Magnis pencils in a fifth graphite deal but is working against clock in Tanzania

Magnis Energy has signed a ‘binding’ agreement to deliver significant volumes of graphite from its Tanzanian mining project. Time, though, is not on its side.

Magnis Resources’ Nachu graphite project in Tanzania.

On Monday, Magnis Energy had exciting news: Traxys, a minerals brokerage, had signed a “binding” agreement for the delivery of significant volumes of graphite to be produced at the company’s Tanzanian mining project.

The agreement, however, had one unusual feature. There was no upfront payment from Traxys to secure the supply of natural graphite concentrate – in all, up to 600,000 tonnes from 2024.

Magnis, however, would have to pay up. Under the deal, Traxys received 700,000 shares in the next-generation battery operator as a “marketing fee” and some 1.3 million options at 60c each.

Magnis, which has plans for EV battery plants in New York and Townsville, has been a market star. Since the start of the year, its share price is up 132 per cent. They now trade at 44c.

Fulfilling the deal will be a tall order for Magnis, which has been working on the Nachu project in southern Tanzania since 2013.

The offtake agreement requires the company to start the construction of a processing plant within nine months. Magnis will also have to secure finance and get all approvals from the Tanzanian government by that time.

Like its battery manufacturing projects – run through a subsidiary known as Imperium3 – Magnis has struggled to get the Nachu mine running for several years.

And Traxys is not the first memorandum or deal Magnis has for its graphite. It is its fifth.

Former Magnis figures, who spoke on condition of anonymity, citing legal threats, say the deals had proven costly, with payments to consultants required.

The first “binding” Nachu offtake agreement – with Sinoma, or the China National Materials Import & Export Corporation – was signed in 2014.

Magnis would have to deliver 80,000 tonnes of graphite annually for five years.

The plan, according to company documents, was for the processing plant to be completed by the end of 2015. That would mean graphite production in 2016.

Shortly after the deal with Sinoma came an agreement for the delivery of 100,000 tonnes of graphite every year to Sinosteel.

Magnis chairman Frank Poullas. Picture: James Croucher

By March 2015, Magnis signed a deal with Sinoma to organise project finance, engineering, and construction on the site.

But no graphite was sold – to either of the two Chinese firms.

Both offtake agreements were terminated in January 2017, and Magnis instead signed a memorandum of understanding with Russian nuclear energy agency Rosatom. “Discussions are continuing on the project financing of the Nachu Graphite Project in tandem with offtake discussions,” the company said at the time.

Magnis delivered some graphite samples to Rosatom in July 2017. The potential offtake agreement was not mentioned again.

Another deal, with Europe’s World Plastik ve Petrokimya Sanayi ve Ticaret, was announced in December. The company only disclosed that the deal would run three years from first delivery, “with further details remaining commercial in confidence”.

In November, Magnis chairman Frank Poullas told the company’s annual meeting that the project was now “shovel ready”. The company only needed to relocate several families living on the mine site, Mr Poullas said.

Magnis director Peter Tsegas heads up operations in Tanzania.

He had earlier told The Australian that Magnis was not unique, noting “no graphite company, no listed company has broken ground in Tanzania”.

“None of the companies here are mining,” he said.

“With Magnis we were doing very well until there was that issue with the Tanzanian government and everyone is moving again.”

The Australian has, in recent months, documented regulatory interest in Magnis.

The corporate regulator’s Office of Enforcements demanded Magnis hand over documents including internal accounts in mid-September, documents obtained under freedom of disclosure laws showed. The request for Magnis to produce documents came one day after The Australian’s initial report into the battery company, which raised questions about some of the $900m in contracts relating to its New York EV batteries plant.

Magnis has also been queried by the ASX, including in October, when it was forced to respond to questions about contracts signed with Sukh Energy, a client.