VANCOUVER (miningweekly.com) – Canadian graphite project developer NextSource Materials has published the results of an updated feasibility study (FS) for its flagship Molo graphite project, in Madagascar, outlining positive economics despite current depressed carbon prices.

Toronto-based NextSource (previously Energizer Resources) based the updated FS on front-end engineering design (FEED) and detailed engineering studies, as opposed to a basic engineering study, giving more weight to the study’s overall results.

The first phase of the project will comprise a graphite mine with a permanent processing plant with capacity to produce 17 000 t/y of high-quality SuperFlake graphite concentrate over a mine life of 30 years.

The mine has a low price tag of $18.4-million – the lowest capital mine cost (capex) of any new and competing graphite project – resulting in an after-tax net present value, at an 8% discount rate, of $25.5-million and an internal rate of return (IRR) of 21.6%. The capital payback period is estimated at 4.8 years.

“These results are a significant achievement given the very difficult reality that every junior graphite project is currently facing; depressed graphite prices coupled with high project capital costs that render almost every emerging graphite project as noneconomical, and therefore nonfundable until market conditions improve.

“For Molo to realise a post-tax IRR of over 21% under these current market conditions is considerable and can be attributed to our unique modular build methodology, which provides us with a tremendous first-mover and economic advantage over other companies,” president and CEO Craig Scherba stated in a news release.

He stressed that the first phase of the project would make use of a fully modular build approach that, aside from the Molo deposit’s almost 50% of premium-priced large and jumbo flake graphite, would provide it with a significant first-mover and economic advantage over its peers.

NextSource said the project operating costs (opex) included all-in costs for freight and insurance (CIF) to ship the company’s trademarked Molo SuperFlake concentrate to the Port of Rotterdam, and the FS had verified Molo opex as one of the lowest in the industry on a full-cost, CIF basis. The average production cost of shipped graphite concentrate is expected to be $688.43/t, while the company expects to sell at $1 014/t.

The updated FS incorporates the procurement of all mining equipment, off-site modular fabrication and assembly, factory acceptance testing, module disassembly, shipping, plant infrastructure construction, on-site module re-assembly, commissioning, project contingencies and three months of capital.

IMPROVED RESULTS
When compared with the results of the company's previous 2015 Molo FS, the updated version is based on decreasing the initial output from 53 000 t/y to 17 000 t/y, while the overall capex has been reduced by more than $169-million.

The operation will make use of dry stack tailings for Phase 1 production instead of cyclone deposition, which significantly reduces the capex associated with a conventional tailings deposition facility.

Despite a smaller initial production profile of SuperFlake when compared with the 2015 FS, the total all-in opex for CIF delivery to customer port Rotterdam was reduced from $709/t.

The updated study also increased the plant head grade from 7.04% graphitic carbon to 8.1% carbon.

Under the new FS, the project construction time has been halved to nine months and the number of on-site personnel to construct the Molo mine has been reduced from 1 500, with a traditional 'stick-build' construction process, to 50 with modular assembly.

The updated FS uses a lower average weighted selling price of $1 014/t to reflect current market conditions, compared with the more optimistic previous price of $1 694/t used in the 2015 FS.

The updated FS also assumed 100% equity funding, whereas the 2015 Molo FS assumed 50% debt funding on an eight-year operational basis.

Based on the positive results of the updated FS, the NextSource will start work on an economic analysis for the eventual Phase 2 expansion that will incorporate its unique modular approach to produce about 50 000 t/y of finished SuperFlake graphite concentrate.

The Molo project hosts compliant proven and probable reserves of 22.44-million tonnes grading 7.02% graphitic carbon. It also has a measured mineral resource of 23.62-million tonnes grading 6.32% graphitic carbon, 76.75-million tonnes grading 6.25% graphitic carbon in the indicated category and 40.91-million tonnes grading 5.78% graphitic carbon in the inferred resource category.