Renascor’s BAM study lays out journey to become a low-cost supplier of Aussie graphite

An optimised Battery Anode Material (BAM) study has confirmed compelling economics of Renascor’s integrated graphite mine and downstream Purified Spherical Graphite facility in South Australia.

The BAM study supersedes all previous studies and confirms Renascor’s Siviour Graphite Project as a low-cost, high-value supplier of 100% Australian-made graphite for the global lithium-ion battery anode sector.

Renascor plans to integrate its world class Siviour Graphite Deposit with a downstream manufacturing facility, also in South Australia, and the BAM Study provides a clear path to creating a competitive advantage as a low-cost producer of Purified Spherical Graphite.

Highlight outcomes of the optimised BAM Study include a post-tax unleveraged NPV of A$1.5 billion with a post-tax unleveraged IRR of 26%, and average annual EBITDA of A$363 million.

With the successful delivery of the BAM, Renascor’s immediate next steps will focus on securing binding offtake agreements, concluding lender due diligence and securing early contractor engagement.

Low Operating Cost

The BAM shows that the Project will deliver a globally competitive estimated Purified Spherical Graphite (PSG) gross operating cost of US$1,782 per tonne over the first 10 years and US$1,846 per tonne over 40-year mine life (LOM).

This includes a graphite concentrate operating cost of US$405 per tonne over first 10 years and US$472 per tonne over the LOM, which compares favourably with operating costs from existing commercial PSG operations (all of which are in China), for which Renascor’s market data suggests average operating costs of approximately US$2,000 per tonne.

Renascor achieves a relatively low PSG operating cost, in large part, by using its own graphite concentrates as feedstock to produce PSG and introducing operational efficiencies into a state-of-the-art PSG facility.

While the Australian Government has approved a loan facility of $185m for the development of BAM, estimated capital for the initial upstream operation of $214.5 million is expected to be funded via Renascor’s existing cash balance ($129 million as at 30 June 2023) and debt facilities.

RNU’s phased development plan, beginning with production of graphite concentrate before shifting to PSG, is designed to align with graphite market demand and is expected to reduce execution risk prior to the initial downstream capital requirement of $394.6 million.

Secure supply from OZ

China currently produces 100% of the world’s supply of PSG.

By offering commercially viable supply from Australia, which is considered among the most attractive mining jurisdictions worldwide, Renascor offers a secure alternative source.

This also provides the company with a competitive advantage with potential offtakers seeking to diversify existing supply channels.

Results to assist with securing offtake

“The project has already attracted conditional funding support from the Australian Government and non-binding commitments from leading anode manufacturers,” RNU managing director David Christensen said.

“We look forward to using the results of this study to assist in securing binding offtake and funding to permit us to advance into construction and operation of an important new supply line for the lithium-ion battery industry.”

Graphite market at risk of going into supply deficit

Currently, the battery market accounts for approximately 50% of total demand for graphite concentrates.

As take-up of electric vehicles increases, the battery market’s share of total demand is expected to rise to 75% by 2029, with the overall market for graphite concentrates increasing by ~60% from 1.2 million tonnes to 2.9 million tonnes over the same period.

This rapid increase in demand for graphite concentrates, coupled with a lack of upstream development in recent years, puts the market at risk of going into supply deficit if new projects are not brought online in the near term.

This article was developed in collaboration with Renascor Resources, 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.