NextSource Up on New Feasibility Study for Molo Graphite Project

Shares of developer NextSource Materials (TSX:NEXT,OTCQB:NSRCF) jumped almost 30 percent after the company released an updated feasibility study for its Molo flake graphite project.

The new study, which looks at a phased development approach to production, estimates the total capital cost for Madagascar-based Molo at US$60.1 million. 

The pre-tax internal rate of return is estimated at 43.1 percent and the pre-tax net present value is set at US$237.1 million, using an 8 percent discount rate. After tax, the net present value is expected to be US$184.3 million and the internal rate of return is anticipated at 36.2 percent.

“Our all-modular build strategy has low capital and operating costs, and a rapid build time,” said Craig Scherba, president and CEO of NextSource.

“With our phased build-out, this will allow our graphite to be easily absorbed into the current market while maintaining NextSource’s flexibility and competitive advantage to quickly penetrate the market and generate revenue, establish strong relationships with as many key buyers as possible, and verify our product for highly technical markets with production-run material.”

The project’s Phase 1 output is estimated at 17,000 tonnes per year of SuperFlake graphite concentrate over the first two years of production, with the processing plant feed rate reaching 240,000 tonnes of ore per year. NextSource’s SuperFlake graphite can achieve 98 percent carbon purity with simple flotation. 

Due to equipment cost inflation, the build cost for Phase 1 has increased from the US$18.4 million estimated in a 2017 study to US$21 million. Operating costs are expected to be US$565.93 per tonne in the initial stage.

Phase 2 production will begin in year three, with output expected to reach 45,000 tonnes of SuperFlake graphite per year over a mine life of 30 years. Processing ore capacity is seen reaching 720,000 tonnes per year, with Phase 2 capital costs estimated at US$39.1 million and operating costs set at US$514.17 per tonne.

Earlier this year, the company received a 40 year mining permit and a global environmental permit for Molo. The company is now looking to secure the mine capital for Phase 1, with build time expected to take nine months to commissioning. 

NextSource has already signed an offtake agreement with a Japanese trading company, which will purchase 20,000 tonnes of Molo graphite for use in anode applications for electric vehicles. The company said it is currently in the process of formalizing an additional sales deal with a leading European trader.

The Molo graphite project has a total combined graphite resource of 141.28 million tonnes at 6.13 percent carbon. It also contains ore reserves of 22.44 million tonnes at 7.02 percent carbon.

On Monday (September 30), shares of NextSource closed up 28.57 percent in Toronto at C$0.045.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: NextSource Materials is a client of the Investing News Network. This article is not paid-for content.