Nextsource Explores Saudi Advantages for a $280 Million Graphite Anode Plant

NextSource Materials (TSX: NEXT) announced that the construction of a new graphite anode plant in Saudi Arabia for electric vehicles is projected to require an investment of $280 million, marking a significant step in the company's global expansion efforts.

According to a technical study released on Thursday, the planned facility aims to manufacture 20,000 tonnes per year of graphite anode active material for lithium-ion batteries. This initiative mirrors NextSource's current supply operations to Toyota and Tesla from its factory in Madagascar. Additionally, the company is progressing with a plant project in Mauritius and is exploring opportunities for expansion into the United Arab Emirates and North America.

The study reveals that the Saudi Arabia project boasts an after-tax net present value of $677 million at an 8% discount rate and an internal rate of return of 20.3%. Construction costs and $12 million in working capital will primarily be financed through equity. NextSource is currently in discussions for debt financing and is open to exploring a potential joint venture for additional funding.

President and CEO Craig Scherba stated in a release, "Establishing a battery anode facility (BAF) in Saudi Arabia would allow us to leverage the Kingdom’s strong infrastructure, strategic location along shipping routes, and favorable business climate. We are evaluating several potential sites for developing BAFs as part of our global expansion strategy."

NextSource is counting on Saudi Arabia's shift, where billions of petroleum dollars have been redirected in recent years towards the next generation of energy. The country's Vision 2030 initiative, aimed at significantly ramping up electric vehicle (EV) production and battery mineral mining, has drawn interest from Barrick Gold (TSX: ABX; NYSE: GOLD), Robert Friedland’s Ivanhoe Electric (TSX: IE; NYSE AM: IE), and other major players. Lucid Motors, Ceer Motors, and Hyundai Motors have also established factories in the region.

Saudi Arabia aims to serve as a regional financial center bridging Africa, Asia, and the Middle East. The country has been enticing foreign investors with offers such as full project ownership, co-funding up to three-quarters of capital expenditures, five years free of royalties, a 20% corporate tax rate, and 30% discounts on local processing.

When operating at maximum capacity, NextSource's Saudi plant is projected to achieve annual revenue of $230.1 million, with annual earnings before interest, taxes, debt, and amortization estimated at $128.5 million, as indicated by the study.

NextSource, headquartered in Toronto, stated that it is in the process of selecting the site for its Saudi project and preparing a feasibility study. This study will involve front-end engineering and design, as well as environmental and social impact assessments required for permitting.

The company emphasized that decisions regarding the timing and scale of construction depend on the chosen site, agreements for anode active material sales, and securing funding and permits for the project. NextSource anticipates that commercial production could commence approximately 16 months after construction commences.

NextSource aims to establish an anode processing hub within the next five years, designed to produce up to 100,000 tonnes annually of coated spheronized purified graphite. The company plans to employ modular plants to ensure production can be scaled to meet the demand from automakers effectively.