Renascor Resources sets up expansive graphite supply line into China

Asia’s moreish taste for Australian-sourced graphite could only be just beginning with graphite producer Renascor Resources (ASX: RNU) reporting that it has signed its first-ever memorandum of understanding (MoU) to provide graphite concentrates from its Siviour Graphite Project in South Australia.

Albeit, the agreements are non-binding in nature.

The MoU was agreed with China’s Qingdao Chenyang Graphite, one of the largest graphite companies in the Qingdao area of China’s Shandong province.

The terms of the agreement state that Renascor will supply graphite concentrates in accordance with Renascor’s proposed “staged development” of its Siviour graphite project, as first proposed by its pre-feasibility study (PFS) published earlier this year.

Cross-border understanding

The first stage of Renascor’s action plan is to reach a position of producing around 22,800 tonnes per year and offload around 10,000 tonnes to Chenyang.

In stage 2, Renascor’s annual production is forecast to increase to 156,000 tonnes per year while its supply to Chenyang is agreed to increase to 30,000 tonnes per year.

Renascor has admitted that the MoU came about after a series of meetings with Chenyang organised by Mastermines, Renascor’s Asia marketing advisor.

“It came as no surprise that an Australian graphite resource such as Siviour would be welcomed by Chinese processors. Sivour’s low cost and safe jurisdiction mark it as unique in graphite developments worldwide and it has been welcomed by the Chinese market,” said David Gillam, Director of Mastermines.

“We see the agreement with Chenyang as the first step in bringing a number of targeted agreements to Siviour. Chenyang is a long-established processor that has a genuine need for Renascor’s graphite concentrates in coming years.”

Renascor also said that the MoU also contemplates cooperation between Chenyang and Renascor to establish “pilot plant production” at Chenyang’s facilities, as well as collaboration for the supply of “advanced products from Siviour graphite”.

One potential avenue to be explored by Chenyang and other buyers is the lithium-ion anode material produced from Siviour’s graphite earlier this month.

As an early-stage graphite producer and international supplier, the MoU is not contractually binding and the two companies have set aside time to enter further negotiations relating to exact price, product and quality, by using the existing MoU as a framework to ensure both parties are happy with the terms.

Both companies are keen to ensure they are not commercially disadvantaged by being tied to financial commitments they may wish to change over time as various factors undergo change and evolution in the graphite industry — factors such prevailing graphite prices, graphitic content and end-user specifications that may still be subject to change.

Further discussions are planned for next month during a site visit to Chenyang’s facilities by Renascor executives.

“Aligning with Chenyang is an important first step in developing the Siviour resource. Renascor plans to ensure that strong relationships are formed and maintained as we fast-track Siviour to full production. We look forward to building upon this first step during the coming months,” said David Christensen, managing director of Renascor Resources.

“As we prepare for next month’s meetings in China with Renascor executives, we expect to build upon this agreement and establish additional relationships that will offer Renascor broad exposure to key growth markets,” added Mr Gillam.