Beowulf (AIM: BEM; Spotlight: BEO) and its wholly owned Finnish subsidiary Grafintec Oy (“Grafintec”) are pleased to announce the successful conclusion, and robust economics of the Pre-Feasibility Study (“PFS”) from the Graphite Anode Materials Plant (“GAMP” or the “Project”).
Highlights
Positive economics from initial Phase 1 development:
- Post-tax Net Present Value using a discount rate of 8% (“NPV8”) of €924 million and post-tax Internal Rate of Return (“IRR”) of 37% over 25 years
- Pre-tax NPV8 of €1.2 billion and pre-tax IRR of 42% over 25 years
- Initial capital cost of €225 million with a pay-back period of 3 years from initial production
- Based on production of 25,000 tonnes per year of Coated Spherical Purified Graphite (“CSPG”)
- Generates €120 million of Free Cash Flow (“FCF”) per year and €150 million of Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) per year when in full production
Future expansion in Phase 2 offers further upside:
- Post-tax NPV8 of €2.2 billion and post-tax IRR of 38% over 25 years
- Pre-tax NPV8 of €2.8 billion and pre-tax IRR of 42% over 25 years
- Based on expansion to 75,000 tonnes per year of CSPG with construction beginning in third year of Phase 1 production
- Generates €361 million of FCF per year and €451 million of EBITDA per year when in full production
Further potential upside from:
- Vertical integration of Grafintec’s graphite projects
- Government and EU support through grant funding schemes and tax incentives aimed at large industrial investments supporting the transition to a net-zero economy
Ed Bowie, Chief Executive Officer of Beowulf, commented:
“The conclusion of the GAMP PFS is a major milestone for the Company. The study, which was led by consultants Anzaplan, has demonstrated the technical and financial viability of the GAMP project and supports Grafintec’s ambition to be a critical player in the European battery materials supply chain.
“The continued strong support from local and national government in Finland and the potential to create a vertically integrated graphite business presents an exciting future for the project.”
Rasmus Blomqvist, Managing Director of Grafintec, commented:
“Through extensive test-work, we have demonstrated that we can produce high grade CSPG suitable for the battery sector, and the robust project economics suggests that GAMP can be a low cost and highly profitable producer.”
GAMP Development Strategy
The strategy for the development of the GAMP is to establish an independent producer of anode material to supply the growing lithium-ion sector in Europe. The Company intends to develop the plant in Finland which has the benefit of access to a highly skilled workforce, low-cost renewable energy, strong local and government support and proximity to the European customer base. Grafintec held a plot reservation in the GigaVaasa industrial hub, although as previously noted, this reservation lapsed in August 2024. Grafintec continues to engage in dialogue with GigaVaasa and the municipality of Korsholm, and a number of other potential sites for the future development of the GAMP.
Whilst Grafintec, through the Aitolampi project, has one of Europe’s largest flake graphite resources, the plan is to initially import material from a third-party mine. The test-work undertaken for the PFS was completed using a six-tonne sample sourced from our preferred supplier, a miner with a multi-decade track record of producing high grade concentrate. Longer term, the Company will assess the viability of developing its own graphite mining projects and creating a European vertically integrated graphite business.
The PFS anticipates an initial Phase 1 development to produce 25,000 tonnes per year of CSPG with the potential to increase output in Phase 2 to 75,000 tonnes per year. The planned annual production capacity can provide anode material for an estimated 357,000 electric vehicles per year in Phase 1 or 1,071,000 electric vehicles per year for Phase 2.
GAMP Process
The process for converting graphite concentrate into CSPG is as follows:
- Spheronisation: milling process to convert concentrated flake graphite into uniform particles, spherical graphite (“SG”). The process produces two SG products, a medium SG product of 18 microns (“SG-18”) with a yield of 47% and a fine SG product of 8 microns (“SG-8”) with a yield of 13%. The remaining material is high grade fine graphite which may have a number of industrial applications.
- Purification: upgrading SG from approximately 95% to greater than 99.95% graphitic carbon (“Cg”) content through hydrometallurgical process to produce SPG-18 and SPG-8. This process involves caustic (sodium hydroxide) baking with a series of caustic and sulphuric acid leaching processes.
