The ASX-listed graphite junior is in discussion with CN Docking Joint Investment and Development, a subsidiary of China National Building Materials Group (CNBM) and China Gold Group Investment.
Graphex Mining said negotiations continued in China last week with both parties making significant progress towards finalising a term sheet. The key outstanding issues are the mechanics of the investment structure and how the JV will be operated.
Graphex Mining said the key parameters of the transaction are expected to include a substantial equity investment in Graphex’s wholly-owned Tanzanian subsidiary, Ngwena, with the project partners receiving a 50% interest in Chilalo via a project-level JV; an offtake agreement for 100% of Chilalo graphite; and all parties in the JV working together to obtain debt financing, with the project partners taking primary responsibility for debt negotiations with Chinese banks.
Furthermore, Graphex Mining will be the manager of the JV and will provide technical expertise for the development and operation of the project.
“We are pleased with the progress we are making on terms for the JV, including offtake and financing arrangements with our project partners,” said Graphex MD Phil Hoskins.
“I would like to acknowledge the ongoing commitment of senior management time and resources from our project partners to our negotiations. This followed their recently completed technical due diligence that included comprehensive metallurgical test work, a mid-year site visit and finally, the completion of an internal feasibility study.
“Following the conclusion of the Chinese new year, the parties expect to continue negotiations with the aim of executing a term sheet. Subject to agreement being reached, the parties will then begin the preparation of detailed documentation. These agreements will require approval from the group boards of CNBM and China Gold as well as Chinese regulatory approvals customary for overseas investment. However, there is no certainty that a binding arrangement will eventuate.”
Commenting on the proposed transaction structure, Hoskins continued: “We consider the proposed deal structure, where the offtaker invests alongside us as a JV partner, to be critically important in ensuring their commitment to the project’s success.
“A transaction of this nature is a strong show of confidence in the quality of our product and project and will provide Chilalo first mover advantage in supplying China, the largest market for expandable graphite. Conclusion of this transaction is expected to ensure the development of the Chilalo project with minimal dilution for shareholders.”
Graphex Mining was created by a spin-off of IMX Resources’ Chilalo project in Tanzania with a strategy as a pure play graphite company to fast-track development.