This morning our 2021 Wise-Owl Pick Of The Year Evolution Energy Minerals (ASX: EV1) set a deadline for its updated Definitive Feasibility Study (DFS).

EV1 confirmed that the updated DFS would now be released in early 2023 and that it would confirm its graphite project “as a high-margin project, that is well positioned to secure finance for development”.

The market never likes it when timelines get pushed back for key bits of news like a DFS but EV1 put out a good explainer as to why the study was delayed.

EV1 confirmed that the delays were because the company had “changed the design of its mine to remove a tailings storage facility” and instead pursue a strategy of dry stacking its tailings.

This is basically an improvement in the way any mining waste is handled - reducing costs associated with earthworks and sustaining capital expenditure while also improving the ESG credentials of EV1’s project.

In today’s announcement EV1 explicitly stated that it expects this change to “deliver improved project economics”.

While we initially expected the DFS to be delivered before the end of the year we like EV1’s approach of optimising the mine design so that the DFS will show as strong a project Net Present Value (NPV) as possible.

After all, the DFS will be the primary document financiers refer to when looking to provide financing for EV1’s project.

What’s next for EV1?

We are still waiting on EV1 to complete its drilling program and we want to see the signing of a Framework Agreement with the Government of Tanzania which will provide its project with regulatory certainty.

Our late-stage graphite development Investment, Evolution Energy Minerals (ASX:EV1), released the findings from its Life Cycle Assessment which measures the proposed mine’s environmental impact.

Here are our key takeaways from today’s EV1 announcement:

• Chilalo flake graphite concentrate is estimated to emit approximately half the CO2 as Chinese produced graphite (70-80% of global graphite supply)
  
• The study was based off the company’s 2020 DFS which did not incorporate the use of renewable power. (EV1 expects this to improve its emissions intensity even further).

We think that for EV1 to get these kinds of numbers is a significant win for the company in their bid to become a leading supplier of sustainable graphite.

We also expect EV1 green credentials to be meaningful for potential offtakers and financiers.

Delivering this Life Cycle Assessment was one of the milestones from our EV1 Investment Memo:

We’ve also updated our EV1 Progress Tracker to reflect the achievement of this milestone.

Click Here to See EV1 Progress Tracker

Our late-stage graphite development Investment, Evolution Energy Minerals (ASX:EV1), has given us some great insights into the current state of the graphite market and the company’s strategy going forward.

EV1 has now stated its intention to become a vertically integrated graphite producer.

This means EV1 won’t just mine graphite, it will also be a part of the downstream graphite industry. This is where raw graphite is processed to make high-end types of graphite that fetch many multiples of the raw product’s price.

We’ve noted previously that EV1’s graphite product meets the most demanding specifications - making it suitable for the nuclear industry, hydrogen fuel cells, graphite foils and electric vehicles (EVs). These are the end uses of graphite that could super-charge EV1s margins on its graphite.

This follows a string of positive announcements outlining the results of EV1s testwork on the company’s Chilalo graphite product, specifically regarding the fines portion of EV1’s future production.

Here our key takeaways from today’s announcement:

• Flake graphite market in supply deficit due to battery demand - A major part of our EV1 Investment thesis, we hope EV1 can move into production at the same time the graphite market enters a long-term structural supply-demand imbalance due to battery demand. EV1 notes that although prices have flattened, this is peak season for graphite mining in China (the world’s largest graphite producer). This supply should shrink heading into the northern hemisphere winter.
• Final Investment Decision and project financing expected March quarter 2023 - We think given the graphite market dynamics, the timing couldn’t be better for a Final Investment Decision. We like to see companies give clear timelines for knocking down milestones and objectives and this was Key Objective #1 in our EV1 Investment Memo.
• Updated DFS and FEED due in Q4 2022 - The precursor for a Final Investment Decision, this will give us a much better look at the financial metrics involved in the proposed Chilalo mine. Meanwhile, Front End Engineering Design (FEED) will help plan the mine construction.
• Downstream site selection commenced - Picking a place to set up a downstream plant is an important first step towards building out a vertically integrated graphite production project. Specialist personnel will be appointed to help advance downstream strategy.
• Coarse flake downstream may require additional production - With an offtake with Chinese graphite giant YXGC already - pending a downstream JV agreement with the company, EV1 will commence a scoping study. EV1 intimated that if this goes ahead the proposed Chilalo mine may have to expand the initially planned production level. We take this as a very promising sign that EV1’s graphite will be in high demand.