- Coating: the purified SPG is blended with petroleum needle coke and heated in a furnace to form a thin layer of carbon material around the purified SPG, producing CSPG. The coating process enhances the physical and electrochemical properties of the anode material.
The final PFS report is currently being drafted and reviewed and is anticipated to be released to the Company in the coming weeks and a further technical update will be provided to the market.
GAMP Economic Analysis
The GAMP economic analysis was prepared by Anzaplan based on the test-work results and supported by quotes from third-party suppliers.
Construction of the GAMP is assumed to comprise a single module for Phase 1 with throughput of 42,000 tonnes per year with Phase 2 comprising two additional modules, each with the same throughput and capital expenditure as the Phase 1 module. The construction of each phase is assumed to take two years with 60% of the capital expenditure being incurred in the first year and the balance in the second year. The capital expenditure breakdown per 42,000 tonne module is set out below.
Significant progress was made during 2024 in optimising the process flow sheet, reducing both the energy requirements and, through recycling reagents, reducing reagent costs. These factors have contributed to the GAMP demonstrating an extremely competitive operating cost. The breakdown of operating costs per annum and per tonne of concentrate feed are presented below.
Further Upside Potential
As mentioned above, the Company’s resource projects offer further potential upside. The Aitolampi project in Eastern Finland has an Indicated and Inferred Resource of 26.7 million tonnes (“Mt”) at 4.8% graphite for 1.275Mt of contained graphite, making it one of Europe’s largest flake graphite deposits. Geophysical testing, and specifically electro-magnetics (“EM”) which can be used to indicate graphitic schist, suggests the potential for the Aitolampi resource to be extended with further drilling. In addition, the Rääpysjärvi project, which lies 8 kilometres from Aitolampi, has at least as much EM anomaly, and surface sampling has identified higher grades of graphite than are found at Aitolampi. Rääpysjärvi, which has never been drilled, therefore has the potential to add significant additional resources.
Metallurgical test-work on samples from both projects suggests they are amenable to concentrating and then further purifying to battery-grade material and therefore are expected to be suitable future feedstocks for the GAMP. Developing these projects would create a fully integrated European graphite anode supply chain. In addition to improved supply chain security, accessing a domestic supply of concentrate would reduce both the costs and the carbon dioxide (“CO2”) emissions associated with transportation and energy mix. The integration of the mining projects therefore has the potential to further improve the overall project economics and the CO2 emission intensity.
The EU classifies Natural Graphite as a critical raw material and battery-grade Natural Graphite as a strategic raw material. As such, there are a number of incentives to support the development of industrial operations that support the transition to a net-zero economy and improve supply chain resilience. Grafintec has already benefited from the Business Finland BATCircle2.0 and BATCircle3.0 grant funding schemes (see press releases dated 31 October 2024 and 26 November 2024) in support of its research and development activities. Additional grant funding schemes are available, including the EU Innovation Fund which supports up to 60% of the relevant capital and operational costs for projects that demonstrate innovative low-carbon technologies.
Further economic benefits may be realised from tax incentives proposed by the Finnish Government to stimulate industrial investments supporting the transition to a net-zero economy. This tax credit is available for projects with total capital expenditure of greater than €50 million, is proposed to be no more than 20% of the investment costs and would be capped at €150 million per company. The companies entitled to the investment credit could start deducting the credit from their corporate income tax from 2028 onwards. The proposal is awaiting final approval from the European Commission, ensuring it aligns with EU State Aid rules. Once the final approval is granted, Business Finland aims to open the investment credit application process. The right to the tax credit must be applied for and granted by the end of 2025.
Whilst the Company may not be in a position to avail itself for all funding schemes, this illustrates the breadth and scale of support for innovative businesses such as Grafintec. Grafintec is carefully evaluating these different opportunities and aims to apply for those which fit the Company’s strategic plans and have best chances of success.
Grafintec intends to apply for Strategic Project status for the GAMP under the EU’s Critical Raw Materials Act, during the next application window. Designation as a Strategic Project allows a project to benefit from streamlined permitting processes, access to funding, and priority treatment to expedite its development.
Grafintec has also been engaged with a number of potential strategic partners with respect to the future development of GAMP. These discussions will continue following the completion of the PFS.