NextSource Materials (NEXT.TO) has executed a Letter of Intent with a Chinese processor of graphite anode maderial and aits Japanese graphite offtake partner to work together on figuring out if it would make sense to build a battery anode plant in the close vicinity (but not necessarily in) of Madagascar.
That would enable NextSource to become part of a vertically integrated supply chain where it could benefit from the beneficiation of its graphite material into an anode product before shipping it off to the end consumer. To that end, it is important to note that both the existing Japanese offtaker for the graphite concentrate (Superflake) product as well as a Chinese anode supplier are now in NextSource’s team.
There’s no guarantee the studies will indicate building an anode plant will be viable, but it does make sense to ship the graphite over a shorter distance, upgrade it, and then ship the end product over a longer distance straight to China or to whoever wants to buy the anode product. As of the end of December, NextSource still had US$567,000 in cash but a negative working capital to the tune of US$450,000 of which the majority is caused by the warrant liability, a purely theoretical component of the liabilities side which won’t have any impact on the cash flows and cash requirements.
Disclosure: The author has a long position in NextSource Materials. NextSource currently is not a sponsor of the website, but has been in the past twelve months.