What’s next for EV1? EV1 is always very precise with expectations and timelines.This latest announcement reiterated that it anticipates signing a Framework Agreement with the Government of Tanzania, providing its project with regulatory certainty. This promises to be a big tick mark for EV1 and will help it cement its place in the Tanzanian mining industry.

Readers who follow our Investment Portfolios will know that we have been making strategic Investments in commodities that have made critical minerals lists for the EU, USA, Japan, India and Australia.

These minerals are considered critical to the digitisation and decarbonisation macro thematic and include lithium, graphite, cobalt, nickel and PGE’s, to name a few.

Over the weekend, the following speech from the president of the European Commission, Ursula von der Leyen, gave a speech announcing that the EU would look to pass a “European Critical Minerals Act”.

The aim is to avoid the position Europe finds itself in with oil and gas, where it relies on a single trading partner like Russia.

The act would see the EU put in place:

1. Agreements with partners like Chile, New Zealand, Mexico, India and Australia for the supply of critical minerals.
2. Identification of strategic projects across all along the supply chain from mine sites to processing/refining projects.
3. The act would also see the setting up of strategic reserves of these critical minerals.

All of this bodes well for our Investments across commodities identified as “critical minerals” giving these projects strategic importance on the world stage.

To see a list of all the critical minerals in the Australian Critical Minerals strategy document, check out the following link.

Here is a snippet from that speech:

We’ve been looking over the latest announcement from our graphite Investment, Evolution Energy Minerals (ASX:EV1) and we like what we see.

In the Tuesday announcement, EV1 profiled the performance of its non-spherical by-product from the proposed battery anode flowsheet:

Importantly, EV1 by-product outperformed the industry leading products in this area across both resistivity and conductivity.

Meaning batteries that use EV1’s by-product should last longer, are easier to make, cost less and perform better.

We think this is another win for EV1s downstream activities and further vindication of their choice to use an inverted flow sheet.

The current price for this kind of by-product is US$12,000 per tonne.

What’s next for EV1? Further product qualification initiatives, and an optimised DFS ahead of a final investment decision. We think announcements like the one released Tuesday should improve margin on EV1’s graphite and in turn, increase the investability of its Chilalo project for project financiers.

This morning our 2021 Wise-Owl Pick of the Year Evolution Energy Minerals (ASX: EV1) came out of a trading halt having completed a capital raise.

EV1 raised a total of $13M at 32c per share via a placement to private investors.

Importantly we saw ARCH capital partners show intent and commit to maintaining their 24.7% shareholding in the company by participating in the placement.

EV1’s managing director Phil Hoskins also said that the placement allowed for ““the introduction of a number of institutional investors to the Evolution share register”, which is good timing given the company is progressing its project towards a final investment decision targeted for the end of this year.

EV1 is adding to its ~$5.37M cash balance (at 30 June 2022) which should mean it has ~$18.37M in cash post placement,

EV1 plans to use its balance sheet strength to complete the following:

• Front end engineering design work and delivery of an updated definitive feasibility study for its graphite project.
• Progress the company's downstream strategy.
• Product qualification and marketing.
• Drilling for near surface high grade material to improve project economics

The placement shares will come onto market in two separate tranches, the first tranche of 24,281,250 EV1 shares are expected to be issued on 19 August 2022 and the remaining 16,343,750 will be issued after shareholder approvals in early October (expected on the 5th of October 2022).

This morning our 2021 Wise-Owl Pick of the Year Evolution Energy Minerals (ASX: EV1) announced the details for an upcoming webinar where the company plans to provide a “project development and downstream strategy update”.

EV1’s Managing Director Phil Hoskins will be running the call at 11:00am AEST (9:00am Perth time) this Friday (5th of August).

