MELBOURNE, Oct 27 (Reuters) - South Korea's POSCO 005490.KS may build and help arrange financing for a graphite project in Tanzania being developed by Magnis Resources MNS.AX , as the Australian explorer races to start producing from the east African site by 2017.
Demand for graphite is expected to soar as it is a major ingredient in lithium-ion batteries for hybrid vehicles and wind and solar energy storage, with appetite for greener transport and energy booming.
Magnis said on Tuesday it had signed a memorandum of understanding that could see POSCO Engineering & Construction arrange debt from lenders it has ties with for the $210 million Nachu project, as well as coming up with a fixed-price bid by mid-2016 to build the mine and processing plant.
"The quality of the graphite at Nachu is the best in the world and with the huge demand in the battery market, we are excited to be involved with Magnis," POSCO E&C mining plant business group director Peter Lim said in a statement put out by Magnis.
Electric car maker Tesla Motors Inc TSLA.O is looking for graphite supply for a factory it is building in Nevada which it says will make more lithium ion batteries annually by 2020 than were produced globally in 2013.
Magnis is in talks to line up debt and construction proposals from a range of sources in order to get the most competitive offers and the quickest development plan, said its chairman, Frank Poullas.
The plan with POSCO E&C is similar to one that Magnis lined up with state-owned China National Nonmetallic Minerals Industrial Corp (SINOMA) for $150 million in potential project finance and construction services.
SINOMA is one of two Chinese companies that have agreed to buy a total 180,000 tonnes a year, or about 70 percent, of the planned output from Nachu. Supply agreements like those are key to lining up financing.
"The remaining offtake that we plan to sign will be with western groups, just to spread that risk," Poullas told Reuters.
"What we've seen with a lot of parties looking, when it comes to financing, is they want western offtakes."
Poullas declined to comment on whether Magnis was in talks to supply Tesla.