Evolution Energy Minerals Ltd (ASX:EV1) has signed a Memorandum of Understanding (MOU) with leading Chinese graphite product manufacturer Yichang Xincheng Graphite Co (YXGC) for an intended coarse flake graphite offtake arrangement as well as downstream value-addition into high-value products.
This strategically significant MOU includes the key terms of a binding offtake agreement expected to be finalised in the coming weeks for 30,000 tonnes of the company’s planned coarse flake graphite production over three years.
The MOU also sets out the parties’ intentions to form a joint venture for the feasibility, construction and operation of a downstream manufacturing facility in Europe, utilising YXGC’s technology to produce expandable graphite, graphite foil and other high-value graphite products.
“Leading supplier”
EV1 managing director Phil Hoskins said: “We are delighted to sign this MOU with YXGC, a company with whom we’ve cultivated a strong relationship over many years.
“We began the process of qualifying Chilalo graphite product with YXGC in 2015 and have conducted a number of visits to YXGC’s ISO-certified facilities, which are leading edge in quality and safety.
“Whilst not a household name, YXGC’s industry standing cannot be challenged, being the leading supplier of high-value graphite products to the world’s most distinguished electronics and technology companies.
“Evolution is committed to supplying graphite only to customers who engage in value-addition, which makes YXGC the logical offtake partner for Evolution, given the several phases of value addition that they undertake beyond flake graphite concentrate.”
Shares have been as much as 10.7% higher intraday to $0.57 and have risen from $0.38 at the market close of April 12.
Proposed offtake agreement
With the MOU in place, the parties have immediately commenced negotiations on a binding offtake agreement that among other things, is expected to include:
- An initial offtake term of three years from first delivery;
- A commitment from YXGC to purchase a fixed quantity of graphite over the term of the agreement (30,000 tonnes per annum representing approximately 56% of production over the first three years); and
- In addition to conditions that are customary for a binding offtake agreement, the offtake agreement would be conditional on the achievement of key milestones relating to the development of Chilalo Project in Tanzania.
Looking ahead, the binding offtake agreement is expected to be executed in the coming weeks and is a key element in derisking project financing.
High-value collaboration
Under the terms of the MOU, the parties will work to put in place an agreement under which YXGC initially acts as Evolution’s processing agent to toll-treat graphite concentrate from Chilalo into expandable graphite, graphite foil and other associated products for sale to western customers.
In parallel with the toll treatment arrangement, but as a second phase to the development of Chilalo, the parties intend to jointly assess the feasibility, construction and operation of a downstream manufacturing facility in Europe, applying YXGC’s technology to produce expandable graphite, graphite foil and other high-value graphite products.
Hoskins adds: “What really excites us is this second phase to our relationship, which advances the company’s unique strategy to target a diverse set of downstream products – fine flake for battery anodes and coarse flake for expandable graphite and foil.
“Both parties recognise that combining Chilalo’s high-quality product with YXGC’s industry-leading technology will ideally position our planned downstream operation to supply western customers with expandable graphite, graphite foil and a multitude of other high-value products.
“We will look to rapidly progress this highly value-accretive downstream facility in parallel with the development of the Chilalo Project.
“The company will set out the planned production and target comments upon commencement of a feasibility study and the finalisation of the JV agreement."
About YXGC
YXGC is a global leader in the manufacture of graphite products, supplying to customers in Europe, North America and Asia for more than 20 years.
Using coarse flake graphite, YXGC applies its in-house, proprietary technology to manufacture a range of high-value graphite products, including expandable graphite, fire retardant materials, foils, sheets, gaskets and tape that are used in a wide range of industries.
YXGC products are widely used in the petroleum and chemical industry, steel refining, electric power, metallurgy, machinery, automobile, shipbuilding, pharmacy, aerospace, nuclear and, most significantly, a number of distinguished global electronic and technology companies.