For readers who want to tune into the webinar the Zoom registration link is below:

https://us02web.zoom.us/webinar/register/WN_PpDiiv8sQa6zdM8IZCupfQ

Spanning three days on the pristine Sunshine Coast of Queensland, the Noosa Mining Investor Conference kicked off its 12th year on Wednesday. Attracting a diverse and large spread of corporates, brokers, retail and institutional investors, this year’s event featured over 60 companies presenting and over 1,000 people in attendance, all hosted within the coastal town's Peppers Resort.

At the event, we caught up with a number of executives from our Investment companies (including AKN, AOU, BPM and PFE) as well as companies of interest, either as potential additions to one of our Portfolios, or to gain expert insight to macro and regional headwinds impacting the markets.

The conference is held in the ideal location to mix work with pleasure, and meet a host of CEOs of ASX juniors. Each day ends with a short ‘business at the bar’ session that quickly morphs into talking tactics about where to eat and drink. On Thursday and Friday nights, many head to the Noosa Surf Club for its networking sessions, enjoying its glassed indoor area and open deck to the beach.

We look forward to providing updates on companies we met with down the road.

EV1 has been testing out its Chilalo graphite (fines) to see how suitable it would be for lithium-ion batteries like the ones found in EVs.

And we think the results from early cycling work are very encouraging.

This comes after EV1 proved that its fines product:

• Has very low levels of Molybdenum and Boron at levels which significantly exceed the specifications of major EV manufacturers (and could be suitable for the nuclear industry).
• Can be purified to 99.9995% C and when processed into coated spherical graphite
• AND with an inverted flow sheet, EV1 achieved 64% yield on their spherical graphite product, a full 24% more than the industry standard yield

Today’s test work shows that the surface coated graphite from Chilalo achieved an irreversible capacity loss of 6.95%, below the 7% threshold required for “super-premium” battery applications which fetch between U$18,000 to $22,000 per tonne.

Irreversible capacity loss is a measure of how many times a graphite battery material can be used and reused - basically a measure of its longevity/durability.

This is essential to use cases in EVs as consumer preferences favour batteries with a long life.

What’s next for EV1? The preliminary results from the long-term battery cycling program mean that EV1 has enough data to go and commence qualification initiatives of their coated battery anode materials with targeted battery manufacturers. EV1 has done 20 cycles and will continue the work through to 100 cycles.

We’ve long held the view that this downstream work is essential to re-rating EV1’s market cap to fall in line with its larger graphite peers - so we’re very pleased with their progress on the downstream front.

This is really good. Our 2021 Wise Owl Pick year Evolution Energy Minerals (ASX:EV1) announced this morning that the company had achieved a 64% yield on their spherical graphite product.

That’s a full 24% more than the industry standard yield - meaning more margin for EV1 if/when the company gets into production.

It also means it will take less graphite to produce more battery anode material.

What’s more, the reversible capacity of EV1’s graphite (the measure of specific capacity rating) of 368 mAh/g1 is near the theoretical capacity of 372 mAh/g; and EV1’s graphite’s irreversible capacity loss (essentially demonstrating the retention of specific capacity from charge to charge) is < 7%.

In layman’s terms, this means EV1’s spherical graphite product is getting pretty darn close to the upper limits of what graphite can achieve from a theoretical perspective - i.e the physics of the graphite is almost perfect.

The results of EV1’s testwork to date are impressive to say the least - the company has achieved a purity of 99.9995% - which exceeds the purity requirements of both the battery sector as well as the high value nuclear sector that we alluded to in our latest EV1 note.

After today, we’re of the view that EV1 has some quality graphite on its hands - stuff that can help make some of the highest performance battery anode material in the world (perfect for EVs).

It’s a big win for EV1, and as long term Investors in EV1, we’re glad their downstream strategy is starting to bear fruit.

The upshot? It all comes down to the remaining ~35% of EV1’s Tanzanian graphite products (fines) and EV1 has yet to seal an offtake for this portion of their proposed production:

Key takeaway - we think that the downstream testwork and inverted processing flow sheet the company is working with should help secure a better offtake agreement for the fines product further down the track.

That would be an ideal outcome for us as EV1 Investors.

