Alabama Graphite Corp. Com ABGPF

Economic Analysis

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Economic Analysis The PEA has shown that a mine life of 27 years is possible with a 16,500 tpa final product operation. The Project has a pre-tax NPV of $444 million with an 8% discount rate (post-tax $320 million). The IRR for the Project is 52.2% on a pre-tax basis (post-tax 45.7%). The graphite prices used to determine the above Base Case values were $8,165 /ton ($9,000 /tonne) for coated spherical graphite (CSPG) and $1,814 /ton ($2,000/tonne) for purified micronized graphite (PMG). The pre-tax payback period is estimated at 1.9 years from the start of milling operations (post –tax 2.0 years). The greatest sensitivity in the project is to recovery. While sensitivity exists, actual practice may show less fluctuation than is considered in this analysis. The +10% and +20% values are somewhat meaningless as they show recoveries greater than 100% due to the already elevated recovery. Recoveries on the negative side may also not be practical as the testwork has shown less fluctuation that the percentage variations here would indicate. But they do indicate a steeper slope showing a greater sensitivity. This large a swing in recovery has the obvious effect of influencing the project, but may not be realistic. The next most sensitive item is the graphite price. While the project still maintains a positive NPV and elevated IRR, the reduction in the graphite price has a dramatic impact. A 20% drop in the metal price drops the IRR by 10% and the NPV by $94 million. Operating costs are the next most sensitive. A 20% increase in these results in the $24 million decrease in the NPV. The sensitivity to capital cost is the least sensitive. The cost of the plant is where this fluctuation may occur as it represents the majority of the capital expenditure. An increase in the capital costs by 20% drops the NPV by $12 million. The project development options are sufficiently understood and the project shows positive economics to support a decision to proceed to a FS.