Renascor Resources share price crashes 20% despite positive study results

Renascor Resources has announced the study results of its proposed South Australian graphite mining and processing project.

| More on:
two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Renascor Resources Ltd (ASX: RNU) share price is down 21% over the past two days following an update on the mineral explorer's proposed Siviour Battery Anode Material (BAM) project.

Renascor Resources owns the Siviour Graphite Deposit in South Australia.

Siviour is the second-largest proven graphite reserve in the world. The largest is in Africa.

Renascor wants to build a vertically integrated graphite mine and downstream processing project, and yesterday released the results of a revised study of its proposed operation.

On Tuesday, the company's share price closed 5.3% lower while today it has shed another 16.7% so far. Let's take a closer look at the study's findings.

Renascor Resources share price falls despite 'compelling economics' for project

The miner says the study results reveal "compelling economics" for the operation.

It says the results confirm Siviour will be "a low-cost, high-value supplier of 100% Australian-made graphite for lithium-ion battery anodes".

The project has an estimated post-tax unleveraged NPV10 of $1.5 billion. It has a post-tax unleveraged IRR (internal rate of return) of 26%, and an average annual EBITDA of $363 million.

The study projects 150,000 tonnes per annum of graphite concentrate production over a 40-year mine life.

It also projects downstream processing of 100,000 tpa of purified spherical graphite (PSG).

This is the type of graphite used almost exclusively in the anode part of lithium-ion batteries.

The study estimates PSG gross operating costs over the first 10 years of US$1,782 per tonne and US$1,846 per tonne over the life of the mine.

This includes graphite concentrate operating costs of US$405 per tonne over the first 10 years and US$472 per tonne over the mine's life.

The company will build the upstream graphite concentrate mine first at a cost of $214.5 million.

Renascor Resources will fund this using its existing cash balance of $129 million and debt facilities.

The next step will be building the downstream PSG facility at a cost of $394.6 million. Renascor hopes to commence production in 2026.

How will Renascor fund its project?

The company has received a conditionally approved $185 million loan through the federal government's Critical Minerals Facility program.

Renascor is also progressing discussions with Export Finance Australia (EFA) and the Clean Energy Finance Corporation (CEFC).

It's also tapping commercial lenders and its potential offtake partners for additional funding.

Renascor Resources has non-binding strategic cooperation and offtake agreements in place with global giants POSCO and Mitsubishi Chemical Group Corp.

Global manufacturers want alternatives to China

Renascor Resources says anode manufacturers around the world are keen to secure supply from low-risk mining jurisdictions like Australia.

In terms of PSG, China is currently the only producer in the world.

Renascor says its market data suggests average operating costs of approximately US$2,000 per tonne in China, so the Siviour Project will be substantially cheaper at US$1,782 per tonne over the first 10 years.

The company says:

Renascor offers a secure alternative source, which Renascor considers as a competitive advantage with potential offtakers seeking to diversify existing supply channels.

The advantage of Australian supply has recently become more relevant as a result of policy initiatives in North America and Europe aimed at securing graphite supply and other critical minerals.

Initiatives such as the Inflation Reduction Act in the United States provide incentives that favour raw material supply chains from free trade partners like Australia.

Proposed European legislation is similarly targeting supply from secure jurisdictions such as Australia as alternatives to Chinese sources.

What did management say?

Commenting on the BAM Study, Renascor Managing Director David Christensen stated:

By integrating the world class Siviour Graphite Deposit with an in-country downstream manufacturing facility, the BAM Study provides a clear path to creating a competitive advantage as a low-cost producer of Purified Spherical Graphite.

We look forward to using the results of this study to assist in securing binding offtake and funding to permit us to advance into construction and operation of an important new supply line for the lithium-ion battery industry.

Renascor seeking first mover advantage

Renascor Resources expects the overall market for graphite concentrates to increase by approximately 60% from 1.2 million tonnes per annum now to 2.9 million tonnes in 2029.

Lithium battery manufacturers will buy an increasing share of graphite concentrates as the take-up of electric vehicles increases.

Demand for PSG is projected to rise by 315% from about 380,000 tonnes in 2022 to 1.2 million in 2030.

The company said:

The development plan adopted in the BAM Study, which provides for the accelerated start-up of the Graphite Concentrate operation, is intended to offer Renascor a potential early-mover advantage by entering the market at the time of growing undersupply, which Renascor expects will lead to increased prices.

Since 2022, PSG prices have ranged between US$2,000 and US$3,800 per tonne.

The current reported spot price is US$2,475 per tonne.

Marketing consultant Fastmarkets forecasts the PSG price to rise from US$4,150 per tonne in 2024 to US$5,035 in 2033. It projects an average of US$4,716 over the next decade.

Renascor Resources share price snapshot

The Renascor Resources share price has risen in value by 625% over the past five years.

Over the past 12 months, the Renascor Resources share price has dipped 34%.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why James Hardie, Mader Group, MMA Offshore, and WA1 shares are dropping today

These shares are having a tough time on Thursday. But why?

Read more »

Red arrow going down and symbolising a falling share price.
Share Fallers

Why Beach Energy, Core Lithium, Helia, and Red 5 shares are dropping today

These shares are having a tough time on Wednesday. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Beach Energy, Fortescue, Kina Securities, and Melbana Energy shares are dropping today

These shares are missing out on the good times today. But why?

Read more »

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Share Fallers

Why did this ASX All Ords stock just crash 45%?

Investors are sending the ASX All Ords stock tumbling today. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Bapcor, Chalice Mining, Integral Diagnostics, and Winsome Resources shares are dropping

These shares are having a tough session on Monday. But why?

Read more »

a business man in a suit holds his hand over his eyes as he bows his head in a defeated post suggesting regret and remorse.
Share Fallers

Why Core Lithium, Deterra Royalties, Northern Star, and Opthea shares are dropping

These shares are ending the week deep in the red. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why ASX, Brazilian Rare Earths, Liontown, and Sigma shares are sinking today

These shares are under pressure on Thursday. But why?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Share Fallers

Why did this ASX AI stock just crash 21%?

Investors just sent this ASX AI stock tumbling by more than 21%. But why?

Read more »