ASX-listed graphite junior inks crucial deal with Tanzanian Government

Battery metals developer Evolution Energy Materials (ASX: EV1) is another step closer to producing its first graphite, laying the groundwork for a joint venture with the Tanzanian Government.

The framework agreement clears the way for the government to provide the necessary rights, permits and approvals for EV1’s flagship Chilalo Graphite Project, in the Mtwara region of Tanzania, to produce its first graphite.

Kudu joint venture company 

A joint venture between Evolution Energy Minerals (84%) and the Tanzanian Government (16%) is a central feature of the agreement. Under the terms of the deal, the mining licence and prospecting licences could be reissued for an additional 10 years after the initial term expires.

Evolution’s managing director Phil Hoskins described the settling of these agreements as a critical step forward in the development of the company’s Chilalo project – particularly in helping to provide the certainty financiers require.

“The completion of these Agreements provides that certainty, together with the updated detailed feasibility study, which is expected to be released in the coming weeks,” he said.

“We have worked closely with the Tanzanian Government for an extended period of time and recognise that aligning with the Government and with the people of Tanzania is fundamental to unlocking the value of our Chilalo Project.”

Why is graphite important?

Flake graphite is primarily used in the manufacture of lithium batteries for electric vehicles and various other applications. A core component in battery anodes, graphite takes in and holds lithium ions when batteries are charging, and releases them when energy is expelled.

Much of the focus on EV battery materials initially centred on lithium carbonate. But another element – this one a naturally occurring crystalline substance comprised of layers of graphene – is (arguably) just as important. That’s because a typical 60kw-hour EV battery contains a little over 70 kilograms of graphite – versus around 9 kilograms of lithium.

Flake graphite is also key to the manufacture of green hydrogen batteries and other applications in renewable energy and the broader decarbonisation theme.

Global demand for graphite is expected to treble by 2030, to more than 4 million tonnes, according to research firm Benchmark Mineral Intelligence. In line with rising demand, graphite currently trades at around US$3,100 a tonne, up 10% since last February, according to recent figures from Benchmark Mineral Intelligence.

And prices will likely rise even more strongly in the coming years, with the lithium-ion market alone expected to need 1 million tonnes per year by 2025. Benchmark figures indicate just 1 million tonnes of graphite was produced – for all uses – in 2021.

Graphite prices

Uncoated spherical purified graphite price, US dollars per tonne (Source: Bloomberg, Benchmark Mineral Intelligence)

What’s next?

 A public signing ceremony is expected to be held later this month, before the President of Tanzania, Her Excellency Samia Suluhu Hassan.

The results of a detailed feasibility study are also due to be released in early 2023. This will follow on from several stages of test work on graphite from the Chilalo site completed last year. These confirmed low levels of boron and molybdenum - a prerequisite for use in advanced battery materials.

When Chilalo graphite was processed into coated spherical graphite, the product ‘significantly’ exceeded the specifications required by major EV manufacturers. 

 Evolution Energy Minerals expects to produce its first graphite in 2024.

 Last April, EV1 struck a crucial three-year deal with Chinese company Yichang Xincheng Graphite Co (YXGC) for the supply of up to 30,000 tonnes per annum of flake graphite. This volume represents around 50% of EV1’s annual production target of 60,000 tonnes.

Milestones ahead…

• The company is aiming to commence construction in 2023

• March 2023 – Formal signing of framework agreement with Tanzanian President, Her Excellency Samia Suluhu Hassan, in March

• Q2 2023 – Updated definitive feasibility study, following on from the DFS completed in 2020, which is anticipated in the coming months.

…and so far

• September 2022 – EV1 unveiled its strategy to target the Fuel Cell Electric Vehicle supply chain

• August 2022 – Evolution Energy received firm commitments of $13 million capital raise

• July 2022 – Graphite samples passed thermal purification test work with flying colours, easily exceeding required purity levels for battery and nuclear applications.

• May 2022 – Binding offtake agreement signed with China's Yichang Xincheng Graphite Co, for 50% of EV1’s annual output for a minimum three-year period.

Disclaimer: Market Index helps small-cap ASX-listed companies connect with Australian investors through clear and concise articles on key developments. Evolution Energy Minerals was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.