EV1 Project financing update

ASX:EV1

Published 11-MAY-2023 11:04 A.M.

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Our 2021 Wise-Owl Pick of the Year Evolution Energy Minerals (ASX: EV1) just put out a project financing update.

Back in March EV1 updated its graphite project’s Definitive Feasibility Study (DFS) delivering:

Net Present Value (NPV) = US$338M.
Payback Period = 3.3 years.
Internal Rate of Return = 32%
CAPEX = US$120M.

With its DFS out of the way, EV1’s focus now is on project financing so that a Final Investment Decision (FID) can be made on developing its graphite project in Tanzania.

Here is where EV1 is at with financing right now:

1. On debt financing:

EV1 confirmed that non-binding expressions of interest had been received from European, African and Tanzanian banks.

Alongside the expressions of interest EV1 also noted that independent technical, environmental and social consultants had been appointed as part of due diligence from financiers.

The consultants also went on site to check out EV1’s project which is a strong sign of intent.

EV1’s debt advisors are Auramet which have a long history of financing projects like EV1’s.

2. On equity financing:

EV1 confirmed that discussions are progressing with multiple investor groups including investment funds (including ESG funds), private equity groups and strategic investors.

A key reason for us making EV1 our Wise Owl Pick Of The Year in 2021 was because the company had cornerstone backing from ARCH Sustainable Resources Fund - a London based ESG investment fund.

ARCH initially invested ~$8M into EV1 at the company’s IPO (20c per share), since then ARCH have invested a further ~$3.2M at 32c per share - at present ARCH hold ~24.71% of the company.

A key part of our thesis was that when it comes time to finance the development of EV1’s project (which is now), ARCH would help bridge the equity portion of financing by introducing ESG/institutional investors to the company.

3. Potential for an offtake + equity deal?

EV1 also made specific mention of its fine flake product which is “earmarked for downstream processing” and that the company has intentionally avoided signing an offtake agreement for this product.

A form of project financing that has become relatively common in the battery metals space is one where strategic partners (typically the companies who need to purchase the graphite) come in as project financiers IN EXCHANGE for offtake agreements on some of the product being produced.

We have seen many deals structured this way in the lithium space; one particular example is General Motors’ commitment for up to US$650M for Lithium America’s project in the US.

While it isn't a base case expectation of ours, EV1 pulling something similar off would definitely be a surprise to the markets (and hopefully lead to a positive share price re-rate).