Evolution Energy Minerals Ltd (ASX:EV1) is trading higher on teaming up with Yichang Xincheng Graphite Co (YXGC) to transform coarse flake concentrate from the Chilalo Graphite Project in Tanzania into value-added graphite products.
Both companies have signed a binding term sheet, indicating they’ll complete a market, scoping and definitive feasibility study that weighs up options for a downstream processing plant that can process 25,000 tonnes of coarse flake concentrate every year.
Once both parties cut the ribbon on the scoping phase, they’ll form an incorporated joint venture (JV), in which Evolution will hold a 60% stake. YXGC will earn its 40% interest in the JV by providing its technology and marketing expertise.
The scoping phase will be managed in parallel with Evolution’s current priority — the financing and implementation of the Chilalo mine development.
Evolution is targeting a final investment decision for Chilalo in early 2023.
Investors have responded positively to the YXGC partnership, sending shares as much as 30.44% higher to $0.30.
Building on past relationships
Ultimately, the downstream joint venture further cements EV1’s relationship with YXGC.
Earlier this year, both parties struck up a three-year offtake deal, stipulating that YXGC would buy 30,000 tonnes of coarse flake concentrate per annum from Evolution’s Chilalo Graphite Project.
Beyond the binding offtake arrangement, however, EV1 and YXGC want to establish downstream graphite product manufacturing outside China.
This would allow Evolution to capture greater margins in the value chain and provides YXGC — a global leader in the manufacture of expandable graphite and graphite foil — with an opportunity for international expansion using its own technologies.
As such, Evolution believes this term sheet is critical to position the company as a downstream graphite foil and bi-polar plate manufacturer.
Partnership of equals
Speaking to the relationship with YXGC, Evolution managing director Phil Hoskins said the company’s strategy was grounded in sustainably producing graphite products for the modern economy.
“YXGC is a global leader in the processing of coarse flake graphite to manufacture high-value products such as graphite foils,” he said.
“Combining Chilalo’s high-quality coarse flake graphite with YXGC’s experience, technology and know-how will enable Evolution to capture additional margins and maximise the value of Chilalo.
“We look forward to this initiative being the next step change beyond our immediate focus of financing the Chilalo mine development.”
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