China drives demand for graphite
HERALD SUN MARCH 18, 2015
Electric cars, like the Tesla, are expected to be in high demand in China
ONE thing we should have learned from the Chinese-inspired mining boom is that when the Middle Kingdom sets a goal, it eventually hits it.
From the Beijing Olympics to the massive bout of infrastructure and housing expansion, the time from reaching a decision to fulfilling the dream has sometimes been quick by Western standards.
Which is why graphite explorer Magnis Resources is cheering on Chinese plans to move from 270,000 electric cars at the moment to five million or more by 2020.
Already significant registration incentives, manufacturer rebates and the ability to avoid the odds and evens numberplate system on Beijing and Shanghai roads are pushing the electric car — along with the very understandable desire to cut the pollution choking China.
All of which partly explains the Chinese interest in helping Magnis develop its Nachu graphite project in Tanzania, which promises to churn out large quantities of the particularly prized large, jumbo and super jumbo flake graphite that are used in electric vehicle batteries.
Binding offtake agreements have now been signed with Sinoma and Sinosteel for 180,000 tonnes a year and Sinoma has also signed a memorandum of understanding to develop and help finance the project.
As chairman Frank Poullas puts it: “By providing us with services which we can pay for in product, these partners are saving us from paying and raising cash.
“That means we can get the project going faster and get into production without unduly diluting shareholders.’’
A pre-feasibility study has forecast robust economics for the mine, with a net present value of $US1.04 billion and an 84 per cent internal rate of return.
That is using a conservative graphite basket price of $US2110 a tonne, which could rise significantly given the potential for the very large flake products to command higher prices as it is used as a substitute for more expensive synthetic graphite.
Capital payback is a quick 1.4 years with a low sensitivity to capital costs.
As the first new mine in Tanzania since 2008, the project is also popular locally, and an environmental impact study is nearing completion, to be followed by the mining approval process.
All going well, plant construction could start later this year with first production by the third quarter of 2016, with the speculative buy call maintained
