PERTH (miningweekly.com) – The McIntosh flake graphite project, in Western Australia, will require a capital investment of A$148-million to support the production of 88 000 t/y of high-grade flake graphite concentrate.

Owner Hexagon Resources said on Wednesday that a prefeasibility study (PFS) estimated the project would have a pre-tax net present value of A$272-million and an internal rate of return of 50%.

“We are very pleased with the PFS outcomes, which were a significant step on the path to commercialisation of McIntosh. They indicate the viability of the project even on these initial, or Stage 1, parameters and give us some considerable certainty of a sensible base case and substantial upside as we move towards development,” said Hexagon MD Mike Rosenstreich.

The project is expected to process some 2.4-million tonnes a year, generating annual earnings before interest, taxes, depreciation and amortisation of A$100-million, with a margin of 51%.

Rosenstreich told shareholders that the high-grade and premium quality flake concentrate produced at McIntosh would attract long-term offtake parties, most likely in South East Asia.

“We are taking a more assertive marketing approach than many of our peers in terms of impacting the graphite market. We consider that the demand side for graphite, especially natural graphite, is significantly underestimated in current forecasts. A key market factor is the opportunity to displace more expensive synthetic graphite from the battery sector with consistent high-quality natural flake product.”

Rosenstreich said that the McIntosh product would generate unique marketing opportunities and strategic relationships.

“This is the basis for the company’s assertive scale of production which will also facilitate more opportunities for product diversification while maintaining a meaningful scale of production for our core customers.”

Feasibility study work was already under way and will incorporate enhancement opportunities to reduce capital and operating costs, improve revenue uplift through process improvements and downstream processing testwork, as well as additional drilling planned to start mid-year to increase the resource and reserve base.