Kibaran Resources (ASX: KNL, Share Price: $0.30, Market Cap: $55m) is one of our preferred graphite sector exposures, due to the highly measured and conservative approach being employed to achieve production status. Kibaran maintains aggressive exploration and appraisal activity with respect to its various Tanzanian graphite projects, although its flagship Epanko project remains the current focus.
Kibaran has advised that SRK, appointed as the Independent Engineers for technical due diligence by Germany’s KfW IPEX-Bank, have now completed their review, as part of senior debt financing due diligence on the Epanko graphite project. This is a major milestone in terms of potential project funding.
Market Significance
Kibaran’s strong share price performance (doubled since May) reflects growing confidence in the company’s emerging production story, where a lot of hard work has been invested over recent years in terms of exploration and appraisal work. This includes high-grade drilling results, exceptional metallurgical test-work results, an upgraded JORC resource base and positive Scoping Study and BFS results that demonstrate robust project commerciality. This has been further reinforced by recent ThyssenKrupp and Sojitz off-take deals, which add further weight to Kibaran’s credentials as a future graphite producer.
Announcement Detail – Completion of Epanko Engineer’s Report
Kibaran has provided a status update with respect to the senior debt financing for its Epanko graphite project located in Tanzania. SRK was appointed as the Independent Engineers for technical due diligence by the prospective lender, KfW IPEX-Bank, and they have now completed their review.
The IER focused on the Epanko Bankable Feasibility Study (BFS) and the associated financial model. It involved detailed analysis of the BFS including the geology, mining, metallurgy, process test-work, pilot plant work, capital and operating costs, pricing and the financial model. The review also assessed all project-related risks and included a site visit to Epanko at the end of January.
The IER will be forwarded to Nedbank, Africa’s largest investment bank which indicated interest in providing senior project debt financing of up to US$30 million, alongside KfW IPEX-Bank.
Technical Significance
It’s not widely known, but Kibaran is the first ASX-listed company to undergo banker’s due diligence for a graphite project in Africa. Whilst the IER has identified a number of recommendations, Kibaran in conjunction with SRK has developed a detailed action plan to address these – and SRK has now submitted its Final IER to KfW IPEX-Bank.
The IER is the key aspect of KfW IPEX-Bank’s rigorous due diligence in terms of the approval process for up to a US$40 million senior debt facility for the development of Epanko.
With the IER in conjunction with the action plan confirming the bankable status of the Epanko Feasibility Study prepared by GR Engineering, KfW IPEX-Bank is now reviewing the IER as part of their preparation for the submission of the UFK Guarantee application. The completion of the IER paves the way to securing the senior debt financing.
By way of background, KfW IPEX-Bank is a leading German specialist financier with a top rating of AA+ (S&P) and A2 (Moody’s). NedBank is Africa’s largest investment bank.
Summary
We initially acquired Kibaran Resources at a price around $0.22 during September 2015 – representing a current gain of 36%.
Kibaran Resources is in the right place at the right time as far as market interest in high-quality graphite plays with a defined path to production is concerned. The company maintains graphite of the highest quality, which has opened up a lot more potential doors for commerciality than the majority of its peers. Accordingly, the majority of the company’s planned output is now spoken for – with agreements with the German and Japanese customers. Furthermore, Kibaran’s market capitalization of $55m is modest compared to many of its peers. Quite simply, Kibaran is long on substance and short on hype, which means the stock will remain firmly held within our Portfolio.
