Tanzania could be celebrating its first graphite production in late 2020/early 2021 should ASX-listed junior Walkabout Resources fulfill its objective to secure the necessary cash to start full-scale construction at its Lindi Jumbo graphite project.
With an early-start work programme underway and a de-risked small-scale start-up approach to follow, the company offers an investment-friendly option to tap into an extremely high grade project with longer term upside potential, chairman TREVOR BENSON told LAURA CORNISH.
Situated 200 km from the port of Mtwara in south-east Tanzania, Benson confirms that the company’s Lindi Jumbo graphite project is development ready.
“We have our mining licence in place, a definitive feasibility study (DFS) confirming strong project economics and strong support from the Tanzania government,” he states.
Having successfully raised cash over the course of its project advancement history, the company has been able to initiate an early-stage programme which will help Lindi Jumbo transition into full-scale development with speed and ease.
To date significant progress has been made on early works for the project with the clearing, topsoil removal and stockpiling, terracing and levelling and establishment of ROM pad areas for the processing plant. Clearing of the area for the explosive magazines is complete and levelling and base preparation for the planned civils is also in progress. Clearing and grubbing for the starter area of the tailings storage facility (TSF) is underway and once completed the stripping of the topsoil material for stockpiling will commence. The company has also relocated approximately 730 local residents – most of them cashew farmers.
Having appointed an EPC contractor for the project – Jinpeng Mining and Machinery – the procurement of long-lead time items has been placed and the manufacture of some those items already underway.
Walkabout Resources has also secured three binding offtake term sheets for the supply of its graphite production. The first is with Chinese expandable graphite producer, Inner Mongolia Qianxin Graphite Co. The binding terms are to deliver a minimum of 10 000 tpa and a maximum of 20 000 tpa of large flake graphite for a period of three years following the commencement of production.
A final off-take agreement shall replace the term sheet. Although a framework for the pricing mechanism has been discussed, the final pricing agreement will only be agreed at a date, at least one month prior to delivery of the first batch of concentrate, based on the spot price at the time of delivery.
The final tonnage will also depend on the availability of adequate material in the sought-after fractions. These mechanisms give the company flexibility in delivering excess product above the agreed minimum to other customers should demand result in improved prices at the time.
The second binding offtake agreement is with Chinese graphite products manufacturer Qingdao Risingdawn Graphite Technology Co. The binding terms of the agreement are to deliver 10 000 t of flake graphite concentrate into China for a period of three years following the commencement of production. A final off-take agreement shall replace the term sheet and this is due to be finalised during the second half of 2019.
The two agreements now secure the sale of 100% of the planned production of high-purity large flake graphite concentrate for at least the first three years following commencement of operations.
“The only hurdle left to jump is securing the necessary US$30 million to move our project into construction,” Benson iterates. This will be secured largely through debt to avoid shareholder dilution. “We hope to finalise our funding by November this year. The market has responded positively to the initiatives we’ve taken thus far and our smaller-scale approach and we feel positive of meeting our cash goal targets,” Benson notes.
Should the company succeed it will quickly move the project into full-scale construction and estimates a nine to 12-month timeline to move into commissioning and production. This could see the company produce first graphite towards the end of 2020 or early 2021.
Jumbo grades and stellar economics
Walkabout Resources maintains that its largest value proposition amongst a multitude of other graphite juniors is its premium product which will likely remain in short supply, even in a highly contested supply environment.
“All of our test work has demonstrated the ability to return favourable ratios of the high-value, larger graphite flakes with up to 50% of the total graphite in concentrate in the super jumbo (+500µm) and jumbo (+300µm) categories. As much as 74% of our natural flake sizes will be above 180 µm. Our 17.9% total graphite content LOM reserve grade is the highest in Africa and these are the numbers we are going to deliver from the first day of mining.”
An updated DFS – completed in May 2019 – reveals strong project economics, based on a 40 000 tpa graphite production model and a 24-year lifespan. “We could increase this to 50 000 tpa with no extra capital,” Benson notes.
Key project economics includes:
- A LOM revenue of $1.445 billion;
- Very high cash margins of >$1 000/t Free on Board (FOB);
- A high post-tax NPV10 of $197 million;
- A robust post-tax IRR10 of 119%;
- A 24-month payback period; and
- Operational costs which remain in the lowest industry quartile at $347/t of concentrate FOB at the port of Mtwara.
The intent is to fully outsource the mine operations to specialist partner suppliers, which has the effect of reducing capital and fully aligning the various co-dependent working areas of the relatively small and uncomplicated, yet remote operation.
“The Tanzanian government has been incredibly supportive of the project and shares our objectives to move Lindi Jumbo from project to mine,” Benson concludes.