Giyani Announces the Results of its Feasibility Study for the K.Hill Battery -Grade Manganese Project Post -tax NPV at 8% of US$481 M, IRR of 28%
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Giyani Announces the Results of its Feasibility Study for the
K.Hill Battery -Grade Manganese Project
Post -tax NPV at 8% of US$481 M, IRR of 28%
Not for distribution to U.S. newswire services or for dissemination in the United States.
TORONTO, November 14, 2022 -- Giyani Metals Corp. (TSXV: EMM, GR: A2DUU8) (" Giyani " or the
"Company ") is pleased to provide results of the feasibility study (" FS") for the K.Hill battery -grade
manganese project in Botswana (the “ Project ” or “ K.Hill ”).
The FS has been prepared by SRK Consulting (“SRK ”), as lead, on an integrated mining and processing
operation for the onsite production of high -purity manganese sulphate monohydrate (“ HPMSM ”)
directly from manganese oxide ore mined at K.Hill. HPMSM is a refined precursor material used in the
production of cathode powders for lithium -ion batter ies (“LI Batterie s”) deployed in electric vehicles
(“EVs ”).
K.Hill’s total Indicated Resource of 2.1 million tonnes (“ Mt”), estimated by SRK in February 2022, was
evaluated for the purpose of the FS and almost 100% of the Indicated Resources have been converted
into 2.0 Mt of Probable Reserves. The Inferred Resource of 3.1 Mt for K.Hill, estimated by SRK , is in
the process of evaluation to be upgrad ed into the Indicated Resource category . New Mineral Resource
Estimates for K.Hill and the nearby Otse manganese oxide prospect are currently targeted for
completion in H1 2023.
Highlights1:
• Robust economic return s: a post -tax net present value (“ NPV ”), at an 8% discount rate , of
US$481 M (C$649M ) and a post -tax internal rate of return (“ IRR ”) of 28% .
• Low capital in tensity for what will be one of the largest HPMSM projects in the world : estimated
initial capital expenditure of US $281M (C$379 M), including contingency of US $32M (C$ 43M ), for
a fully integrated battery raw materials project.
• Strong free cash flow: net free cash flow over the life of the Project is estimated at US$1,093M
(C$1,476M), equivalent to US$99M (C$134M) per year with first commercial production in 2025 .
• Significant geological upside offers potential to expand Project and extend mine life : exploration
work to upgrade the 3.1 Mt of Inferred Resources in the K.Hill southerly extension is progressing
and the addition of these resources and the Otse prospect provide s the potential to expand the
Project in future years and extend the mine life sig nificantly.
• Operational advantage of h igh er grade ore and conventional mining: Giyani's Probable Reserve
grade of 1 8.9% manganese oxide (“ MnO ”) is the highest among its listed battery- grade manganese
peers and underpins a scalable operation with an initial throughput of 200 thousand tonnes (“ kt”)
ore production per annum , offering potential future production capacity expansion .
1 Based on a US$:C$ exchange rate of 1.35
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• LI Battery demand expected to increase significantly : CPM Group LLC (“CPM ”), an independent
research and consultancy company , projects demand for HPMSM in LI Batter ies to grow by nearly
30 times between 2021 and 2036.
• Pathway to becoming a low -carbon producer: Giyani’s HPMSM production p roces s directly from
manganese oxide ore does not require power -intensive calcining or electrorefining and the
planned integration of 4.5 MW of solar power contributes to a very competitive Scope 1 and 2
emissions footprint of only 1.4 kg of carbon dioxide equivalent per kilogram of HPMSM ( see Giyani
News Release o f September 29, 2022).
• Strong environmental , social and governance (“ESG”) credentials: the Project ’s development
strategy has been formulated around the mitigation hierarchy of “avoid -minimize -mitigate” with
initiatives such as renewable energy integration , water self -sufficiency and dry stack tailings
management to be included in the Environmental and Social Impact Assessment (“ ESIA ”), currently
estimated to be completed and submitted to the authorities in Botswana in Q1 2023 .
• Optimization work opens opportunities for enhancing Project value : in addition to potential life -
of-project (“LOP ”) extension s through further exploration success, work is ongoing to lower
operating costs , particularly related to certain consumables affect ed by supply chain disruption
and global inflation.
Jonathan Henry , Executive Chair of Giyani , commented:
Our flagship K.Hill m anganese project has the potential to be one of the most significant and largest
battery- grade manganese producers globally. The feasibility study shows how far the scope of the
Project has developed since the April 2021 preliminary economic assessment and is the next step to
bringing this project into production . These results demonstrate the robust economics of K.Hil l, with
our ongoing work also highlighting the expansion and optimi zation potential .