All of this at a time when graphite prices remain strong - especially in the ultra premium side of the market (EV1 quoted US$18k–22k a tonne for their coated spherical graphite in today’s release).

What’s next for EV1? EV1 flagged today that long-term cycle testwork is ongoing - basically testing to see how the Chilalo fines product holds up over a repeated series of uses in a battery. After that, we’re looking to see EV1 solidify its place in Tanzania's mining industry via a Framework Agreement with the government.

China plans to make up to US$1.1 trillion in financing available for infrastructure spending, which we think will increase commodity demand. Read the following Bloomberg article for details.

Read the full article here.

Below are our key takeaways:

• China is making 7.2 trillion yuan ($1.1 trillion) in funds available for infrastructure spending.
• According to Citigroup, infrastructure investment in 2022 is likely to rise by 7.7% versus 2021.
• President Xi Jinping has called for an “all out” effort to increase infrastructure spending this year to fuel economic growth and meet a GDP growth target of around 5.5%.

The Bloomberg article touches on the impacts of China’s COVID induced lockdowns on the domestic economy.

With economic growth tipped to slow, the Chinese government is getting ready to lean on fiscal stimulus through infrastructure investment to spur economic growth.

We think this type of fiscal stimulus is likely to become a common theme in China and the West, with macro themes like decarbonisation requiring massive CAPEX.

This infrastructure spending forms part of our “commodities supercycle” investment thesis, where we see increased fiscal stimulus and CAPEX investment spurring higher demand for commodities already facing supply shortages.

This morning our 2021 Wise-Owl Pick of the Year, Evolution Energy Minerals (ASX:EV1) made further progress with its commercial verification program to evaluate the suitability of its graphite fines product for battery anode materials.

EV1 confirmed that thermal purification achieved an industry-leading purity level of 99.9995% carbon (C).

What we’re really interested in from today’s EV1 announcement is the “inversion” of the traditional battery anode process flow sheet:

Importantly, this flow sheet results in a product that exceeds the required purity level for battery grade spherical graphite, while also using an environmentally friendly thermal purification processing methodology.

This compares to the conventional approach which is currently responsible for producing 100% of the world’s battery grade graphite.

The key difference between the two is that the conventional process uses highly toxic chemicals such as hydrofluoric (HF) acid — existing anode manufacturers use between 400-600kg of HF acid for every tonne of graphite feedstock.

Thermal purification, on the other hand, is completely sustainable using no toxic chemicals. This fits in with EV1’s strategy of producing net zero carbon graphite.

We think this is a step in the right direction towards positioning EV1 as the world’s leading producer of the most green and sustainable battery anode materials.

The thermal purification process also has cost advantages. EV1 explains that the cost of the conventional process is ~US$700 per tonne as compared to the thermal purification process which EV1 expects to cost ~US$500 per tonne.

EV1 is making strong progress towards qualifying its graphite fines product as suitable for use in both high performance batteries and in the nuclear industry — where graphite products can fetch as high as US$30,000 per tonne.

We covered this test work in our last EV1 note which you can read here: EV1’s Graphite Meets Purity Standards – Good for Batteries and Nuclear Energy

What’s next for the ongoing test work:

EV1 has confirmed that downstream processing and battery anode testwork is ongoing. The company expects to release the results of testwork on the production of coated spherical graphite in the coming weeks.

Subject to the results of that testwork, EV1 intends to undertake a feasibility study on the production of coated battery anode materials and other advanced battery products.

This, we hope, will lead to improved overall project economics for EV1 as it moves towards making a final investment decision to develop its graphite project in Tanzania.

The following Bloomberg article highlights China’s plan to spend up to US$220 billion to spur economic growth through infrastructure spending.

All of this new infrastructure will require more commodities.

Read the full article here.

Below are our key takeaways:

• China’s Ministry of Finance is considering US$220 billion of infrastructure funding aimed at shoring up the country’s beleaguered economy.
  
  
• The funding is to be brought forward from next year’s quota, marking the first time the issuance has been brought forward due to concerns around the dire state of the world’s second largest economy.
  
