A mining company based in Toronto has just laid out a detailed plan to turn one of the world’s largest known graphite deposits into a much bigger operation, and the numbers behind that plan are worth unpacking. NextSource Materials Inc. (OTCQB: NSRCF, TSX: NEXT) released an updated feasibility study for the Phase 2 expansion of its Molo Graphite Mine in southern Madagascar, and the study describes a staged buildout that would take the site from its current Phase 1 operation to a total capacity of 150,000 tonnes per year of flake graphite concentrate over a 37 year mine life.
The plan calls for three new processing modules, each capable of handling 50,000 tonnes per year, to be built next to the existing Phase 1 plant in two separate stages. NextSource says it will use the same modular construction method it relied on for the first phase, an approach meant to cut down on build time and construction risk compared to a conventional mine build. The expansion carries an estimated price tag of $290.8 million in capital costs, and the study puts the project’s pretax net present value, discounted at 8%, at $402.5 million, with a pretax internal rate of return of 21.0%. On an after-tax basis, the numbers come in a bit lower, with a net present value of $348.4 million and an internal rate of return of 20.0%. The company expects the project to pay for itself in about 7.2 years once concentrate production begins.
The rationale behind the expansion ties back to demand from the electric vehicle industry. NextSource already has an offtake agreement with Mitsubishi Chemical Group Corporation (TYO: 4188) covering purified and spheronized graphite for the anode facility NextSource is developing in the United Arab Emirates, and the company says it is in ongoing talks with automakers and other battery material buyers about future demand. CEO Hanré Rossouw framed the expansion as part of a broader effort to supply graphite flake and battery anode material directly to electric vehicle battery makers, though he was careful to note that no final decision to proceed with construction has been made yet. That decision, the company says, will depend on further conversations with offtake partners and potential strategic investors.
The study itself was prepared by Stantec Consulting International Ltd., a subsidiary of the publicly traded engineering firm Stantec Inc. (NYSE: STN, TSX: STN) working alongside a group of independent consultants and geologists. The underlying resource base is substantial. Molo hosts measured and indicated resources totaling just over 100 million tonnes at an average grade of 6.26% carbon graphite, with proven and probable reserves of 82.6 million tonnes at 6.27%.
One complication has emerged since the last round of studies. In May 2026, Madagascar’s government issued a decree naming graphite a strategic mineral substance, which gives the state the right to a minimum 10% ownership stake in projects like Molo without having to pay for it. The decree also opens the door to rules requiring a portion of production, up to 30%, to be sold domestically. NextSource has said the feasibility study’s financial figures do not yet account for what a state ownership stake would do to the project’s returns, since the exact size of that stake has not been settled. The company is in discussions with Madagascar’s government to try to clarify how the new rules will apply and to negotiate a stability agreement that would give both sides more certainty going forward.
For a company that has spent years developing a single mine in southern Madagascar, this study represents an attempt to show investors and potential partners what a much larger version of that business could look like, even as regulatory questions in the host country remain unresolved.