Giyani has an early- mover advantage to meet the growing demand for HPMSM from the EV sector,
which is prioritizing responsible, low -carbon producers outside of the dominant Chinese supply chain.
Our hydrometallurgical process, which treats our captive ore without the need for calcining or
electrorefining, saves both cost and carbon emissions, as evidenced by the results of the recent life
cycle assessment for K.Hill.
Alongside the optimization work that will be completed after the FS release , which will review
opportunities to enhance the Project’s value, we continue to evaluate the 3.1 Mt of Inferred Resources
at K.Hill and potential additional resources at nearby Otse still to be consolidated into the P roject
plan , with the view to extend K.Hill’s operating life and production capacity significantly.
In parallel to the FS work , the team has progressed the construction of our demonstration plant and it
remains on track to produce HPMSM samples for testing by potential off -takers in H2 2023.
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Operational and Economic Highlights
The FS is based on a Probable Reserve Estimate that will be detailed in the updated National
Instrument (" NI") 43 -101 Technical Report on the Project. The NI 43-101 report will include results of
the FS and be filed within 45 days of this release on SEDAR at www.sedar.com and made available
on the Company’s website at www.giyanimetals.com . All financial figures are quoted in US dollars
unless otherwise stated and the numbers in the tables below may not add exactly due to rounding .
Table 1 Project overview
Metrics Units Results
Project summary
Type of mine - Conventional open pit mine
Type of production facility - HPMSM hydrometallurgical processing
facility
Life of the Project (“ LOP”) year s 11.0
Net realized price assumption
Average realized HPMSM price (Yr 1 – 5) $/t 3,373
Flat realized price HPMSM price (Yr 6 – 11) $/t 3,918
Production Annual LOP
Total ore mined dry kt 226 2,032
Run-of-mine (“ RoM”) manganese oxide grade % MnO 18.9 18.9
Steady -state m etallurgical recovery % 88.5 % 88.5 %
Total r ecovered manganese oxide kt Mn O 31 339
Total HPMSM produced kt 73 808
Project cash flow Average annual LOP
Revenue from HPMSM $M 272 2,993
Total operating costs (incl . royalty) $M 125 1,369
Total EBITDA $M 148 1,624
Initial capital expenditure excl. contingency $M - 249
Contingency on initial capital $M - 32
Total initial capital expenditure incl.
contingency
$M - 281
Sustaining capital expenditure incl. contingency $M - 21
Closure costs $M - 5
Total LOP capital expenditure incl. contingency $M - 307
Project economics Pre -tax Post -tax
NPV (8% real discount rate) $M 603 481
IRR % 32.0 28.3
Payback period from start of processing years 3.3 3.6
Cumulative cash flow, undiscounted $M 1,317 1,093
Notes:
Net realized prices for HPMSM at mine gate, assuming 50% of sales to the European Union and 50% sales to North
America .
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Economic Analysis
A technical economic model (“ TEM ”), prepared by SRK on a 100% equity basis, demonstrates that
K.Hill provides a robust post -tax NPV at an 8% discount rate of US $481M (C $649M) and a post -tax IRR
of 28% in real terms. The TEM use s HPMSM forecast price s provided by CPM for the Company’s key
markets of Europe and North America, but adjusted to run a flat price from Year 6 of the production
period.
Free cash flow over the LOP is estimated at US $1,0 93M (C $1,476M), equivalent to US $99M (C $137M)
per year (Figure 1). Payback of initial capital expenditure is estimated to be approximately 3.6 years
from start of production (Table 2).
Figure 1 LOP key economic forecast and net free cash flow (NFCF)
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Table 2 Valuation metrics
Metric Unit Pre -tax Post -tax
NPV 5% $M 808 656
NPV 8% $M 603 481
NPV 10% $M 495 388
Payback period, from start of processing Years 3.3 3.6
A sensitivity analysis was run on the key variables affecting Project economics and NPV . The results
of the sensitivity analysis are shown in Figure 2 below and include the assumed flat pricing structure
from Year 6 outlined above.
Figure 2 Valuation sensitivities
Taxation
For the purposes of the TEM , following a review of the Botswana tax regime and discussions with
local stakeholders, it has been assumed that the Project will be subdivided into two business units
with discrete tax treatment : mining ; and manufacturing.
The mining operation will sell ore to the manufacturing operation and be taxed according to the
Botswana mining company tax formula ( minimum of 22% on operating income) . A mining royalty of 3%
will be applied to the revenue on the sale of the manganese ore to the manufacturing unit. C apita l
investments on the mining unit can be depreciate d in the year incurred and unredeemed capital will
be carried forward indefinitely.
