Evolution Energy Minerals Ltd (ASX:EV1) has appointed highly experienced, leading financial advisory group Auramet International to advise and secure project financing for its Chilalo Graphite Project in Tanzania.
Aurumet is well known for advising and sourcing debt, streaming and/or equity finance for African resources projects and EV1 will work closely with Auramet to determine the optimal mix of debt and equity financing for Chilalo.
Through Auramet, EV1 will be able to initiate dialogue with several potential financiers including, but not limited to, Tanzanian banks, commercial banks, African and Australian institutions and Export Credit Agencies.
“Auramet is a leading financial advisor to the resources sector with significant experience in Africa. They have completed numerous debt, equity and offtake agreements for companies operating in the mining industry,” EV1’s managing director Phil Hoskins said.
“This appointment is an important stage for the company as we seek to execute the material project milestones and move to construction as soon as possible.”
EV1 is working on the major milestones required to reach a final investment decision in Q4 2022.
The key milestones to secure project finance include:
- Execution of binding offtake agreements (the cornerstone binding offtake agreement for Chilalo’s coarse fake graphite was concluded earlier this month);
- Finalising a framework agreement with the Tanzanian Government delivering legal and fiscal certainty (expected in the coming months); and
- Completion of an updated DFS (expected by September 2022).
Milestone progress
Binding offtake agreements
On May 9, EV1 signed a binding offtake agreement with Yichang Xincheng Graphite Co Ltd for the sale of 30,000 tonnes per annum of coarse flake graphite from its Chilalo Project for the first three years of operation.
Read: Evolution Energy Minerals inks cornerstone offtake deal for Chilalo coarse flake graphite
YXGC is the leading global producer of high-value expandable graphite and graphite foil for the electronics industry.
The offtake agreement is expected to support the company’s financing activities, with offtake arrangements a condition precedent for project financiers.
This offtake agreement follows a strategically significant MOU with YXGC that also set 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.
Framework agreement with Tanzanian Government
EVI is making good progress on putting in place a framework agreement with respect to the arrangements for the Government of Tanzania’s (GOT) free carried interest in Chilalo.
A draft framework agreement and draft shareholders’ agreement are under review by the GOT and constructive dialogue with the government is continuing.
EV1 understands the importance of certainty surrounding GOT’s free carried interest required by financiers. The company has thus prioritised the completion of the framework agreement and shareholders’ agreement as it looks to move to a construction decision.
Updated DFS
A definitive feasibility study on Chilalo in 2020 delivered excellent economic returns, with the DFS forecasting a post-tax NPV8 of US$323 million and post-tax IRR of 34% on a capital cost of US$87.4 million (including 10% contingency and pre-strip).
EV1 is completing an optimisation of the DFS focused on:
- Reducing mining costs and bringing forward revenue from a revised mining schedule;
- Lowering both operating costs and Chilalo’s carbon footprint with the implementation of a hybrid solar/diesel power station; and
- Investigation of dry stacking of tailings, which has the capacity to reduce capital costs and eliminate a critical ESG risk factor.
Following an extensive tender process, EV1 expects to engage an engineer later this month to conduct the Front End Engineering Design, which among other things, will deliver an updated capital cost estimate.
“I have followed the progress of the Chilalo project over the past seven years and view it as one of the most attractive graphite opportunities globally,” Auramet International’s Mark Tyler said.
“Auramet is confident of securing an attractive project financing solution for a number of reasons. The Chilalo deposit is high grade and exhibits large flake size, and management has committed to a tailored marketing solution with an emphasis on product qualification and customer relationships into diverse market applications.
“More recently, the addition of Michael Bourguignon provides Evolution with unique experience in constructing and commissioning a large African graphite project, whilst the presence of the ARCH Sustainable Resources Fund provides financiers with confidence in the availability of equity funding and the ESG credentials of the company.”