Evolution Energy Minerals Ltd (ASX:EV1) has secured a binding offtake agreement with Yichang Xincheng Graphite Co Ltd (YXGC) for the sale of 30,000 tonnes per annum of coarse flake graphite for a minimum of three years.
The agreement will cover more than 50% of the Chilalo Graphite Project’s intended production for the first three years and represents in excess of 70% of forecast revenue over the same period, supporting and de-risking the project through its first few years of production.
YXGC is a global leader in the manufacture of high-value expandable graphite and associated high-value graphite products, such as graphite foil.
Evolution’s agreement with YXGC will offer “significant” support for financing activities for Chilalo, as offtake agreements are a key conditional precedent for project financiers.
“Cornerstone offtake agreement”
“We are delighted to sign this cornerstone offtake agreement with YXGC, which significantly de-risks the project financing of our Chilalo Project,” Evolution Energy Minerals managing director Phil Hoskins said.
“The agreement is the culmination of a significant amount of work that we have undertaken with YXGC over many years and is testament to the strong relationship and mutual respect we enjoy with YXGC.
“YXGC is internationally renowned as a leading manufacturer of expandable graphite and high-value graphite products and the company believes that its partnership with YXGC is critical to securing the finance for development of Chilalo.
“Furthermore, this offtake agreement is part of a broader collaboration to combine Chilalo’s high-quality product with YXGC’s industry-leading technology as part of a downstream operation to supply western customers with expandable graphite, graphite foil and a multitude of other high-value products.”
The offtake agreement is conditional on several factors:
- Execution of a binding agreement with respect to the downstream joint venture (JV) in Europe as contemplated in the existing MOU (ASX announcement May 2, 2022);
- Execution of a binding toll treatment agreement as contemplated by the MOU;
- Evolution notifying YXGC that it has obtained the necessary finance and commenced construction of the Chilalo Project before December 31, 2022;
- Commencement of production of graphite concentrate at the Chilalo Project before March 31, 2024; and,
- Notifying YXGC that first delivery of graphite concentrate will occur on or before March 31, 2024.
Project-related milestones to be met
Evolution Energy expects to complete several project finance-related milestones over the coming months, including:
- Sales arrangements for fine flake product from Chilalo for use in the manufacture of battery anodes – the company is progressing discussions with several parties regarding the sales arrangements for its fines (-100 mesh) product, which represents approximately 35% of Chilalo production, and looks forward to updating the market in due course;
- A framework agreement with the Government of Tanzania to provide fiscal and regulatory certainty for the development of Chilalo;
- The appointment of project finance advisors; and
- An updated definitive feasibility study.