Income from the manufacturing unit will be taxed at the Botswana manufacturing tax rate of 15% ,
assuming a manufacturing d evelopment order will be received from the Botswana authorities. For the
manufacturing unit, initial capital investments will depreciate at 10% per year on a straight -line basis
and sustaining capital will depreciate at 20% per year.
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Capital and Operating Expenditures
Capital and operating expenditure estimate s were provided by SRK and Coffey Geotechnics Ltd., a
Tetra Tech Inc. company (“ Tetra Tech ”).
Capital expenditure
Capital expenditure estimates were prepared for initial , sustaining and closure capital .
The total estimated initial capital expenditure for the design, construction, installation, and
commissioning for all facilities and equipment for the Project is US$2 81M including contingency of
US$ 32M . This estimate includes direct field costs required to execute the Project, plus indirect costs
associated with design, construction, installation, and commissioning. This estimate is based on
pricing as of H2 2022, with no allowances for inflation or esc alation (Table 3). Closure costs of US$5M
have been estimated.
This estimate is a Class 3 estimate prepared in accordance with the Association for the Advancement
of Cost Engineering (AACE®) International Cost Estimate Classification System. The accuracy of the
estimate is ‑ 10% to +15%.
Table 3 Summary of LOP capital expenditures
Area Total (US$M)
Mining 10.5
Processing 98.1
Infrastructure and services 31.2
Tailings management facility (“TMF ”) 6.6
Offsite infrastructure 9.7
Indirect costs (incl uding first fill and commissioning costs) 65.5
Construction overheads 21.6
Owner’s costs 5.5
Total initial capital expenditure excluding contingency 248.7
Contingency on initial capital expenditure 32.0
Total initial capital expenditure including contingency 280.7
Sustaining capital including contingency 21.4
Closure cost 5.1
Total 307.3
Contingencies on initial capital expenditure have been added at appropriate percentages to each area
resulting in a contingency of US$ 32M or 1 3% of direct and indirect expenditure in relation to the initial
capital expenditure.
Capital expenditures incurred after start -up are assi gned to sustaining capital and are projected to be
paid out of operating cash flows. In keeping with industry practice, the annual sustaining capital
allowance has been estimated as 2.5% of the hydrometallurgical plant direct capital cost over a period
of 8 years totalling US$ 21M (including 15% contingency of US$3M ). Figure 3 shows the breakdown of
the initial Project capital expenditure by area .
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Figure 3 Initial capital expenditure breakdown by area
Operating expenditure
Operating expenditure has been derived for:
• open pit mining (inclusive of water management) and labour ;
• mineral processing;
• tailings management; and
• general & administrative ( “G&A”).
Total operating expenditure for K.Hill is expected to average around US$672 /t milled based on an
average annual RoM through put of 200 k t/a , excluding royalties, as shown in Table 4 below.
Processing expenditure account s for around 95% of the total operating expenditure of the Project .
Table 4 Summary of Project operating expenditure per tonne processed
Area Operating cost
(US$/t processed )
Mining 20.0
Processing 636.4
Tailings management 2.0
G&A 13.4
Total operating costs 671.8
Notes:
Total operating costs excluding royalties of US$2.0/t processed
Metallurgical processing reagents and r aw materials constitute the largest component of processing
expenditure based on the plant design criteria and flowsheet to produce HPMSM.
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Figure 4 shows that the processing reagent expenditure account s for approximately 73% (US$ 92M
annually ) of the direct expenditure . However, of the total reagent expenditure, approximately 36% is
associated with importation and freight costs of certain key reagents currently assumed to be sourced
on the international markets.
Figure 4 B reakdown of process operating expenditure, including freight associated with
processing reagents
During 2021 and early 2022, Covid- 19 related disruptions led to a n unprecedented ris e in international
freight rates, which elevate d prices for the procurement of reagents . Since mid -2022, international
freight rates have seen declines of between 50 – 75% 2 and are expected to continue to normalize
towards pre- Covid levels.
As part of its post -FS activities, detailed below, Giyani has commenced the process of identifying
oppo rtunities to reduce operating expenditure by lowering consumption of certain key reagents and
developing local or alternative sources of reagents to mitigate international freight costs.
Working capital
An allowance for working capital is included in the TEM and reflected in the cash flow with the
following delays assumed:
• Debtors: 90 days;
• Creditors: 60 days ; and
• Stores: 30 – 60 days.
2 Source: Freightos Limited