Name of the Project
Caula graphite and vanadium project.

Location
Northern Mozambique.

Client
New Energy Minerals, formerly Mustang Resources.

Project Description
Caula contains an exceptional combination of high-grade (13%) total graphitic carbon and could deliver high percentages of super jumbo, jumbo and large flakes.

The project has established a Joint Ore Reserves Committee-compliant resource of 22-million tonnes at 0.37% vanadium and 13.4% graphite for 81 600 t of vanadium and 2.93-million tonnes of graphite respectively.

A strategic review has found that the most effective way of developing Caula involves a two-stage development strategy.

Phase 1 will produce 120 000 t/y over two years, with production estimated at about 10 000 t/y to 15 000 t/y of graphite concentrates and 14 000 t to 18 000 t of vanadium concentrates over two years.

From the start of operations, vanadium will be extracted to a concentrate. This will be sold to a vanadium producer or stockpiled for future production of refined vanadium pentoxide chemicals. The Phase 1 graphite plant is being designed to allow for the future incorporation of all processing equipment into the larger Phase 2 graphite plant.

The sale of graphite and vanadium products produced in Phase 1 will be used to secure binding offtake agreements and associated finance required for Phase 2 development.

Phase 2 will have a mine production rate of about 1.5-million tonnes a year, with estimated production of about 120 000 t/y of graphite concentrates and about 204 200 t/y of vanadium concentrate over 24 years.

A full-scale vanadium concentrate processing plant, capable of producing refined vanadium products  for the fast-growing aerospace alloy and battery markets, will also be built.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The project has a pretax net present value, at a 10% discount rate of $673.41-million and an internal rate of return of 78.3%, with a payback of less than four years from the start of production from Phase 1.

Value
Preproduction capital expenditure for Phase 1 is estimated at $7.37-million and for Phase 2 at $114.21-million.

Duration
Phase 1 of the project development is expected to be completed and produce sellable products in the first half of 2019.

Latest Developments
New Energy has struck a deal to divest of the remaining 50% interest in the Caula graphite and vanadium project.

New Energy has entered into a binding share sale and purchase agreement with private investment vehicle Auspicious Virtue Investment Holdings, which already holds a 50% interest in Balama Resources – the owner of the Caula project.

Auspicious Virtue will acquire the remaining interest in Balama for A$7-million.

As part of the agreement, New Energy has agreed to conduct an equal-access capital reduction, under which the company will provide a capital return for shareholders of no less than 60% of the purchase price, less the cost incurred to complete the transaction.

New Energy has told shareholders that the sale of its remaining shares in Balama will reduce shareholder exposure to a dispute with Arena Investors,  pertaining to an alleged debt of A$5.1-million. Although New Energy is confident in its dispute against Arena, a negative outcome could result in Arena having a substantial claim against New Energy, which, in turn, could result in nil value from the Caula project being returned to existing shareholders.

The agreement with Auspicious Virtue is subject to several conditions, including an independent expert concluding that the sale is in the best interest of shareholders, as well as shareholder approval for the transaction and the capital reduction.

The company is expected to convene an extraordinary general meeting in March.

Key Contracts and Suppliers
TOMRA Sorting (preliminary ore sorting testwork).

On Budget and on Time?
Not stated.

Contact Details for Project Information
New Energy Minerals, tel +61 8 9217 2400.