NextSource Materials reports positive feasibility study for Phase 2 expansion at Madagascar graphite mine

Source: Proactive

NextSource Materials Inc. (TSX:NEXT, OTCQB:NSRCF) has reported positive results from an updated feasibility study for a proposed Phase 2 expansion of its Molo Graphite Mine in southern Madagascar. The study outlines plans to increase production capacity to 150,000 tonnes per year of flake graphite concentrate over a 37-year mine life.

Expansion Overview

The feasibility study envisions a staged expansion beyond the existing Phase 1 operation, involving the construction of three new 50,000-tonne-per-year processing modules in two phases.

Key Financial Highlights

• Capital expenditure: Approximately US$290.8 million
• Pre-tax net present value (NPV): US$402.5 million (at an 8% discount rate)
• Pre-tax internal rate of return (IRR): 21%
• Payback period: 7.2 years

Modular Construction Approach

According to the study, the modular construction approach is intended to reduce build time, development costs, and execution risks compared with conventional mine construction. The capital estimate includes:

• Mining equipment
• Modular fabrication
• Shipping
• Infrastructure
• Commissioning
• Contingencies
• Working capital

Management Commentary

President and CEO Hanré Rossouw stated that the updated study supports the company's strategy to expand the Molo Mine in stages to meet anticipated demand for flake graphite, particularly from the electric vehicle (EV) battery market.

"A staged expansion of this magnitude will position NextSource as a major global supplier and underpins our vertical integration strategy to offer an ample and secure supply of graphite flake and battery anode material, enabling direct supply to the electric vehicle battery market."

"In addition, the staged approach set out in the updated Feasibility Study reduces operating risk, lowers financing costs and accelerates revenue while providing flexibility to respond to market demand."

Offtake Agreements and Strategic Discussions

The phased expansion was developed based on:

• An offtake agreement with Mitsubishi Chemical Group for graphite products from the company's planned battery anode facility in the United Arab Emirates
• Ongoing discussions with automotive manufacturers and battery anode partners regarding future demand

NextSource noted that it has not yet made a production decision for the first phase of the expansion, and discussions with offtakers and potential strategic partners regarding the project timeline remain ongoing.

Cost and Revenue Assumptions

| Metric | Value | |--------|-------| | Life-of-mine average operating costs (at mine site) | US$419 per tonne | | Total cash costs (free-on-board basis) | US$650 per tonne | | All-in sustaining cost | US$665 per tonne | | Life-of-mine weighted average selling price | US$1,138 per tonne |

Mineral Resources and Reserves

The Molo project contains the following resources:

• Measured mineral resources: 23.51 million tonnes grading 6.31% graphitic carbon
• Indicated resources: 76.75 million tonnes grading 6.25% graphitic carbon
• Inferred resources: 40.91 million tonnes grading 5.78% graphitic carbon
• Total proven and probable mineral reserves: 82.58 million tonnes grading 6.27% graphitic carbon