An independent review of the front-end engineering design (FEED) and an updated definitive feasibility study (eDFS) for the Mahenge graphite project, in Tanzania, has increased the project’s costs from the $116-million considered in the 2019 definitive feasibility study to $182-million.
ASX-listed Black Rock Mining on Monday said that the capital cost estimated in the eDFS did not include the $33-million that would be required to bring grid power to the Mahenge project from the first year of operation, with the company currently exploring potions to fund the power line externally.
The eDFS has increased the estimated Phase 1 production from the 83 000 t/y of graphite to 89 000 t/y, with the mine life remaining unchanged at 26 years. Steady-state production has increased from an expected 340 000 t/y of graphite to 347 000 t/y, with the all-in sustaining cost now estimated at $518/t, up from the $494/t estimated in 2019, with throughput rates increasing from 1-million tonnes a year to 1.15-million tonnes a year.
The project’s estimated net present value has declined from the $1.5-billion estimated in 2019 to $1.4-billion, while the expected post-tax internal rate of return has declined from 45% to 36%.
Black Rock told shareholders on Monday that the increase in the capital cost was driven by inflation in the cost of building materials, labour, energy and other consumables, while project optimisation and debottlenecking enhancements to improve the flowsheet and provide additional operating flexibility resulted in the higher anticipated production.
Black Rock in September struck a conditional framework agreement with US-based cleantech graphite processing company Urbix, which could bring forward the construction of the Mahenge Module 2 concurrent with Module 1, subject to Urbix providing substantial pre-payment or equity support to secure offtake for the second module.
The updated capital cost for the second module has now been estimated at $107-million, or 59% of the capital required for the first module.
Black Rock noted that bringing forward the second module would approximately double Mahenge’s capacity, and combined with a substantial prepayment and/or equity support through Urbix, was expected to lead to a similar company equity funding requirement to building Module 1 only. The updated capital expenditure for modules 3 and 4 is $117-million and $104-million respectively.
“We are extremely pleased with the outcome from our FEED process and eDFS update, which continues to demonstrate that Mahenge will be a globally significant graphite mine,” said Black Rock CEO John de Vries.
“Importantly, it now delivers updated economics that reconfirm Mahenge’s attractive forecast returns; a pathway to complete debt financing; high confidence to all stakeholders that the company can take advantage of the significant market tailwinds with respect to clean energy storage and decarbonisation strategies; and confirmation on the company’s discipline and commitments to Tanzania, investors and the local communities for a best-in-class approach to environmental and social governance principles.
“With increasing interest and market sentiment for graphite continuing to grow, Black Rock is now well positioned to become a meaningful producer into the strongly growing clean energy thematic,” said De Vries.
SOURCE: MINING WEEKLY