Global commodity trader Traxys has signed a binding six-year offtake agreement with Traxys for the supply of 600,000 tonnes of natural graphite concentrate covering all flake sizes from Nachu from late 2024.
Magnis is expected to deliver 50,000t for the first 12 months, rising to 110,000tpa thereafter.
Magnis will issue 700,000 shares as a marketing fee, plus 1.3 million A60c options exercisable within 24 months.
Traxys will pay a market rate on delivery of the graphite products.
Traxys managing director Kevin Smith said the trader had been interested in Nachu for some time.
"There is a huge demand from lithium-ion battery producers for all battery materials including graphite and being able to produce a battery grade anode product via mechanical processes only is a very unique feature of Nachu graphite," Smith said.
Magnis chairman Frank Poullas said signing followed several months of providing flake graphite samples from Nachu and was a major step forward towards finally developing the mine.
Magnis now needs to update the existing bankable feasibility study that was completed in 2016.
That BFS considered production of 240,000tpa of graphite concentrate averaging 98.3% total graphitic carbon over an initial 15-year mine life. Magnis said unlike many other mines, Nachu would be able to produce high purity graphite flake while maintaining a large flake size distribution along with high recoveries
The BFS outlined a post-tax net present value of US$1.7 billion with an internal rate of return of 98%, with forecast operating margins of $1791/t assuming a basket price of $2350/t.
More recently, it has been running the numbers on a smaller-scale project than was originally envisaged as a means to get into production as rapidly as possible.
Other conditions precedent required by Traxys are that Nachu finalise Tanzanian government approvals and project funding, and commence construction - all by October 1, 2022.
Nachu was one of many projects in Tanzania that was delayed by former president John Magufuli's 2016 decision to rewrite the mining law, but this month many developments are back on the front foot, with president Samia Suluhu Hassan signing a number of framework agreements to establish a free-carried 16% interest for the government.
Among those now keen to proceed to development was Black Rock Mining, which has the Mahenge project, making it the first graphite hopeful to gain the government green light.
For the past few years Magnis has been focused on manufacturing of lithium-ion battery cells in the US, but in recent months it has reported renewed interest in Nachu from Asian and North American groups keen to discuss offtake options.
Magnis shares have traded between A14.5c and 75.5c over the past year, with the stock rising 8% this morning to 47.2c, valuing it at $426 million.