  
• The funding would primarily be used on infrastructure spending to boost an economy hit by Covid lockdowns and a housing downturn.
  
  
• Commodities rallied in European trading hours following the news, with copper moving 3.6% higher on the London Metal Exchange.

For over two years, we have been writing about an upcoming commodities supercycle brought about by infrastructure spending, following decades of underinvestment in the “real economy”.

All this investment in the “real economy” requires raw materials, which is why we think the macro backdrop for commodities over the next decade is strong.

The Bloomberg article highlights the readiness of the Chinese government to lean on fiscal stimulus to spur economic growth at a time when the Chinese economy is slowing down.

Generally, governments would try to respond to slowdowns in economic growth by cutting interest rates. With this tool exhausted after the COVID pandemic, we think infrastructure spending will become the new policy of choice for governments worldwide.

Again, this infrastructure spending will increase demand for commodities which we expect will take commodity prices higher.

The following Bloomberg article showcases the moves major carmaker Volkswagen is making in the batteries industry.

Read the full article here.

Below are our key takeaways:

• VW is pressing forward with investments along its battery supply chain, commencing construction at a new cell factory in Salzgitter, Germany, one of five facilities in Europe under the carmaker’s PowerCo subsidiary.
  
• Salzgitter is home to VW’s main motor factory, and it is where the company last year opened an $80 million facility to research, develop and test EV batteries.
  
• Roughly $2 billion will be invested in the new cell factory, where production is scheduled to begin in 2025.
  
• VW expects its battery business to generate €20 billion in revenue by the end of this decade.
  
• VW CEO Herbert Diess said, “We are invested in some startups and we are looking forward to a joint venture together with Bosch for the machine tools and equipment for those plants, so we’re really gearing up to become one of the bigger battery cell producers”.

The news is just another sign that downstream investment in battery supply chains is showing no signs of slowing down.

VW is one of the world's largest carmakers and is heavily investing in downstream production capacity. It expects this part of its business to generate over €20 billion in revenues by the end of the decade.

This is a situation where investment in midstream/downstream (manufacturing/battery industry) is far ahead of upstream investment (mining), this leads to the supply/demand imbalances for the raw materials required to produce batteries only becoming worse.

The imbalance comes from the timing of these mega projects. Building a downstream / midstream facility could take 1-4 years whereas it takes around 7 years on average to bring a new resource discovery into the production stage.

As a result, we think that raw materials prices will remain high for at least the next decade whilst the mining industry catches up to demand.

Investment Memo: EV1 2022

Objective: Final Construction Decision & Project Funding

Milestones: FEED - Appoint Engineer: 🔲 → 🔄

EV1 is advancing a Framework Agreement with the Government of Tanzania around their free-carried interest in EV1’s Chilalo project.

This should further aid project financing discussions as there will be more certainty around economic metrics.

EV1 says its DFS optimisation should be complete by September, with an engineer to be engaged this month for Front End Engineering Design. We expect the economics to improve with rising graphite prices and ESG elements to also be included.

We’ve updated the Key Objectives from our EV1 Investment Memo accordingly:

Investment Memo: EV1 2022

Objective: Final Construction Decision & Project Funding

Milestone: N/A

EV1 has appointed leading resources financier, Auramet, to help advance project financing.

Mark Tyler of Auramet said he thinks it's “one of the most attractive graphite opportunities globally.” And we agree.

Having Auramet onboard is a significant win for EV1 and should help them make progress towards Key Objective #1 from our EV1 Investment Memo:

This morning our 2021 Wise-Owl Pick of the Year Evolution Energy Minerals (ASX: EV1) confirmed that it has commenced trading on the Frankfurt Stock Exchange in Germany.

The company is trading under the ticker “FSE: P77” and trading activity can be viewed via the following link: https://www.boerse-frankfurt.de/equity/evol-energy-min-ltd

The significance of this is that investing in EV1 is now much easier for European investors.

In today’s announcement EV1 also mentioned that it is currently working on a commercial verification program to evaluate the production of sustainable battery anode materials.

It also confirmed that it would try and use this technology to build a battery anode manufacturing facility in Europe (which it is pursuing through its European Battery Alliance membership).

