
Contract costs have been revised to current market prices, especially for steel and labour. Shipping costs are estimated to be 150% higher compared to the original budget, caused by the shipping container shortage influenced by the global pandemic.
The company is not concerned with the increased costs at present and is looking to other areas of the project negotiations to offset the loss.
Plant enhancement
Since initial plant design, WKT has become increasingly confident in the premiums available for the jumbo and super jumbo graphite produced at Lindi. The mine has some of the highest proportions of very large flake graphite in final concentration in the world.
The company acknowledges that it will be necessary to develop a reputation as a supplier of high-quality graphite concentrate with very high proportions of the product meeting or exceeding minimum size specifications if it wishes to regularly obtain a premium price.
In light of this, and the company’s increasing confidence, Walkabout opted to exercise its option to apply an upgraded design to the back end of the plant that undertakes screening and bagging of the graphite concentrate.
This change of scope includes the redesign of the final processing building to be larger and include enhanced screens, supporting equipment and automated bagging units. The company says these changes will improve plant precision for sorting final products and provide growth in alignment with its plans.
The incremental cost of adding these scope changes to the EPC contract is approximately US$1.5 million.
Processing plant progress
Manufacturing and procurement at the processing plant have been on schedule since the mobilisation payment to Jinpeng was paid in September. Quality management checks on procured construction materials and completed works has been performed by Axis Group International, acting on Lindi Jumbo’s behalf.
The first shipment is expected to be dispatched in mid-November 2021. Power rationing in China has so far not affected Jinping and thus has had no adverse effect on the company’s activities.
WKT intends to mitigate some of its increased shipping costs through Jinpeng and the Axis Group’s recent experience in delivering equipment to Africa, and especially Tanzania.
They will be loading about 90 containers in 10 batches in a staggered delivery sequence in line with the construction schedule on-site. As part of the scope, Jinpeng is responsible for the transport and shipping of the batches from their premises in Yantai to the Port of Dar es Salaam.
Walkabout is finalising the appointment of a Tanzanian logistics company to manage the received shipments at port, customs clearance and road transport to site. The selected local company will work with Jinpeng and the Axis Group to ensure clearance and transport delays are minimised.
Tanzania site works
Site bulk earthworks are progressing to schedule and within budget with the focus on:
- Terracing and levelling at the processing plant area in preparation of the concrete works;
- Upgrading of the access and internal roads;
- Construction by the civils contractor TNR of the Tanroads designed low-water drift across the stream near the town of Ruangwa;
- Topsoil clearing and preparation of the tailings storage facility area;
- Site preparation and installation of the contractor workshop area; and
- Demarcation of the Mining Licence boundary.
Excavation and terracing of the processing plant area in Tanzania is nearing completion, with preparation for concrete works and installation of the run of mine retainer wall to begin shortly. The preparation of roads has made the construction site accessible and ensures construction can continue throughout the wet season.
In line with the local content requirements for all mining projects, the Erection All Risks project owners’ insurance package was secured through a local insurance broker in Tanzania, has been underwritten by two Tanzanian Insurers and has been approved by CRDB bank.
The insurance policies have been listed as one of the material agreements in the Debt Facility Agreement.