Sarytogan Graphite Project Pre-Feasibility Study Reveals Strong Financial Prospects
SGA (SGA) Share Update August 2024 Sunday 11th
Sarytogan Graphite Project Pre-Feasibility Study Shows Promising Returns
Sarytogan Graphite Limited (ASX: SGA) has released the results of its Pre-Feasibility Study (PFS) for the Sarytogan Graphite Project in Central Kazakhstan, highlighting strong financial returns and a multi-generational resource.
Instant Summary:
- Three product types with attractive 10-Year weighted-average sales prices.
- Staged development plan to minimize initial capital expense.
- Maiden Ore Reserve estimated for an initial 60-year mine life.
- Net Present Value (NPV) of up to US$518 million.
- Internal Rate of Return (IRR) ranging from 25% to 35%.
Project Overview
The Sarytogan Graphite Project, located in Central Kazakhstan, has shown promising results in the recently completed Pre-Feasibility Study (PFS). The study indicates that the project can produce three types of graphite products at competitive prices. These include Microcrystalline Graphite (>80% Carbon) priced between US$746 to $791 per ton, Ultra-High Purity Fines (UHPF) with up to five nines purity priced between US$4,468 to $5,577 per ton, and Spherical Purified Graphite (USPG and CSPG) priced between US$2,500 and $8,000 per ton.
The project is designed with a staged development approach to reduce initial capital expenditure and align with market demand. The initial stage involves a 50,000 tons per annum (tpa) beneficiation plant, which will be underutilized initially to match market penetration. Subsequent stages include the addition of thermal reactors and spheronisation capacity to produce higher-value products.
Financial Highlights
The PFS estimates a maiden Ore Reserve of 8.6 million tons at 30% Total Graphitic Carbon (TGC), sufficient for a 60-year mine life while consuming only 4% of the total Mineral Resource. The financial analysis shows an attractive Net Present Value (NPV) of up to US$518 million and an Internal Rate of Return (IRR) ranging from 25% to 35%, depending on the stage of development. The project also boasts a payback period ranging from 3.4 to 5.3 years.
Development Strategy
The development strategy for the Sarytogan Graphite Project involves four stages:
- Stage 1a: 50,000 tpa beneficiation plant.
- Stage 1b: Addition of one 6,000 tpa thermal reactor.
- Stage 2a: Addition of two more thermal reactors.
- Stage 2b: Addition of 7,000 tpa spheronisation and 4,000 tpa coating capacity.
This phased approach allows the company to manage capital expenditure effectively while scaling up production to meet market demand.
Market and Environmental Considerations
Kazakhstan's strategic location between Europe and China, two of the largest markets for graphite and batteries, provides a significant logistical advantage. The European Union has identified graphite as a critical raw material, further supporting the project's market potential.
Environmental considerations have also been addressed, with substantial progress made on the requisite Environmental Permit. The company has conducted public hearings and submitted a draft Environmental Impact Assessment (EIA), receiving support from local communities.
The positive financial metrics and strategic location of the Sarytogan Graphite Project are likely to attract investor interest. The project's strong NPV and IRR, coupled with a conservative development strategy, reduce financial risks and enhance its attractiveness. However, the requirement for additional funding and the uncertainties associated with market penetration and environmental approvals could pose potential risks.
Investor Reaction:
Analysts are likely to view the PFS results favorably, given the project's strong financial returns and strategic location. The phased development approach and conservative financial projections are expected to mitigate risks, making the project an attractive investment opportunity. However, investors will closely monitor the company's ability to secure the necessary funding and achieve market penetration.
Conclusion:
Investors should consider the Sarytogan Graphite Project as a promising opportunity, given its strong financial metrics and strategic location. The company's phased development approach and conservative financial projections reduce risks, making it an attractive investment. Investors are encouraged to monitor the project's progress, particularly in securing funding and achieving market penetration.