The assessment and definition of a downstream strategy is Objective #2 in our 2022 EV1 Investment Memo, and we think that today’s news opens up the company to further pursue these opportunities inside Europe.

To see all of the key objectives we want to see EV1 achieve in 2022, why we continue to hold EV1 in our portfolio and the key risks to our investment thesis, check out our 2022 EV1 Investment Memo by clicking the image below.

This morning the US government announced a conditional US$107M agreement with ASX listed Graphite miner Syrah Resources. Very rarely do we see the US government step in and make loans directly to listed companies, and very rarely are they companies outside of the US.

The loan comes as the US government recently announced that it would be looking at financing critical minerals projects in a rush to try and secure its supply chains. The funds are expected to be used to build out a processing plant with enough battery anode production capacity to supply ~2.5m electric vehicles (EVs) per annum.

We think that the US government’s involvement in project financing is more recognition of the importance of graphite in the EV supply chain.

This was one of the many reasons we announced Evolution Energy Minerals (ASX: EV1) as our 2021 Wise-Owl Pick of the Year.

EV1’s graphite project is ‘shovel ready’ with a DFS completed in Jan 2020 demonstrating an NPV of US$323M. EV1 is looking to make a Final Investment Decision by the end of this year and will then look to get its project into construction.

EV1 is also committed to achieving best in class ESG credentials, which we think will be the key differentiator for its product when it is being marketed to EV battery makers.

Below is a screenshot from our 2022 EV1 Investment Memo, which details why we invested, what we want to see the company achieve in 2022 and the key risks to our investment thesis.

To check the memo out, click on the image below.

Lithium is taking centre stage in the electrification thematic, but the markets seem to be missing that in producing electric vehicle (EV) batteries, several other commodities are just as important.

One of those is graphite, which comprises over 50% of the raw materials in every lithium-ion battery (and over 95% of every battery anode).

As is the case for lithium, there is an abundance of graphite deposits all across the world. And again like lithium, despite the abundance of resources there just isn't enough graphite being produced (specifically battery grade graphite) to meet future demand.

The article from the South China Morning Post titled “Shortage of EV battery raw material graphite could delay global drive to go green” details this problem and is definitely worth a read.

With consultants Wood Mackenzie estimating that graphite demand is set to double by 2035, mainly due to the increase in demand by battery producers, there is a real risk that the graphite market becomes structurally short, just like the lithium market is right now.

This is why late last year we announced Evolution Energy Minerals (ASX: EV1) as our 2021 Wise-Owl Pick of the Year.

EV1’s project is shovel ready with a DFS already completed in Jan 2020 showing a low capex requirement of US$87M and an NPV of US$323M. EV1 is looking to make a final investment decision by the end of this year and will then look to get its project into construction.

EV1’s project differentiates itself with 31% of its resource in the extra large/jumbo category giving it the optionality to either sell it at high margins or use it in downstream opportunities in the battery manufacturing space.

On top of all of this EV1 is committed to achieving best in class ESG credentials which we think will be the key differentiator for its product when its product is being marketed to EV battery makers.

Below is a screenshot from our 2022 EV1 Investment Memo, which details why we invested, what we want to see the company achieve in 2022 and the key risks to our investment thesis.

To check the memo out, click on the image below.

Marvel Gold is exploring whether it can conduct an in-specie distribution of its shareholding in EV1.

Marvel holds 50,000,000 EV1 shares, or ~31% of EV1’s register, that are escrowed until November 2023, meaning Marvel can’t sell until then.

An in-specie distribution is when a company passes on its shareholding in another company to its shareholders. In this case, Marvel would transfer its 50 million EV1 shares to its shareholders pro rata, rather than have the company’s treasury hold onto them.

As mentioned in our launch note, one of the key reasons we liked EV1 is because of its tight capital structure.

With Marvel's shareholding escrowed, ~31% of the shares can’t be sold on-market until 16 November 2023. This means that there will be a limited number of shares to purchase on-market, so if EV1 can deliver progress on its graphite project we could see a sharp share price re-rate.

Whatever happens with the shareholding, ideally we would like to see the escrow remain in place.