Graphex Mining has taken a major step towards becoming a significant supplier of premium, coarse flake graphite by securing up to $US85 million ($119.8 million) from Castlelake to advance its Chilalo project in Tanzania.
The proposed funding would guide the Chilalo project through to production, including development, construction and ramp-up of the operation.
Castlelake, a United States-based private investment firm, will initially provide $US5 million to Graphex through the issue of secured interim loan notes, which will immediately become available.
Graphex has also signed a term sheet with Castlelake for a funding package that includes up to $US40 million of senior secured notes, and up to $US40 million of equity.
It will use the loan notes to satisfy a number of conditions required by Castlelake to secure the funding package.
The conditions include Graphex completing a bankable feasibility study (BFS) for Chilalo.
Graphex must also resolve issues relating to Tanzania’s mining legislation and has already provided a detailed submission to the country’s government for this purpose.
The remaining conditions include the execution of material contracts, including offtake agreements, mining contractor and EPC contractor; entry into definitive transaction documents; and completion of approvals and due diligence.
Graphex managing director Phil Hoskins said the company took great confidence from the commitment of Castlelake, a globally-significant mining investor.
“We believe this transaction affirms the quality of the Chilalo project, the premium product it will produce, the graphite market opportunity identified by the company and confidence in the company’s ability to reach a satisfactory resolution in Tanzania,” Hoskins said.
“We can now proceed with completion of the BFS with a view to Graphex becoming a leading supplier of premium, coarse flake graphite.”
Graphex last month released an updated pre-feasibility study (PFS) for the Chilalo project. The updated PFS confirmed Graphex’s belief that Chilalo is a high quality, high margin graphite project.
It proposed a two-stage development in the PFS, with the first to deliver annual production of 58,000 tonnes for two years, followed by a second phase averaging 108,000 tonnes a year for 4.3 years. Graphex forecast stage one would cost $US43.6 million and stage two $US32.5 million.
If developed, the Chilalo operation would be an open pit operation with plant that applies simple comminution and flotation processing.