EcoGraf secures graphite supply deal for WA manufacturing plant

EcoGraf graphite supply deal Western Australia manufacturing plant Technografit
Germany’s Technografit has agreed to supply graphite feedstock for EcoGraf’s proposed Kwinana production facility for at least five years.

Graphite company EcoGraf (ASX: EGR) has signed a memorandum of understanding with German trading group Technografit for the supply of natural flake graphite feedstock for its proposed battery graphite manufacturing facility in Kwinana, Western Australia.

Technografit is considered a leader in trading mineral raw materials, graphite sales and distribution in Europe.

Under an initial five-year deal, Technografit has agreed to supply graphite concentrate feedstock from “a range of pre-qualified sources” for EcoGraf’s phased spherical graphite development, with feedstock prices to be based on prevailing global market prices.

Initial feedstock requirements of up to 10,000 tonnes will increase up to 40,000t from 2023.

After the five years, the deal can be renewed for a further five years by mutual agreement.

Technografit will provide assistance to EcoGraf with battery graphite sales, product development programs with prospective customers, as well as sales of by-product fines into higher value carbon markets.

EcoGraf said the deal is expected to be made binding by the end of June.

State-of-the-art production facility

In a statement today, EcoGraf managing director Andrew Spinks said finalising the feedstock supply arrangements is “another milestone in the company’s progress to finance and develop its state-of-the-art” 20,000t per annum battery graphite purification facility” in Perth’s south.

According to Mr Spinks, the Kwinana facility will be the “first of its kind” to be constructed outside of China and will provide a “new supply of high-quality and cost-competitive purified spherical graphite for the lithium-ion battery market”.

Today’s news follows the company’s announcement in early March that it had successful trialled its proprietary graphite purification technology to recycle lithium-ion battery anode material in Germany, with the EcoGraf process increasing the carbon purity of the recycled material by more than 200% and achieving a carbon content in excess of 99%.

Project financing

Australian government agency Export Finance Australia recently confirmed it would consider providing debt finance for EcoGraf’s new US$72 million (A$117 million) development, subject to completing a detailed assessment of the project.

A detailed financial model has been prepared for the Kwinana process that incorporates proposed terms for a US$35 million (A$57 million) debt funding package, representing about half of the total construction cost.

COVID-19 impacts

At the start of April, EcoGraf announced some cost-cutting measures due to the impact of ongoing global COVID-19 containment measures including an agreement with non-executive directors to waive their fees.

EcoGraf’s managing director, executive director and management salaries will also be reduced by 50% with salary payments currently suspended.

The executive director salary cut is in addition to the 50% reduction made last year to reduce costs in Tanzania, where EcoGraf has proposed to build the Epanko graphite mine.

EcoGraf has also reduced all non-essential project development expenditure in Tanzania as it focuses on progressing a US$60 million (A$98 million) debt financing proposal with KfW-IPEX Bank.

“The measures we’re taking reflect our commitment to aligning our interests with our long-term shareholders and stakeholders and our determination to build a successful graphite business to become a major, long-term supplier of responsibly produced graphite products,” the company stated.