Northern Graphite to build $200M Saudi plant

Northern Graphite (TSX-V: NGC; US-OTC: NGPHF) agreed with family-controlled Saudi Arabian conglomerate Al Obeikan Group for Investment to jointly build and run a battery material plant in the kingdom after the Canadian miner restarts a dormant mine in Africa. Shares of the company soared.

Located in the port city of Yanbu, on the Red Sea coast, the $200 million (C$278 million) facility will have an initial production capacity of 25,000 tonnes per year, Ottawa-based Northern said Wednesday in a statement. Supply is to come from the company’s Okanjande project in Namibia, where Northern expects to start producing graphite concentrate in 2028.

“Our ambition is always to be first to market. By doing this, we believe we will be first to market with a fully integrated supply chain between Namibia and Saudi Arabia,” Northern Graphite CEO Hugues Jacquemin told The Northern Miner Wednesday in a telephone interview from Riyadh.

“We will continue to pursue the projects we have in Europe and North America, but this one will definitely move faster. It will be a model of what we want to do. Then we can copy paste what we do here elsewhere.”

The joint venture accelerates Northern’s transformation from a pure miner into a fully integrated producer of battery anode material. In recent years, North America’s only producer of natural graphite has been developing plans to build battery anode material facilities in Canada and France – two projects that will now take a backseat to the Saudi plant.

Northern shares jumped 22% to 31¢ Wednesday afternoon in Toronto, boosting the company’s market value to about C$80 million. Earlier the stock touched 35¢, its highest level since August 2023, TMX Group data show.

Local funding

Construction of the plant is expected to start in the second half of the year after a final feasibility study has been completed, with production set for 2028. Obeikan will own 51% of the JV, compared with Northern’s 49% stake, and spearhead efforts to secure local debt funding required to finance the plant’s construction, development and commissioning.

Output could increase over time to meet growing global demand for graphite anode materials sourced outside of China, Northern said. Anode material is the largest component in the lithium-ion batteries that power electric vehicles.

Negotiations with unidentified global battery makers over a long-term, 25,000-tonne-per-year offtake agreement are well advanced, Northern said. The JV will commit to buying up to 50,000 tonnes per year of graphite concentrate from Okanjande.

Restarting Okanjande should cost about $35 million, Jacquemin said. A preliminary economic assessment published in 2023 contemplates annual output of 31,000 tonnes for the mine over a 10-year life. 

Riyadh forum

Jacquemin says he was introduced to Obeikan officials after a friend of his met company representatives last year at the Future Minerals Forum in Riyadh. Talks intensified after the Saudi group expressed an interest in backing a graphite processing plant in the country.

“Saudi Arabia was never really on our radar as a location for us to build this facility,” Jacquemin said. “As we started talking to Obeikan and looking at the location, the cost structure and the kind of incentives the Saudi government is willing to put on the table, it started to make a lot of sense.”

Saudi Arabia’s investment is consistent with Vision 2030, a strategic plan announced in 2016 by Crown Prince Mohammed bin Salman to transform the kingdom’s economy and society by reducing its dependence on oil. Key focus areas include advanced manufacturing and energy transition technologies.

“Our partnership with Northern is fully aligned with the Kingdom’s ambition to lead in advanced materials and clean energy supply chains,” Obeikan CEO Abdallah Obeikan said in a statement. “This partnership will combine Northern’s expertise with the industrial knowledge of Obeikan and the strength of Saudi Arabia.”

Strategic project

Saudi Arabia “is investing a lot in the electrification of the country. They clearly have very ambitious goals to make batteries here,” Jacquemin said.

Since the new plant is regarded by Saudi Arabia as a strategic project, its backers will have access to funding from the government-owned Saudi Industrial Development Fund, or SIDF, the CEO added.

“SIDF will fund between 50-75% of this project, and there are other incentives. It allows us to move very fast. Their timeline for permitting is very short.”

Saudi Arabia is well positioned geopolitically “because they have agreements with both the West and the East,” Jacquemin also said. “It can be a platform to supply the global market with a lot of different minerals, and graphite is definitely on their list. By being here we can supply the Middle East, but also Europe and North America.”