Nouveau Monde, Mason Graphite PEA for Quebec mine pegs capex at $1.4B

Nouveau Monde Graphite (TSXV: NOU; NYSE: NMG) and Mason Graphite (TSXV: LLG; US-OTC: MGPHF) have released the results of a preliminary economic assessment for the Uatnan project in Quebec, which would produce 500,000 tonnes of graphite concentrate a year.

Uatnan is located 285 km north of the town of Baie-Comeau and about 660 km north of Montreal in northeastern Quebec.

The PEA outlines a conventional open pit mine with a 24-year mine life with a concentrator situated near the deposit. It replaces a feasibility study Mason Graphite completed in December 2018 that planned production of 51,900 tonnes of graphite concentrate annually with a concentrator located hundreds of kilometres away in Baie-Comeau.

It covers Mason Graphite’s Lac Gueret graphite deposit, which sits in Quebec’s designated ‘Plan Nord’ region, where the provincial government has launched an economic strategy to develop natural resources north of the 49th parallel.

Mason Graphite currently owns 100% of the rights to the deposit, which is under an option and joint venture agreement with Nouveau Monde. The two companies signed the investment agreement in May 2022, under which they will collaborate to advance the property with a view to forming a joint venture. The deal involves Nouveau Monde making an equity investment in Mason Graphite of up to $5 million in two instalments.

To form a joint venture, Nouveau Monde will need to spend a minimum of $10 million on the property and complete an updated feasibility study. Once the option and joint venture is completed, Nouveau Monde will own 51% of the project and Mason Graphite 49%. The joint venture will have access to Nouveau Monde’s phase-1 natural graphite flake concentrator plant currently operating in Saint-Michel-des-Saints. Nouveau Monde will be the operator of the project and the joint venture will be funded by both companies on a pro rata basis.

The PEA forecasts initial capex of $1.4 billion and sustaining capex of $147 million for a total capex of $1.6 billion, with an after-tax payback period of 3.2 years. The project’s after-tax net present value at an 8% discount rate comes in at $2.2 billion with a post-tax internal rate of return of 25.9%. The study pegs opex per tonne of graphite concentrate at $268 per tonne.

The mining operation would have a production rate of 3.4 million tonnes per year at a life-of-mine average grade of 17.5% total carbon in graphite form (graphitic carbon) and a finished product purity of 94% total carbon in graphite form.

Among ‘largest’ graphite projects

The companies describe Uatnan as “one of the world’s largest graphite projects in development.” Lac Gueret has a pit-constrained measured and indicated resource of 65.64 million tonnes grading 17.2% graphitic carbon for 11.30 million tonnes of total carbon in graphite form. Inferred resources add 17.82 million tonnes grading 17.2% graphitic carbon for 3.07 million tonnes of total carbon in graphite form.

The resource estimate used a graphitic carbon cut-off grade of 5.75% and was based on 25,956 assay intervals from 43,343 metres of core drilling and four surface trenches and 207 channel samples.

Mason Graphite notes on its website that it has identified two graphite zones on the Lac Gueret property: the GC zone and the GR zone. Graphite mineralization in the GC zone has been mapped up to 1.2 km and at widths of up to 400 metres, it says, and the mineralization remains open at depth. Mineralization in the GR zone has been identified in an area of up to 1 km and as much as 110 metres wide.

The companies said the mineralized material and waste rock would be mined with nine-metre-high benches and drilled, blasted, and loaded into 60-tonne haul trucks with backhoe excavators. Starting in year five, they plan to start backfilling the mined-out portion of the pit with waste rock when possible.

The 40-sq.km project is accessible year-round via Highway 389 and  logging roads.

Over the last year, Nouveau Monde has traded in a range of $4.36 and $10.89 per share and at press time in Toronto was trading at $6.65 per share, up almost 5%, giving it a market cap of $371.5 million. Mason Graphite has a 52-week trading range of 12.5¢ and 71¢ per share and at press time was trading at 27.5¢ per share, up 6¢ on the day or 28%, giving it a market cap of $38 million.