The Renascor Resources Ltd (ASX: RNU) share price is down 21% over the past two days following an update on the mineral explorer's proposed Siviour Battery Anode Material (BAM) project.
Renascor Resources owns the Siviour Graphite Deposit in South Australia.
Siviour is the second-largest proven graphite reserve in the world. The largest is in Africa.
Renascor wants to build a vertically integrated graphite mine and downstream processing project, and yesterday released the results of a revised study of its proposed operation.
On Tuesday, the company's share price closed 5.3% lower while today it has shed another 16.7% so far. Let's take a closer look at the study's findings.
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Renascor Resources share price falls despite 'compelling economics' for project
The miner says the study results reveal "compelling economics" for the operation.
It says the results confirm Siviour will be "a low-cost, high-value supplier of 100% Australian-made graphite for lithium-ion battery anodes".
The project has an estimated post-tax unleveraged NPV10 of $1.5 billion. It has a post-tax unleveraged IRR (internal rate of return) of 26%, and an average annual EBITDA of $363 million.
The study projects 150,000 tonnes per annum of graphite concentrate production over a 40-year mine life.
It also projects downstream processing of 100,000 tpa of purified spherical graphite (PSG).
This is the type of graphite used almost exclusively in the anode part of lithium-ion batteries.
The study estimates PSG gross operating costs over the first 10 years of US$1,782 per tonne and US$1,846 per tonne over the life of the mine.
This includes graphite concentrate operating costs of US$405 per tonne over the first 10 years and US$472 per tonne over the mine's life.
The company will build the upstream graphite concentrate mine first at a cost of $214.5 million.
Renascor Resources will fund this using its existing cash balance of $129 million and debt facilities.
The next step will be building the downstream PSG facility at a cost of $394.6 million. Renascor hopes to commence production in 2026.
How will Renascor fund its project?
The company has received a conditionally approved $185 million loan through the federal government's Critical Minerals Facility program.
Renascor is also progressing discussions with Export Finance Australia (EFA) and the Clean Energy Finance Corporation (CEFC).
It's also tapping commercial lenders and its potential offtake partners for additional funding.
Renascor Resources has non-binding strategic cooperation and offtake agreements in place with global giants POSCO and Mitsubishi Chemical Group Corp.
Global manufacturers want alternatives to China
Renascor Resources says anode manufacturers around the world are keen to secure supply from low-risk mining jurisdictions like Australia.
In terms of PSG, China is currently the only producer in the world.
Renascor says its market data suggests average operating costs of approximately US$2,000 per tonne in China, so the Siviour Project will be substantially cheaper at US$1,782 per tonne over the first 10 years.
The company says:
Renascor offers a secure alternative source, which Renascor considers as a competitive advantage with potential offtakers seeking to diversify existing supply channels.
The advantage of Australian supply has recently become more relevant as a result of policy initiatives in North America and Europe aimed at securing graphite supply and other critical minerals.
Initiatives such as the Inflation Reduction Act in the United States provide incentives that favour raw material supply chains from free trade partners like Australia.
Proposed European legislation is similarly targeting supply from secure jurisdictions such as Australia as alternatives to Chinese sources.
What did management say?
Commenting on the BAM Study, Renascor Managing Director David Christensen stated:
By integrating the world class Siviour Graphite Deposit with an in-country downstream manufacturing facility, the BAM Study provides a clear path to creating a competitive advantage as a low-cost producer of Purified Spherical Graphite.
We look forward to using the results of this study to assist in securing binding offtake and funding to permit us to advance into construction and operation of an important new supply line for the lithium-ion battery industry.
Renascor seeking first mover advantage
Renascor Resources expects the overall market for graphite concentrates to increase by approximately 60% from 1.2 million tonnes per annum now to 2.9 million tonnes in 2029.
Lithium battery manufacturers will buy an increasing share of graphite concentrates as the take-up of electric vehicles increases.
Demand for PSG is projected to rise by 315% from about 380,000 tonnes in 2022 to 1.2 million in 2030.
The company said:
The development plan adopted in the BAM Study, which provides for the accelerated start-up of the Graphite Concentrate operation, is intended to offer Renascor a potential early-mover advantage by entering the market at the time of growing undersupply, which Renascor expects will lead to increased prices.
Since 2022, PSG prices have ranged between US$2,000 and US$3,800 per tonne.
The current reported spot price is US$2,475 per tonne.
Marketing consultant Fastmarkets forecasts the PSG price to rise from US$4,150 per tonne in 2024 to US$5,035 in 2033. It projects an average of US$4,716 over the next decade.
Renascor Resources share price snapshot
The Renascor Resources share price has risen in value by 625% over the past five years.
Over the past 12 months, the Renascor Resources share price has dipped 34%.
