The Company engaged TRU Group Inc (“TRU”) to complete the Project’s PEA. A PEA, by regulation, includes an economic analysis of the potential viability of the Project’s mineral resources and the use of inferred resources is allowed. The final report, originally released in February 2017 and revised in July 2017, concluded that, based on exploration drilling and test work completed to date as well as various documented assumptions:
- An estimated 44 million tonnes of graphite mineralization at 7% Cg would be available to be mined and, when processed in the Processing Plant at a recovery rate of 80% Cg, supports a project life of 40 years producing 60,000 tonnes per year of graphite concentrate at 95% Cg, once full production is reached in Year 6;
- At full production, the Manufacturing Plant is expected to convert 60,000 tonnes per year of concentrate into 41,850 tonnes per year of CSG and 13,500 tonnes per year of purified graphite powders (see Figure 4);
- The selling price assumed for CSG is $6,200 per tonne and $1,500 per tonne for purified graphite powders, generating, at full production, annual sales revenues estimated to be $280 million and annual post tax earnings of $118 million or $2,132 per tonne;
- An after tax net present value of $616 million (10% discount rate) was generated with an internal rate of return of 22% and payback achieved in the fourth year of production.
Table 5: Project's PEA Post-Tax Financial Results
|Summary of the Project’s Post-Tax Financial Results (US$ Million)|
|NPV of Net Cash Flow (10% Discount Rate)||$616|
|Internal Rate of Return||22%|
|Payback Period in Production Year||4|
The independent qualified persons responsible for preparing the Graphite One PEA are R. James Robinson, P.Geo., Ioannis (John) Roumeliotis, Ing., and Maureen Paterson, P. Eng. of TRU Group Inc.