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Debt funding hampers promising graphite project

9th April 2021

By: Nadine Ramdass

Creamer Media Writer

     

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The recent changes in Tanzanian mining legislation, combined with the dispute between gold producer Acacia Mining and the Tanzanian government, have created apprehension among investors, particularly in terms of investment in greenfield projects.

However, Walkabout Resources intends to demonstrate to international investors, through its Lindi Jumbo graphite project, that investing in the country can be safe and present significant growth potential.

The project, in south-eastern Tanzania, was discovered in October 2015 and, after completing the definitive feasibility study and securing a mining licence, Walkabout is focusing on securing debt funding to progress its development.

However, the company notes that it has been difficult to convince international investors to invest in the project.

An initial problem was that the changes in legislation were poorly understood by the international market, particularly the financial markets. This added to the difficulty in securing funding and was exacerbated by the graphite industry “being misunderstood”, as “graphite pricing is seen as a very opaque market”, emphasises Walkabout director Andrew Cunningham.

“Moreover, investors are waiting for the first mover. They want to see the first project funded and developed, and then they will be ready to invest.”

He states that China accounts for 60% of graphite production and almost 100% of the downstream beneficiation, particularly in terms of the manufacture of beneficiated graphite used as anodes for battery storage.

However, the growing interest in electric vehicles and battery storage, combined with a growing understanding of the use of graphite in lithium-ion batteries, will create interest and demand for natural graphite.

Further, Tanzania has good graphite and large flake deposits that can meet the expected increase in global demand not only in the battery space but also in the traditional markets and the fast-developing speciality product market for large flake graphite.

Flake graphite is well suited to use in lithium-ion batteries and is a better and cheaper alternative to synthetic graphite, which is expensive to make. “Natural graphite, with the correct properties, is the perfect material to use,” says Cunningham, adding that many larger flake graphite mines in China have closed, owing to environmental restrictions and the increasing expenses associated with operating them.

This leaves a gap in the market – which Cunningham believes Tanzania can fill: “We are trying to establish Tanzania as the go-to place for larger flake natural graphite”.

While the short-term goal is to secure debt funding to progress the project to production, Walkabout’s long-term goal is to establish itself as the “go-to company” in the large-flake natural graphite market.

“Processing facilities to manufacture spherical graphite in the battery storage market are currently planned or under construction outside of China,” notes Cunningham, adding that the interest in graphite applications in countries other than China has created new markets.

“We have two binding offtake term sheets with graphite companies in China, particularly for the larger flakes and a binding marketing, distribution and sales agreement with Wogen Pacific Limited an international minerals trader. Combined these agreements cover the sales of our planned annual production. In addition, we also have nonbinding agreements with graphite companies and traders in both China and Europe.”

He emphasises Walkabout’s need to diversify its offtake by establishing a bigger distribution list of its product to companies in various countries, rather than supplying to only one customer.

The Lindi Jumbo project currently boasts one of the highest grades of larger graphite flake deposits globally and the highest reserve grade of any graphite development project in Africa, at 17.9% total graphite carbon (TGC) and 75% of its flake distribution in final concentrate planned at being above 180 μm.

“The high reserve grade and extraordinary distribution of large flakes in final concentrate above 95% TGC makes this an exceptional project in the graphite world,” says Cunningham.

Walkabout has full confidence in the project and the graphite market, demonstrated by its efforts to de-risk the project and fast-track the timeline through the early works programme on site in Tanzania and at the engineering, procurement and construction partners in China to allow for production in the shortest possible timeline after debt funding has been secured.

“We are fully permitted. We are ready to go,” assures Cunningham.

Cunningham emphasises that Walkabout has been transparent with the Ministry of Mines and the Mining Commission in terms of the project and its challenges, including securing funding, which has resulted in open conversations regarding legislation.

“The legislation is not perfect, but they’re changing it as they learn,” he adds.

It is through these changes that the previous ban on exporting mineral concentrate has been lifted and Walkabout will now be able to export graphite concentrate above 60% TGC.

While there have been many changes to mining legislation in Tanzania, Walkabout is confident that the industry is worth investing in, owing to its untapped potential, especially in terms of graphite.

Edited by Nadine James
Features Deputy Editor

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