Key Highlights

  • On February 5, 2020, South Star Mining Corp. (“company”, “STS”) announced results of a Preliminary Feasibility Study (“PFS”) on its 100% owned Santa Cruz graphite project located in Southern Bahia, Brazil.
  • The PFS showed a base-case After-Tax Net Present Value (“AT-NPV) at 5% of US$81 million, with a high After-Tax Internal Rate of Return (“AT-IRR”) of 35%, and a payback period of 4 years.
  • Unlike a Preliminary Economic Assessment (“PEA”) completed in 2017, the PFS was based on a two-phase open pit operation, allowing the company to advance to production sooner and with a significantly low CAPEX of US$7.3 million.
  • The first phase of operation (Phase 1) is contemplated to produce 5,000 tonne per year (“tpy”) of 95% Cg concentrate in years 1 and 2.
  • A larger phase 2 operation was based on production ramping up to 13,500 tpy of 95% Cg concentrate in year 3, and to 25,000 tpy in years 4 to 11.
  • In January 2020, the company submitted trial mining licensing documents. On March 3, 2020, an environmental license was issued for Phase 1.
  • The company’s immediate focus is to arrange financing to fund the US$7.3 million CAPEX of Phase 1.
  • As the graphite market is not expected to be in a deficit until 2025, most graphite juniors are trading at significant discounts to their AT-NPV. On an Enterprise Value to Resource basis, we estimate that the company’s shares are trading at $4.4/t versus the comparables’ average of $7.5/t.