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Walkabout Resources study result points to valuable graphite mine

Published: 12:00 10 Jan 2017 AEDT

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The study forecast a payback of less than two years.

Walkabout Resources (ASX:WKT) has received results confirming highly robust project economics at the 70% owned Lindi Jumbo Graphite Project located in Tanzania.

The scoping study was for a proposed open pit mine and graphite processing plant at Lindi.

The study forecast capex of US$35 to US$40 million with a payback of less than two years – the second lowest amongst its peers and lowest in Tanzania.

The base case pre-tax net present value (NPV) is forecast to be US$169 million for 25,000 tonnes per annum production  and the upside estimate is valued at US$304 million for 40,000 tonnes per annum production.

The definitive feasibility study is well advanced and due for release in February 2017.


Background

Walkabout most recently increased its high grade JORC graphite resource tonnage at Lindi by 165% to 29.6 million tonnes at 11.0% total graphitic content (TGC).

Lindi has confirmed the highest ratio of super jumbo (+500µm) and jumbo (+300µm) graphite flake size distributions in its East African peer group.

The project also has resource grades in the Measured category of up to three times that of other projects.

The company holds 70% of the project with an option to acquire 100% of the project for $1 million.

As a result of the forecast high growth in demand for natural large-flake graphite and the premium nature of the product produced during test work, the board elected to fast-track the project to production.

Walkabout is currently in discussion with various parties regarding potential off-take deals or funding opportunities for the project.


Scoping study outcomes

The scoping study was undertaken to determine the potential viability of an open pit mine and graphite processing plant constructed onsite at the Gilbert Arc deposit within the Lindi project.

The key outcomes are as follows:

- Lindi Jumbo deposit technically and financially viable with no immediate or obvious impediments to mining;
- Elective annual production target between 25,000 and 40,000 tonnes graphite in concentrate;
- Operating cost per tonne in concentrate estimated at US$290 to US$350 – second lowest amongst peer group and lowest in Tanzania;
- Pre-production capex of circa US$35 to US$40 million with payback of less than 2 years – lowest capex amongst peer group;
- Base case pre-tax NPV estimated to be US$169 million for 25,000 tonnes per annum production option;
- Upside case pre-tax NPV estimated to be US$304 million for 40,000 tonnes per annum production option;
- Pre-tax internal rate of return (IRR) estimate of 63% for base case;
- Pre-tax IRR estimate of 97% for upside case;
- Mine life in excess of 20 years;
- Mine production rate of only between 150,000 tonnes per annum for the 25,000 tonnes per annum option and 250,000 tonnes per annum for the 40,000 tonnes per annum option;
- Product basket price of US$1,563 per tonne in concentrate using reasonable assumptions for future pricing;
- Mill head feed projected at 16.7% TGC leading to low working costs and capital requirements;
- Product highly suitable for expandable Graphite with test results of up to 590 times expandability;
- Capital estimates have been subject to stringent independent verification;
- Rapid and cost effective production expansion options available in response to market
Dynamics; and
- Definitive feasibility study well advanced and due for release in February 2017.


Analysis

The results of the scoping study have found the proposed open pit operation to be highly robust as a result of the high grade nature of the project and the expected premium natural flake graphite product.

Importantly, the product has been deemed highly suitable for the high value expandable graphite market.

The low estimated capital cost of $35 to $40 million places the project in a good position to receive funding and move into the development phase.

The project development schedule indicates that the project can be constructed by the 1st quarter of 2018 provided that funding can be secured before the end of the end of April in 2017.

The results of the scoping have indicated the value of the project is many times that of Walkabout’s current market cap.

Walkabout shares are trading up 9% intra-day, currently priced at $0.095.

The focus now turns to the definitive feasibility study due next month.

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