YXGC Partnership: The binding term sheet outlines a Market Study, Site selection, Scoping Study, DFS and, subject to study outcomes, the decision to construct a downstream processing plant under a 60:40 JV. EV1 will fund the JV initially, with YXGC’s initial contribution its technology and marketing expertise. The value of their expertise will be agreed upon by the parties with YXGC to commence financial contribution once EV1 has funded an amount equal to 150% of the agreed upon value.
YXGC currently produces 30ktpa of expandable graphite and 10ktpa of graphite foil. It is currently completing an expansion to its production facility in China around half the size of the facility proposed under the JV. Construction commenced in August and is due for completion in May next year. YXGC has the technological capability and end user contacts necessary to produce and market graphite foil, bi-polar plates for hydrogen fuel cells, and seals for EVs.
We maintain that Chilalo’s high-purity/quality will continue to position it well to sell into niche end markets and/or capitalise on value-add opportunities itself.
Argonaut’s Mining Scenario and Valuation: Evolution Energy Minerals’ priority focus remains the financing and development of the Chilalo project with value-add opportunities assessed in parallel. Our model assumptions remain unchanged, although we do note that EV1 has offtakes in place for 30ktpa of coarse flake into YXGC, and potentially another 25ktpa into the new YXGC JV, implying that either of these offtakes would need to be wound back, or (more likely in our opinion) mining/processing operations expanded, as the 2020 DFS envisaged 50ktpa graphite in concentrate produced in total. EV1 is targeting FID by early next year. Our modelling does not assume any downstream value-add at this stage, we see this as potential upside.
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