Evolution Energy Minerals Ltd (ASX:EV1) is weighing up a wide range of financing avenues for its cornerstone Chilalo Graphite Project in Tanzania.
The ASX-lister has garnered attention from international banks, investment funds, private equity and strategic investors as it advances the development-ready graphite project.
Discussions come soon after Evolution released an updated definitive feasibility study (DFS) for Chilalo, estimating a post-tax net present value of US$338 million and a 32% internal rate of return, with average graphite concentrate production of 52,000 over a 17-year mine life.
Chasing optimal funding mix
Evolution managing director Phil Hoskins said: “We have achieved a number of important milestones recently with the publication of the updated DFS and the execution of key agreements with the Tanzanian Government, both of which are key requirements of potential financiers.
“We are pleased that potential financiers have appointed an independent technical engineer as they advance their due diligence on the financing of Chilalo, with commercial bank debt one of several funding sources we are considering.”
In essence, Evolution is taking an exhaustive approach to ensure that the most suitable funding mix for the development of Chilalo is secured.
Auramet International LLC, which brings considerable experience in debt advice for African resources projects, continues to advise the graphite stock.
Sizing up Chilalo
EV1 is fielding non-binding debt funding interest from major banks in Europe, Africa and Tanzania. As part of their due diligence mission, prospective financiers have appointed independent technical, environmental and social consultants to release reports in the September quarter.
Tech advisory Palaris’ intelligence will include an exhaustive due diligence review of the updated DFS as well as front-end engineering and design (FEED) and a project risk assessment.
Simultaneously, consultancy Prime Resources will carry out environmental and social due diligence against key standards and guidelines, including the Equator Principles IV, IFC Performance Standards, World Bank Guidelines on environment, health and safety and UN Guiding Principles on Business and Human Rights.
Palaris and Prime recently conducted a site visit, joined by prospective financiers, local government officials, community leaders and members of Evolution’s board and management team.
A wealth of possibility
As it explores several options for Chilalo’s financing, EV1 is holding discussions with multi-lateral institutions, investment and ESG funds, private equity groups and strategic investors.
The company may also consider a project level sell-down (at a premium to market valuation) for parties that offer a strategic benefit to either the mine or downstream processing opportunities.
Proposed equity and debt financing structure
It’s important to note that EV1 already has offtake arrangements in place for Chilalo’s coarse flake material, which is used in expandable graphite products.
Meanwhile, the project’s fine flake graphite concentrate — which test-work has shown to be suitable for battery anode applications — is currently uncontracted to offtake agreements, thereby providing the company with strategic leverage in funding discussions.
Of course, all expressions of interest to date are indicative, non-binding and subject to the standard round of due diligence and regulatory approval.
Evolution will keep the market abreast of any developments in the Chilalo financing story.