Renascor Resources’ Siviour graphite DFS forecasts $2.1b over 40 years

A definitive feasibility study for Renascor Resources’ (ASX: RNU) Siviour graphite project on South Australia’s Eyre Peninsula has confirmed its potential as a world-class, low-cost, long-life operation capable of achieving attractive profit margins in a low graphite price environment.

The study showed Siviour could generate $2.1 billion over a 40-year mine life, at an operating cost of $508 per tonne (or $471/t over first 10 years) – placing it among the lowest projected operating costs globally.

Project economics include a start-up capital requirement of $114 million for the first four years, and an additional $77 million for the remainder of the project’s life.

Average earnings before interest, tax, depreciation and amortisation stand at $83 million, with a post-tax net present value of $388 million.

Up to 60% of start-up costs will qualify for support from Dutch government export credit agency Atradius, which Renascor was granted in April based on the sourcing of Dutch content through Royal IHC.

Royal IHC has committed $1 million to undertake early project works, including metallurgical testwork and detailed engineering and design.

Staged development

The DFS was based on a staged development of Siviour, with average production of 80,000tpa during the first four years of operation (stage one).

An expansion plan in the fifth year will be funded through expected cashflows from the first stage.

Average production from the fifth year through to the 10th year of operation (stage two) is expected to be 144,000tpa.

Renascor managing director David Christensen said the study confirmed Siviour’s status as a low-cost, tier one graphite project.

“We believe this cost advantage, coupled with our location in a low sovereign risk jurisdiction, will enable Siviour to become a premier provider of graphite for the growing lithium-ion battery market, as this sector becomes the dominant end-user of natural flake graphite,” he said.

Offtake discussions

Mr Christensen said Renascor would spend the next six months working on offtake, permitting and financing arrangements for the project’s stage one development.

The company signed a non-binding agreement in April 2018 with China’s Qingdao Chenyang Graphite for the offtake of up to 10,000t of graphite concentrates from stage one of Siviour and up to 30,000t from stage two.

It has since engaged nearly 40 potential offtake partners and is advancing discussions with strategic focus on the lithium-ion battery market.

Work is also expected to include qualification of samples of Siviour graphite concentrates with established end-users.

Low operating cost

Siviour’s projected low operating costs are due in large part to the shallow, horizontal orientation of a single massive orebody offering comparatively low mining costs.

The orientation facilitates a single shallow mining design enabling extraction via conventional open pit methods over a 14-phase mine plan.

Average processing grades for the project will vary during the life of mine, starting at 11% total graphite content up to the fourth year of operation, and gradually decreasing from 9% TGC to 7% TGC from the fifth year through to the 27th year.

From the 28th year onwards, 100% of the ore will be sourced from a 4.7% TGC low grade.

Spherical graphite by-product

Renascor said the Siviour could also host downstream production of higher-value spherical graphite by-product, manufactured from graphite produced onsite through further milling and purification and exported to key players in the growing lithium-ion battery market.

A pre-feasibility study completed in February confirmed the opportunity for the company to unlock further value from Siviour through Australia’s first integrated graphite concentrate and spherical graphite operation.

Production would give Renascor more direct exposure to the lithium-ion market, as spherical graphite is a sought-after component in lithium-ion anodes.

Additionally, as the cost of graphite concentrates is the primary cost in producing spherical graphite, Renascor would enjoy a potential advantage given the low cost of producing Siviour concentrate.

“The low operating cost we expect to achieve at [Siviour] underpins a very high margin spherical graphite operation and offers us more direct exposure to the growing lithium-ion battery market,” Mr Christensen said.

“Nearly all spherical graphite used in lithium-ion battery anodes is currently sourced from China – [our] results demonstrate the potential to offer strategic diversification of supply via a high-quality product mined and processed in Australia.”

At mid-afternoon, shares in Renascor were trading 7.69% higher at $0.014.