Highest environmental and social standards apply

If not now, then when? The timing could hardly be better for Australian battery anode material manufacturer EcoGraf (ASX EGR / WKN A2PW0M) to announce its intention to restart the financing process for its Epanko graphite mine with the help of Germany’s KfW IPEX Bank. After all, the recent announcement from China that Beijing would introduce controls on the export of natural and synthetic graphite, citing national security concerns, caused a stir in the graphite market.

This once again highlights the importance of secure graphite supply sources outside the People’s Republic. It is therefore fitting that EcoGraf is now mandatin KfW IPEX-Bank to obtain import credit cover (UFK cover) from the Federal Republic of Germany and to arrange a senior credit facility (UFK tranche) of up to 105 million US dollars (approx. 160 million Australian dollars) for the development of the Epanko graphite project in Tanzania.

Updated development plans also meet financing requirements

Following recent meetings with the bank and offtake partners for Epanko in Germany, EcoGraf can now confirm that the graphite project still qualifies in principle for UFK cover following the update of the development plans. Accordingly, KfW IPEX-Bank has been engaged to provide advisory, structuring and arranging services to obtain UFK cover and arrange the UFK tranche.

EcoGraf came close to taking this step a few years ago, but market conditions were much more difficult at the time and, above all, the Tanzanian government, then – in stark contrast to the current one – was considerably less open to foreign investment. The current President of Tanzania, Samia Suluhu Hassan, on the other hand, is actively promoting new investment in the critical minerals sector. Furthermore, in relation to EcoGraf, the approval of a special mining license for Epanko is well advanced, underpinning the long-term expansion potential of the development.

Significantly more favourable conditions possible

The UFK program is an initiative of the Federal Republic of Germany to create incentives for the development of key projects that can ensure a long-term supply of critical minerals for German industry, especially for the energy transition. The importance of Tanzania for Germany in this respect was also underlined by the recent visit of German President Walter Steinmeier to the East African country. The special feature of the UFK program is that a longer term is possible than is usually available from commercial lenders. This in turn ensures greater financial flexibility for new developments during commissioning and operation.

Highest environmental and social standards apply

A crucial part of the UFK program is that the highest environmental and social standards are applied. Epanko is to be developed on the basis of the so-called Equator Principles, a voluntary set of rules for banks to comply with environmental and social standards in the area of project financing. A comprehensive, independent engineering review was carried out in 2017, which confirmed compliance with the performance standards of the International Finance Corporation and the environmental, health and safety guidelines of the World Bank Group. EcoGraf is currently completing an update of its environmental and social planning arrangements under the latest Equator Principles IV, which should give financiers and clients confidence in Epanko’s industry-leading sustainability credentials.

Following the conclusion of a framework agreement with the Tanzanian government in April 2023, the company is also receiving support from the government to accelerate the development of Epanko.

Conclusion: In our view, the appointment of KfW IPEX-Bank is an important milestone for the company and we look forward to being informed about the progress of the financing process. As the market situation and outlook for graphite is also viewed positively by many experts, at least in the medium and long term, mainly due to the progress of the global electrification of transportation and the economy, we believe that EcoGraf with its Epanko project, which meets the highest environmental and social standards, could be one of the beneficiaries. Especially as the proportion of natural graphite in lithium battery anodes is also increasing, as it is less CO2-intensive than synthetic alternatives. We are keeping our fingers crossed for EcoGraf.

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According to §34b WpHG and according to Paragraph 48f paragraph 5 BörseG (Austria) we would like to point out that principals, partners, authors and employees of GOLDINVEST Consulting GmbH hold or may hold shares of EcoGraf and therefore a possible conflict of interest exists. We also cannot exclude that other stock letters, media or research firms discuss the stocks we recommend during the same period. Therefore, symmetrical information and opinion generation may occur during this period. Furthermore, there is a consulting or other service contract between EcoGraf and GOLDINVEST Consulting GmbH, which means that a conflict of interest exists.

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