RENASCOR RESOURCES MANAGING DIRECTOR DAVID CHRISTENSEN
Renascor Resources recently received an enormous funding boost from Dutch export credit agency (ECA) Atradius for its Siviour graphite mine in South Australia. Emma Davies spoke with managing director David Christensen about how this unique support covers a large amount of the capital costs of the project and places the company in an excellent, low-risk position moving forward. Q. Can you please explain how Renascor was able to secure backing from the Dutch export credit agency (ECA) Atradius for its Siviour graphite mine in South Australia?
Renascor Resources’ plan to turn Australia’s largest graphite resource into a producing mine by 2021 has been greatly boosted by Atradius’ recent funding support.
We have received in-principle support for up to 60pc of the estimated $108 million capital expenditure to build our initial graphite production facility, Siviour, near Arno Bay in South Australia’s Eyre Peninsula.
We believe that Siviour is a globally significant graphite project and is competitive with any new graphite development in the world.
Currently China produces the majority of the world’s graphite, with one major new project starting operation Mozambique and several others under development primarily in East Africa.
Our Siviour Project, although a new discovery, appears competitive with these new developments in East Africa.
Siviour is one of the world’s largest graphite resources (Mineral Resource: 80.6Mt at 7.9pc TGC for 6.4 Mt of contained graphite. Ore Reserve: 45.2Mt at 7.9pc TGC for 3.6 Mt of contained graphite).
Its relatively unique, flat-lying orientation and proximity to established infrastructure in costal Australia underpins both a low operating cost and a low capital cost. Most importantly, we believe can produce a high-quality graphite product for Siviour at globally competitive prices.
What really sets Siviour apart is that the project is among the first tier globally in terms of competitiveness and quality and it is located in South Australia, a very stable, secure jurisdiction.
We recognised early in Siviour’s development that one of the main obstacles to development would be securing financing, and we therefore looked to establish relationships with key parties who could assist in attracting lenders to Siviour.
Last year, we entered a strategic engineering partnership with Royal IHC, a large Dutch company with a mining services division active in Australia.
As part of the agreement, Royal IHC has committed $1m to undertake early project works, including metallurgical test work and detailed engineering and design work. The intention is for Royal IHC to become the engineering, procuring and construction contractor as we develop Siviour.
As part of the agreement, Royal IHC also agreed to assist us in securing project financing, and this led to a joint effort to seek project finance guarantees from the Dutch export credit agency, Atradius.
Atradius’ purpose is to promote Dutch business and it works frequently with Royal IHC. Working jointly with Royal IHC, we presented the investment case for Siviour and this led to Atradius agreeing in principle to support the project.
Q. How will the recent funding from Atradius for in principle support for up to 60pc of the planned $108 million capital costs benefit the project?
Graphite projects have traditionally been very difficult to finance. This is largely due to historic dominance of the Chinese on both the demand and supply side. With respect to demand, China is the largest consumer of graphite, and lenders sometimes have difficulty accepting counter- party risk from Chinese offtakers. While this situation is starting to change ( we have seen recent examples of project financings in other battery minerals dependent on Chinese sales), it’s still an issue with many lenders.
On the supply side, China is also dominant as the world’s largest producer, and this has led to some uncertainty as to future Chinese supply and its potential impact on the graphite market.
In this case, the use of graphite in the fast- growing lithium- ion battery market, is starting to suggest that supply concerns can also be overcome – but much of this is based on projections of a future shortfall of graphite ( rather than a present shortfall) and conservative lenders have not yet fully embrace the role of graphite developments in the lithium- ion sector.
By potentially obtaining export credit agency guarantees from Atradius, we have an alternative path to funding and overcoming the principle challenge that most graphite developers face in turning a graphite development into a mine.
We see this as a real game changer for Renascor as we move the project through the final stages of development.
Q. What is the next step in securing project financing for the Siviour project?
We have commenced a process to formally obtain the export credit guarantee from Atradius. A large part of this will be dependent of completing the Siviour Definitive Feasibility Study and obtaining final regulatory approvals before a formal due diligence.
We expect to finish work on the Definitive Feasibility Study next quarter, with final regulatory approvals expected before the end of the year.
Q. What is the expected development timeline for the Siviour project?
Siviour is developing with surprising speed, given the resource was delineated just three years ago. Last year, we completed a successful Pre-Feasibility Study, and this year, we expect to complete the Definitive Feasibility Study and all regulatory approvals this year.
This puts us on schedule to commence formal due diligence in the second half of 2019. Although Siviour is a relatively recent discovery, it’s not that far away from the Final Investment Decision, and we could be producing graphite as early as 2021.
Q. Where do you see Renascor in the next five to 10 years in emerging markets such as spherical graphite for lithium ion batteries?
Renascor is particularly well-placed to produce not just graphite concentrates from Siviour, but to also go a step further down the value chain and produce a spherical graphite product for direct sales to lithium ion anode and battery makers.
Our Pre-Feasibility Study suggests Renascor could significantly add to the value of the Siviour Project through a vertically integrated operation that produced spherical graphite for lithium ion battery anodes. With nearly all natural flake spherical graphite currently sourced from China, these results demonstrate Siviour’s potential to offer strategic diversification of supply of this globally important commodity by offering a high-quality spherical product mined and processed in Australia.
The Study also suggests that through conventional milling and purification methods, we will be able to produce spherical graphite at globally competitive prices in order to compete with prevailing Chinese production sources and offer a much needed alternative supply source for lithium ion battery makers.
The spherical operation would leverage off two of the key comparative advantages of the Siviour Project.
First, the spherical operation would achieve competitive margins in large part because Renascor would be able to supply low-priced graphite concentrates from the Siviour mine site. Graphite concentrate feedstocks, like the kind we would produce from Siviour, represents the single greatest cost in the production of spherical graphite.
Second, the spherical operation takes advantage of the project’s Australian location. By offering the spherical product from a secure, developed location, we are able to offer the graphite supply chain the secure, diversified supply that is currently lacking.