Metals Australia’s Quebec Refinery PEA Shows $2 Billion NPV and 25.6% IRR

Strong Economic Case for Quebec Battery Anode Refinery

Metals Australia Ltd (ASX:MLS) has unveiled a Preliminary Economic Assessment (PEA) for its Battery Anode Material (BAM) Refinery in Baie-Comeau, Quebec, delivering a pre-tax net present value (NPV) of USD 2.05 billion and an internal rate of return (IRR) of 25.6%. The refinery is designed to produce over 51,000 tonnes annually of high-purity coated spherical purified graphite (CSPG) products over a 25-year project life, processing 75,000 tonnes per annum of high-purity flake graphite concentrate sourced from its Lac Carheil Graphite Project near Fermont.

The project’s capital expenditure (CAPEX) is estimated at USD 883.8 million, including a substantial contingency of USD 179 million, with operating expenses (OPEX) forecast at USD 2,362 per tonne of CSPG produced. The payback period is relatively short at 4.5 years, bolstered by Canadian government incentives such as the Clean Technology Manufacturing Investment Tax Credit (CTM ITC), which could return up to 30% of capital invested as cash rebates; amounting to an estimated USD 263 million.

Modular Design and Strategic Location in Baie-Comeau

The refinery’s modular design features three production modules, each capable of processing 25,000 tonnes of concentrate, allowing phased development and operational flexibility. Module 1 is slated to begin production in 2030 with a four-year ramp-up, followed by Modules 2 and 3 commencing in 2031.

Baie-Comeau, a regional city of around 20,000 residents on Quebec’s north shore, has been chosen for its freight advantages, available industrial land, and existing infrastructure including a world-class rail-ferry system and deep-water port. The refinery is expected to employ 227 personnel at full capacity, injecting nearly USD 21.5 million annually in direct wages into the local economy.

Validated Metallurgical Process and Market Alignment

Extensive metallurgical testwork led by Dorfner Anzaplan UK Ltd confirms the refinery’s technical viability. The process involves micronization, spheroidization, purification via caustic baking, and pitch tar coating to produce CSPG that meets lithium-ion battery (LIB) anode specifications. Electrochemical testing shows a first cycle efficiency of 95% and stable cycling performance comparable to industry benchmarks.

Market studies by Fastmarkets and Lonestar Technical Minerals provide conservative pricing forecasts, with weighted average product prices of around USD 8,926 per tonne used in the base case. Sensitivity analysis indicates that pricing is the key economic driver; a higher price forecast from Lonestar adds USD 343 million to the after-tax NPV and pushes the IRR to 28.7%. This pricing remains below that used by a peer Canadian project, Nouveau Monde Graphite (NYSE: NMG), which has secured strong government and offtake support.

Upstream Mine Prefeasibility and Project Comparison

The refinery depends on feedstock from the Lac Carheil mine and flake graphite concentrate plant, currently under prefeasibility study with results expected mid-2026. The company’s 2025 resource upgrade increased total mineral resources to 50 million tonnes at 10.2% total graphitic carbon (TGC), significantly higher grade than NMG’s Matawinie project, which boasts 6.54 million tonnes at 4.26% TGC. This grade advantage translates into smaller processing volumes and potentially lower upstream CAPEX and OPEX.

Comparisons with NMG’s integrated mine-to-BAM project highlight Metals Australia’s competitive position, with the Lac Carheil project producing more BAM product from less concentrate input. The company sees NMG’s success as a benchmark, not a competitor, given the Canadian government’s target of five graphite mines and five CSPG plants by 2040.

Tax Review Supports Financial Assumptions

A review by BDO Canada LLP confirms the tax assumptions underpinning the PEA’s financial model, including a corporate tax rate of 26.5% (federal plus Quebec provincial), depreciation rates, and eligibility for the 30% CTM ITC. BDO also identified additional tax incentives such as the tax holiday for major investments, accelerated investment incentives, and zero-emission technology manufacturing rate reductions that could further improve project economics if applicable.

While no formal financing discussions have commenced, Metals Australia anticipates funding could come from a mix of equity, debt, government agencies, and offtake agreements. The company also remains open to alternative value realisation strategies such as joint ventures or partial sales.

Metals Australia’s CEO Paul Ferguson emphasised the project’s alignment with North American critical minerals security and Quebec’s industrial strategy, noting ongoing metallurgical testwork with SGS Quebec and government support through grants. The company aims to publish its upstream prefeasibility study by mid-year, complementing the downstream refinery PEA.

This announcement builds on Metals Australia’s recent resource expansion and engineering progress at Lac Carheil, as reported in triples graphite resource and advances Lac Carheil graphite, underscoring its growing footprint in Quebec’s critical minerals landscape.