Transcript
With regards to the updated DFS we’re expecting that to be released in mid-october. We appointed CBC engineering for the updated DFS and the front-end engineering design and CBC’s the engineer that’s worked with our Executive Director Michael Bourguignon on Syrah Resources project before so getting the old team back together.
The scope itself is not very much different to our original DFS from Q1. The only changes are really to dry stack our tailings, which removes quite a big ESG risk and we’re expecting that actually to improve the economics outside of that. It’s a bit of a repricing exercise obviously in the inflationary environment we’re in, you need to update your costs and these sorts of things, but we still expect it to present a very economic case and that’s because the graphite prices are up significantly since the original DFS two years ago.
I’d say the graphite price or average sale price for our DFS would be about 20% higher than than was used in the DFS.
We’ve been working with the Tanzanian government all year, several trips to Tanzania, to finalize the framework agreement and I’m pleased to say that it’s in really great shape and expecting to be invited to Tanzania during September to sign or have a presidential signing ceremony to be able to finalize that and the reason why having a framework agreement is so important is because financiers need to see that to provide that sort of critical political stability and fiscal terms to be able to enable them to write a serious cheque to enable project finance to proceed.
The framework agreements are tried and tested now the Tanzanian government’s gone through several negotiations. Firstly with the producers than with a number of developers and our agreement is going to be no different we’re expecting the government free carried interest, the royalty and the taxes to be very similar to all other companies and quite importantly the ability to repay third party debt and also shareholder loans in the form of Evolution’s equity being repaid before the government’s free carried interest share begins. So all those things are relatively stock standard now.
We’re in a privileged position where our graphite concentrate has determined it’s suitability into a number of value-added applications.
We’ve spent several years determining that our coarse flake graphite is suitable for graphite foil, expandable graphite, fire retardants, these sorts of applications, but really pleased over the last six months to see that our fine flake concentrate is ideally suited for battery anode materials into lithium ion batteries.
We now owe it to ourselves to investigate the downstream value added options for all of these applications, which will give us diversification in revenue, but be able to capture the extreme margins and set us up to be a sustainable business for a long time to come. So we signed the binding offtake agreement with YXGC early this year for 30,000 tonnes per annum of our course flake concentrate and that’s a three-year agreement and it covers almost 75% of our revenue and it comes off the back of seven years of discussions and extensive test work and qualifications with YXGC and the added benefit of that relationship is the downstream collaboration, for which we signed an MOU.
We’re now working on a binding term sheet, which we expect to be released in the September quarter that will detail the terms of a downstream manufacturing facility and what we’re looking to build there.
At this point, we’re expecting that to be a joint venture that Evolution controls or holds the controlling shareholding and we’re expecting to produce in the order of 20,000 tonnes per annum of high value products including premium quality graphite foil seals for electric vehicles and bipolar plates for hydrogen fuel cells. It’s a fantastic and unique situation for us to be in partnering with the global leader for expandable graphite and graphite foil and one that the quality of our product and the quality of our relationships has been able to deliver.
Our fine flake has been determined to be suitable for producing the top quality electric vehicle anodes and energy storage anodes. The electrochemical performance is as good as it gets but the process in getting there is also highly differentiated to the rest of the industry.
To use thermal purification compared to highly toxic hydrofluoric acid is clearly an environmental advantage to achieve yields into finished product of 64% compared to the average of 40% means that we’ll have much more high-value product coming out the back end of the plant. So product advantages and flow sheet advantages from an economic point of view and also from a sustainability point of view.
In the coming months, we’re expecting to sign our framework agreement with the Tanzanian government in September, release our updated DFS in October and these are the critical de-risking elements required for project financiers. Early this year, we appointed Auramet International on the debt advisory side. We’ve sent out an information memorandum and expecting numerous expressions of interest to come back in the near future and upon delivering the updated DFS will have an independent Technical Engineer reviewing all of our work on behalf of those financiers.
We’re expecting that process to conclude towards the end of this year or early Q1 2023.
The ARCH Sustainable Resources Fund have done everything they set out to do when they joined the company.
So they are a 25% shareholder that’s been very helpful in bringing us up the curve on ESG and a lot of the work we needed to do in that regard.
More recently, they were the 25% cornerstone to our follow-on capital raising, and so they are continuing to follow their money and their stated position is to continue to do that through to FID, which is obviously a really important thing to have up our sleeve. More importantly, they are also introducing some of the investors in their fund for co-investment opportunities into Evolution.
So the more people we can surround ourselves with that are aligned with our strategy moving forward the easier it’s going to be to get the project financing away.
