Evolution Energy Minerals Ltd (ASX:EV1) is securing a number of cost savings in a bid to de-risk the development of its coarse flake Chilalo Graphite Project in Tanzania.
Reducing costs and de-risking
The focus is on project optimisation to reduce costs and de-risk the project, execution of the Resettlement Action Plan (RAP) and operational planning to prepare for project execution.
Recent strides have been made in project financing and crucial developments spanning various aspects of the project, including the engagement of a new strategic investor in BTR New Material Group Co Ltd in recent months.
The company also expects reductions in logistics and power costs from project optimisation studies and infrastructure developments within Tanzania.
In February, managing director Phil Hoskins participated in the Mining Indaba conference in Cape Town, which allowed him to put the case to potential investors and financiers, including the big international banks that Evolution has been collaborating with for several months.
He also met with senior officials of the Tanzanian Government, government agencies and logistics groups.
Port transport solution
Evolution is increasingly confident in its ability to use the Mtwara Port for shipping Chilalo concentrate.
This port, some 240 kilometres from Chilalo, is a commercial deepwater port much closer to the project than the previously earmarked port at Dar es Salaam, which is 638 kilometres away.
The shorter trucking route and lower shipping costs compared to Dar es Salaam will deliver significant reductions in shipping and road transport expenses and minimise the company’s environmental footprint.
Mtwara Port is also favoured by local officials to divert exports from the congested Dar es Salaam port. Evolution is poised to take advantage of any potential concessions offered to exporters using Mtwara instead of Dar es Salaam.
Joining the grid
Power supply constitutes a significant portion of Chilalo's operating expenses, amounting to $91 per tonne of concentrate (12% of total operating costs).
Discussions are underway with government-owned power company TANESCO, which notified Evolution that the power supply from the gas-fired power station at Mtwara would be augmented by 20MW as of March 31, to improve power distribution for the southern grid.
Power transmission projects are expected to connect the southern electricity grid to the main Tanzanian national grid within 12 months – this means there is a potential for Chilalo to gain access to lower-cost grid power.
Road authority to absorb costs
The planning phase for the road design from Ruangwa to Nangurugai is scheduled to span the next six months, followed by a three-month procurement period for materials.
It is projected that the local road authority will complete the construction of a bitumen road by the end of 2025.
In the definitive feasibility study (DFS), a capital cost of US$1.5 million was allocated for Evolution to undertake the upgrade of the Ruangwa to Nangurugai road at its expense but it now appears that the local authority will absorb this cost, resulting in a reduction in the capital cost.
Other positive discussions have also been held with the Tanzanian Government to identify challenges – including legal, regulatory, operational and market factors – and proposing solutions or ways in which the government could assist.
The company says it enjoys great support from the Tanzanian Government in working towards the financing and development of Chilalo.
Community support
Evolution says it acknowledges that the success of Chilalo hinges on the support of its local communities. Implementation of a RAP is part of this engagement, which was agreed upon by the communities and approved by the Tanzanian Government in August 2022.
Evolution says it is actively involved in various facets of the RAP, including the design of replacement housing, executing livelihood restoration programs and disbursing compensation payments to affected members of the local communities.
“It has been a busy and progressive period for Evolution Energy Minerals, as we continue to progress activities for the Chilalo Graphite Project,” said Phil Hoskins.
“In the current climate, the team is focused on lowering costs to enhance the already strong margins generated by the project. In turn, this will aid our project financing process.
“We continue to enjoy strong support from the Tanzanian Government with continued infrastructure enhancements expected to improve project economics and pro-active engagement with us on resolving any roadblocks to development.”