An updated feasibility study for NextSource Materials’ (TSX: NEXT) Molo graphite mine in southern Madagascar projects a longer operating life but lower returns and higher capital costs for the same planned output.

NextSource said Monday that a stage-two expansion at Molo would generate a post-tax net present value, discounted at 8%, of $348.4 million, with an internal rate of return (IRR) of 20%.

The revised economics reflect a lower graphite concentrate price assumption of $1,138 per tonne, down from $1,191 per tonne in a 2023 study. As a result, the NPV is nearly 6% lower than the earlier estimate, while the IRR has declined from 29%. Capital costs have risen 79% to $290.8 million. The updated plan extends the mine life to 37 years from 25 years, underscoring the trade-off in the new study: a longer reserve schedule, but weaker projected economics under the updated cost and pricing assumptions.

“The updated and optimized feasibility study announced today confirms the Molo mine’s ability to be expanded in stages to a larger-scale operation of global significance to meet the robust market demand for flake graphite, particularly for use in electric vehicle batteries,” NextSource CEO Hanré Rossouw said in a release.

“The staged approach set out in the updated feasibility study reduces operating risk, lowers financing costs and accelerates revenue while providing flexibility to respond to market demand.”

Few advanced projects

The update evaluates Molo’s expansion plan against a backdrop of inflation, higher capital costs and weaker graphite prices. Even with reduced projected returns, Molo remains one of the few advanced graphite developments outside China and produces NextSource’s patented SuperFlake brand graphite. That positioning matters because flake graphite is a feedstock for battery anode material, and advanced projects outside China are closely watched by manufacturers seeking more diversified supply chains.

The feasibility study proposes adding three processing modules, each with capacity of 50,000 tonnes per year, across two stages. That would bring planned stage-two output to 150,000 tonnes annually, NextSource said. The figure would represent a substantial increase from the mine’s current capacity of 17,000 tonnes per year of graphite concentrate. Molo entered production in 2023.

The staged expansion model was developed around NextSource’s offtake agreement with Mitsubishi Chemical Group for purified and spheronized graphite. That material would be sourced from the company’s planned Battery Anode Facility in the United Arab Emirates, linking the mine plan to downstream processing rather than only concentrate sales.

5 million tonnes of contained graphite

Molo is considered one of the world’s largest graphite deposits. It hosts proven and probable reserves of 82.5 million tonnes grading 6.27% graphitic carbon, equal to 5.1 million tonnes of contained graphite. The project is located about 900 km south of Madagascar’s capital, Antananarivo.

NextSource shares were unchanged at 30¢ each on Monday morning in Toronto, giving the company a market capitalization of C$73.3 million. The stock has traded between 24¢ and 63¢ over the past 12 months.