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The study looks at an open-pit mine capable of producing an average of 856,701 tonnes of ore a year. That ore will be processed by a plant with an annual capacity of 862,000 tonnes of ore for total production of about 53,017 tonnes of graphite concentrate a year.
Graphite market watchers got an after-hours surprise when Energizer Resources (TSX:EGZ) released a feasibility study for its Madagascar-based Molo deposit late Thursday.
The study looks at an open-pit mine capable of producing an average of 856,701 tonnes of ore a year. That ore will be processed by a plant with an annual capacity of 862,000 tonnes of ore for total production of about 53,017 tonnes of graphite concentrate a year. The mine will operate for 26 years, and will be funded on a 50-percent cash, 50-percent equity basis.
Looking further at economics, the feasibility study points to a post-tax NPV of US$389,797,113 at a 10-percent discount, a post-tax IRR of 31.2 percent and a payback period of 4.84 years. CAPEX is pegged at US$149.9 million, with on-site OPEX per tonne of concentrate set at US$353 from year three onwards, when steady state costs are anticipated. Port transportation costs from year three onwards are expected to be US$182 per tonne of concentrate from the mine site to a Madagascar port, plus US$155 per tonne of concentrate from that port to a European port.
In terms of what’s in the ground, Molo has a measured mineral resource of 23.62 million tonnes grading 6.32 percent carbon, an indicated mineral resource of 76.75 million tonnes grading 6.25 percent carbon and an inferred mineral resource of 40.91 million tonnes grading 5.78 percent carbon. Meanwhile, proven reserves sit at 14.17 million tonnes grading 7 percent carbon, with probable reserves at 8.37 million tonnes grading 7.04 percent carbon.
Energizer plans to start production at Molo in 2017, and anticipates a graphite concentrate sale price of US$1,689 per tonne at that time.
Commenting positively, Richard Schler, CEO of Energizer, said in Thursday’s release, “[w]e have now confirmed that our project is economically viable with a planned mine design that we believe is both conservative and realistic. It indicates the project has attractive economics and that we have one of the lowest operating costs in the industry.” He added that the planned plant “will be able to produce a high quality graphite concentrate, which can supply the entire spectrum of end uses for natural graphite including the foil and Electric Vehicle battery markets.”
It’s worth noting that Energizer has joined a relatively small club with the release of its feasibility study — as yet they are fairly uncommon amongst graphite juniors. However, it’s also worth noting that the company does not yet have any offtake agreements for material from Molo. That said, Schler believes that the feasibility study “will be the stepping stone to help secure both off-take and project financing in the near future.”
It will be interesting to watch what the company’s share price does in Friday trading.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Energizer Resources is a client of the Investing News Network. This article is not paid-for content.