FORMER Xstrata CEO, Mick Davis, has announced plans to build a graphite mine in Madagascar through his newly founded Vision Blue Resources (VBR) – a company that has raised $60m from investors to chase down battery metals assets.
VBR will invest $29.5m of the $60m raised in NextSource Materials, a company that has 100% ownership of the Molo Project in southern Madagascar. The project is billed as “… one of the largest known and highest quality deposits” of flake graphite globally. In its first phase, Molo will produce 17,000 tons a year of 98% purity graphite.
Davis said he was heartened by the financial support so far and promised more financings later this year. “We have also received significant additional expressions of interest to invest in VBR’s future fundraisings and we expect to return to the market later in 2021.”
Davis said demand for battery metals, which include a host of materials from vanadium through to copper and cobalt, would “… dwarf anything the mining industry has ever seen before, including the commodity impact of China’s industrialisation in the last 20 years”.
Davis has staged several returns to mining investment after stepping down from Xstrata in 2012 following its merger with Glencore.
He raised as much as $5bn for X2 Resources, a private equity fund he launched in 2013, with the intention of capitalising on the cyclical decline in the commodity market. However, the fund was closed four years later after failing to make an investment.
Last year, Davis started Niron Metals which aimed to “scour the world” for industrial metals such as copper, zinc, and nickel, according to reports at the time.
VBR said it was targeting either near production or late-stage exploration projects “and where VBR is able to work with existing management teams and shareholders to create significant value”. It will prioritise assets with phased development growth potential that can become “… increasingly significant in the market through incremental expansion and that utilise well-understood processing technologies with low-risk logistics solutions”.
VBR will fund the first phase of Molo Project and accelerate technical studies that will confirm the capital and operating costs for a second phase expansion. It will also study the options for a processing plant producing graphite for lithium-ion batteries. Lithium-ion batteries are used in the manufacture of electric vehicles.
Davis will become chairman of NextSource following the closure of the initial transaction in which VBR will take a 16.7% stake in the company and have the right to nominate a director.
Speaking in October at the Joburg Indaba, an investment conference, Davis said mining firms had focused on investment returns at the expense of resource renewal. “Directors and management teams have not focused on this very simple proposition: every day they take something out of the ground, and unless you do something that replaces that, you end up withering and dying,” he said.
“I fear that this very focused approach on returning cash to shareholders in the form of dividends and capital returns has not in fact taken into account sufficiently the need to reinvest and so has not created optionality.”