Toronto-based NextSource Materials (TSX:NEXT) has published results of an updated feasibility study for its flagship Molo graphite project in Madagascar, showing increased project build cost due to equipment inflation.
An update on the feasibility study published in 2017, the new FS takes into account updated mine capital equipment and mining costs, as well as current 12-month rolling flake graphite pricing on a free-on-bard (FOB) China basis supplied by commodities research firm Benchmark Minerals Intelligence.
To maintain a first-mover competitive advantage and to appropriately plan for future market demand, the FS was designed to provide a flexible mine development approach that comprises an all-modular build solution, the company says.
NextSource currently has an offtake agreement in place with a Japanese trader and is in the process of formalizing an additional sales agreement with a European trader. The FS was undertaken to include two phases in order to account for offtakers’ demand for the company’s SuperFlake graphite concentrate.
NextSource currently has an offtake agreement in place with a Japanese trader and is in the process of formalizing an additional sales agreement with a European trader
Phase 1 of the project will consist of a fully operational and sustainable graphite mine with a permanent processing plant capable of processing 240,000 tonnes of ore and producing about 17,000 tonnes of high-quality SuperFlake annually. The updated build cost of the fully modular process plant increased from the $18.4 million reported in the 2017 FS to $21 million.
Phase 2 incorporates the processing of 240,000 tonnes of ore for each of the first two years and then ramping up to 720,000 tonnes a year in the third year to accommodate additional sales, resulting in a total of 45,000 tonnes of SuperFlake concentrate being produced annually over a 30-year mine life.
Costing for Phase 2 is based on the addition of two modules of the beneficiation plant with a proportional increase in mining and infrastructure costs. The capital mine cost for Phase 2 will be $39.1 million, for a total project cost (Phase 1 and Phase 2) of $60.1 million.
In addition, the company notes that discussions with buyers have indicated their preference is to purchase Molo graphite concentrate at the local Madagascar port at FOB China prices.
As such, the FS operating costs (opex) include the all-in FOB cost to ship concentrate to the local Port of Fort Dauphin. The project’s Phase 1 opex is currently estimated at $565.93/t and Phase 2 at $514.17/t.
Shares of NextSource Materials were up over 14% on Monday. The graphite miner has an approximate market cap of C$20.3 million.