An investment firm led by former Xstrata CEO Sir Mick Davis has thrown its weight behind the Molo graphite development in Madagascar.

Vision Blue, the firm that Davis founded in December 2020 to invest in battery and technology minerals, has selected Molo as its flagship graphite asset, agreeing to a $29.5-million financing package to fund construction of the mine.

When the announcement was made earlier this month, the Toronto-listed project owner NextSource Materials’ stock surged.

Graphite is a key component of batteries used in electric vehicles (EVs) and Davis believes investment in supply is not keeping pace with demand growth.

“This investment in NextSource underlines our belief that the massive secular change in demand for critical battery material resources is not being met by an appropriate supply side response, largely as a result of capital constraints,” the mining heavyweight said in a statement.

In its initial phase, Molo will process 240 000 t/y, producing 17 000 t of graphite concentrate. Expanding production to 720 000 t/y in a second phase will result in 45 000 t/y of graphite concentrate being produced over 30 years.

The mine will enter production in mid-2022, NextSource has confirmed.

The financing will be completed in two tranches, the first of which comprises an initial private placement of $6.1-million. The initial placement, which will close before the end of the month, will facilitate the immediate start of construction through the ordering of longer lead items for the processing plant and to fast-track the completion of technical studies.

The studies will be commissioned to confirm the capital and operating costs for the next phase of mine expansion, and to construct a standalone, value-added graphite plant to produce spherical and purified graphite for lithium-ion batteries in EVs.

On completion of the second private placement, which will raise an additional $12.4- million, Vision Blue will own about 37% of NextSource, or about 49.4% on a partially diluted basis. The financing package also includes a royalty component.

Davis will become chairperson of NextSource upon the closing of the first tranche at the end of this month.