Special Report: Triton Minerals is within sight of moving its Ancuabe graphite project in Mozambique into construction after securing key approvals for a game-changing transaction with major Chinese company Jinan Hi-Tech Holdings (JHT).

Triton (ASX: TON) announced in June that JHT, a multi-billion-dollar provincial SOE involved in the Chinese building and infrastructure sectors, would pay a premium to acquire Shiandong Tianye Mining’s 19.3% stake in the company and subscribe for a further $8.5 million in Triton shares.

As part of the same transaction, JHT agreed to provide support in arranging the debt financing required to build Ancuabe through Chinese banks.

Triton secured approval from Australia’s Foreign Investment Review Board for the JHT transaction in mid-September, before shareholders voted to approve the deal at a general meeting held at the end of the month.

Then last week, China’s National Development and Reform Commission gave its consent for Triton and JHT to move ahead, leaving only a couple of minor conditions to be satisfied before formal completion can be declared.

Triton managing director Peter Canterbury said the backing of JHT meant that the company was exceptionally well placed to ensure Ancuabe became Africa’s next large-scale graphite mine.

“JHT has given an undertaking to assist in arranging approximately US$70 million in debt on what are likely to be favourable terms,” he said.

“And we are confident of being able to secure the modest balance of funds required to take Ancuabe to first production.”

Funding final piece of the puzzle

Ancuabe is at a stage referred to in the mining industry as “shovel ready”.

Triton completed the Definitive Feasibility Study on the project in December 2017 and has in place binding offtake agreements for 50% of production with two major Chinese graphite producers.

Chinese construction giant MCC International has been appointed as the Engineering, Procurement and Construction contractor and a contract for construction has been signed.

Accompanying the contract was a letter of intent from China Merchant Bank for providing concessionary debt financing.

In May, the Ancuabe Mining Concession was granted by the government of Mozambique.

Once Triton provides MCC with notice to proceed, the construction process is expected to take about 18 months.

Outlook positive for large flake

The expandable graphite market is Triton’s principal target for the large flake product that Ancuabe will produce.

Large flake size and above is required for expandable graphite products including fire-resistant building materials and rubber and polymer additives in which thermal conductivity is necessary.

Canterbury believes the pricing outlook for large flake graphite is overwhelmingly positive as China, where majority of supply comes from, is running out and demand is forecast to rise strongly.

One factor expected to drive demand is growth in the fire resistant building materials market in China, where legislators have mandated their use in all new buildings while banning the use of traditional bromine fire retardants due to toxicity concerns.

Current annual consumption of expandable graphite in China is 50,000 tonnes, but building industry officials estimate that could increase to as much as two million tonnes a year.

This story was developed in collaboration with Triton Minerals, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.