BlackEarth’s Maniry graphite project is tastier than ever

BlackEarth has delivered a significant improvement to the already robust scoping study for its Maniry graphite project in southern Madagascar.

The update is based on the recent resource upgrade, reviews of both operating and capital expenditure, as well as the modest increase in graphite prices since the last estimate.

All these factors have allowed BlackEarth Minerals (ASX:BEM) to improve pre-tax net present value and internal rate of return, both measures of a project’s profitability, by 126% and 41.9% to circa US$230m and 86.1% respectively.

Other improvements include a major reduction in the payback period from four years in the original 2019 scoping study to just 1.2 years, and an 81% increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA) to US$561m.

The November increase in Maniry’s indicated resource by 32% to 9.9 million tonnes grading 7.7% total graphitic carbon, or 758,000t of contained graphite, has also increased the estimated mine life up from 11 years to 14 years.

Overall OPEX cost reductions of US$900,000 ($1.28m) per annum have been realised due to savings in mining and mining related costs along with lower logistics costs, general administration costs and non-mining related employee costs.

Likewise, a review of various Stage 1 and Stage 2 CAPEX assumptions have identified cost reductions of US$2.7m and US$2.4m respectively.

These were achieved by assessing the cost of buildings on site and by allowing parts of the workforce to drive to site each day.

Meanwhile, improvements in graphite concentrate pricing over 2021 are expected to increase over the medium to long term as demand pressures effect supply, leading the company to increase the overall basket price by 3% to US$1,258 per metric tonne.

The scoping study envisages a project that processes 500,000 tonnes per annum of graphite ore for the first three years (Stage 1) before increasing to 1Mtpa from the fourth year onwards (Stage 2).

This currently assumes the mining of 100% of the indicated resource and 20% of the inferred resource of 13.2Mt at 6.4% TGC, or 841,000t of contained graphite.

BlackEarth’s updated scoping study is part of the Maniry definitive feasibility study, which is on track for completion in the middle of 2022.

Metachem joint venture

The update also includes a forecast share of revenue that it could receive from its joint venture with India’s Metachem Manufacturing Company, a leading expandable graphite producer.

This project is expected to deliver EBITDA of US$107.7m over a project life of 25 years.

After-tax NPV and IRR have been calculated at US$38.9m and 405% respectively while project CAPEX has been estimated at a very low US$1.5m for the first stage, a further US$1.5m for the second stage, and sustaining CAPEX of US$1.3m over the life of the project.

The low CAPEX is due to the project’s location within a Special Economic Zone in India.

The JV is on track to develop its plant and operations in the first half of 2022 and commence production in mid 2022.

BlackEarth will secure a supply of graphite concentrate to provide to operations in the initial years before Maniry becomes operational.

Expandable graphite output is expected to between 2,000tpa and 2,500tpa for the first three years before ramping up to 4,500tpa from the fourth year on.

This article was developed in collaboration with BlackEarth Minerals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.