NextSource’ eyes longer Madagascar graphite mine life, higher costs

An updated feasibility study for NextSource Materials’ (TSX: NEXT) Molo graphite mine in southern Madagascar outlines lower returns and higher costs for the same output, though it extends the mine life by more than a decade.

A stage two expansion would give Molo a post-tax net present value – discounted at 8% – of $348.4 million, and an internal rate of return (IRR) of 20%, NextSource reported on Monday.

With the graphite concentrate price assumption falling to $1,138 per tonne from $1,191, the NPV is almost 6% lower than it was in a 2023 study and the IRR is down from 29%. Capital costs increased 79% to $290.8 million. Mine life expands to 37 from 25 years.

“The updated and optimized feasibility study announced today confirms the Molo mine’s ability to be expanded in stages to a larger-scale operation of global significance to meet the robust market demand for flake graphite, particularly for use in electric vehicle batteries,” NextSource CEO Hanré Rossouw said in a release. 

“The staged approach set out in the updated feasibility study reduces operating risk, lowers financing costs and accelerates revenue while providing flexibility to respond to market demand.”

Few advanced projects

The update tests Molo’s expansion bid amid rising inflation, higher capital costs and weaker graphite prices. But despite lower returns, the project is among the few advanced graphite developments outside China and produces its own patented SuperFlake brand graphite.

The update proposes adding three 50,000-tonne-per-year processing modules in two stages, giving the stage-two expansion planned output of 150,000 tonnes annually, NextSource said. That would mark a significant increase from the current capacity of 17,000 tonnes per year of graphite concentrate. The mine entered production in 2023.

The staged model was developed based on the company’s offtake agreement with Mitsubishi Chemical Group for purified and spheronized graphite that would be sourced from its planned Battery Anode Facility in the United Arab Emirates.

5M tonnes of graphite

One of the largest graphite deposits in the world, Molo hosts proven and probable reserves of 82.5 million tonnes grading 6.27% graphitic carbon for 5.1 million tonnes of contained graphite. Molo is about 900 km south of the capital Antananarivo.  

NextSource shares were flat at 30¢ apiece on Monday morning in Toronto, for a market capitalization of C$73.3 million. The stock has traded in a 12-month range of 24¢ to 63¢.