Transcription of The Stock Network Interview with Metals Australia (ASX:MLS), CEO Paul Ferguson
Lel Smits: Metals Australia is advancing critical base and precious metals projects across Canada and Australia. Its flagship Lac-Cahil graphite project in Canada has completed an upstream pre-feasibility study and downstream preliminary economic assessment, while Menindee and other Australian projects provide further growth opportunities. I’m joined today by CEO Paul Ferguson to discuss Lac-Cahil, the broader portfolio and emerging opportunity.
Paul, welcome to the Stock Network.
Paul Ferguson: Thanks, Lel, nice to be here talking with you this afternoon.
Lel Smits: Now, Metals Australia has exposure to graphite, gold, silver, base metals and titanium, vanadium, iron.
How do you see the portfolio evolving? And also really, Paul, where are you seeing the biggest value opportunities?
Paul Ferguson: Yeah, so we certainly have a lot in the portfolio, but we’ve been very active in the last two years as well. We’ve had five exploration projects, four of them drilling and two studies. And clearly the focus of the company has been to prioritise the advancement of the graphite project, which we’ve grown significantly.
That’s really a strategic project, well-situated in Quebec, in Canada, and very well positioned to not only the US markets, but also the markets of Europe. For those who don’t know Quebec as well, it’s in eastern Canada, so beautifully positioned out the St Lawrence River and across the Atlantic Ocean to all ports of Europe. So yes, aside the graphite project, we also have over here in Australia, we have the Menindee vanadium titanium magnetite project, which we drilled out late last year.
We hope to put a new resource out on that project. And we’ve done some really good metallurgical test work there to demonstrate that we can produce some very commercially attractive products. And most people don’t understand this, but that project is situated only a couple of kilometres from a zinc, copper, silver resource that we’ve mapped out.
With zinc prices increasing significantly over the last year or so, that project is also attracting some interest as well.
Lel Smits: Fantastic. And look, let’s take a closer look now at Latca Hill, the graphite project in Canada.
It’s completed studies covering both the mine and downstream battery and material refinery. Paul, what do you think really makes the integrated model attractive here? And also, if you can outline those key steps towards the feasibility?
Paul Ferguson: Yeah, so that’s a good question, Lel. So one of the things that I think many graphite companies did early on, and I’m talking over the last 10 years or so, was went down a pathway of just planning to produce a concentrate and then shipping that concentrate somewhere else for somebody else to do the upgrading on.
But of course, I think that the thing we’ve all learnt is that most of the upgraded graphite in the world now comes almost exclusively from China. There’s very little outside of that. And so, as COVID taught us and other supply shocks have taught us, you need to be in charge of your own security of supply.
And that’s really what underpins the need to have an end-to-end, fully integrated solution. So for sure, the mining and the concentrating of the graphite to produce that concentrate product, and that’s still a high-purity carbon product, greater than 95% carbon content, but you’ve got to take that step further. And that’s what we do with the Lac-Cahil project.
We’ve also got a downstream refinery project, which is taking a good portion of that concentrate and upgrading it into battery anode materials, which is the graphite that is used on the anode side of every lithium ion battery and many other battery chemistries for that matter. So it’s essential that that’s done in a jurisdiction like Canada, in our case, for that security of supply for North America and Europe.
Paul Ferguson: Excellent. And finally, in terms of benchmarking Lackahill, you really highlighted its higher ore reserve grade, similar initial concentrate production, also higher expected production compared with Nubu Mond graphite. Really, in summary, what do you think sets Lac-Cahil apart from other North American graphite projects? Great. I’m a mining engineer and mining engineers will tell you, grade is king in any deposit.
So if you’ve got a high grade deposit, that really sets you up in terms of the CAPEX profile and the OPEX profile that is going to be required to support the production of products from that resource. And obviously, if you have a higher grade, it’s less tonnes into a mill or processing plant to produce a given output. In our case, when we compare our mineral reserves of our Lackahill graphite project to Nubu Monds, we have an advantage of over 2.6 times their grade.
So our grade is well in excess of 11% carbon content and Nubu Monds is a low 4%. And so that is significant because what that means is that the plant or the processing plant that we build is around about a third of the size of Nubu Monds and obviously that comes with a CAPEX advantage. And of course, it’s less tonnes in for about the same production profile out, as you’ve pointed out.
We both produce around about 100,000 tonnes of concentrate per year, but we do it from about a third of the tonnes. So that’s the real sweet spot for us. And then as we go downstream and we take that concentrate that we’ve produced, we actually get exceptional conversion of the portion of that concentrate that is being upgraded in our refinery to battery anode materials.
So we get 68% of the concentrate that goes into that refinery comes out as battery anode material, whereas in Nubu Monds case and industry generally, it’s much lower into the 40s or even about 50%. So that’s huge because you’re talking, it doesn’t sound like much, but we can produce an extra 7,000 tonnes a year, but this is the battery anode material that is selling for $10,000, $12,000, $14,000 a tonne. So that is really where that upgrading benefit really takes place in terms of economics.
And then finally, when we compare ourselves to Nubu Monds just on economics and we use some very conservative startup profiles in our plant operation and designs, and we’ve also used some very conservative pricing estimates for products, quite a bit lower than a number of different graphite projects in Canada. And yet our net present value on an after-tax basis for our project is still 70% above Nubu Monds project. And why that’s important to investors is simply this.
The Canadian government is helping fund the Nubu Monds project. It is now a fully funded, fully sanctioned project that is now in construction. And so that augurs really well for us because of all of these benchmarks, whether it’s grade on Capex and Opex, the production that we can produce and the value that is generated, we stand out with a superior project.
So we’re quite confident that the market will see that in due course.
Lel Smits: Paul, thank you for the update from Metals Australia.
Paul Ferguson: Yeah, no problem at all, Lel. Thank you for talking to me today.
Ends