Magnis Resources has signed a memorandum of understanding (MoU) with South Korea-based EPC contractor Posco E&C to proceed with the funding and construction of the Nachu Graphite project in Tanzania.

Based on the roles and responsibilities outlined in the MoU, Posco will have to arrange senior loans through its associations with financial institutions.

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Under the MoU, Magnis is responsible for arranging subordinate debt and equity and the overall co-ordination of funding for the project.

"The financial and sovereign stability afforded by the recent finalisation of the mineral development agreement along with the recent capital raising has been the catalyst to the funding process.

With support from Posco, the company is set to advance the construction contract and funding process simultaneously.

Magnis Resources chairman Frank Poullas said: "Having Posco E&C on-board as our lead arranger and EPC consultant really highlights the quality of our project.

"The financial and sovereign stability afforded by the recent finalisation of the mineral development agreement along with the recent capital raising has been the catalyst to the funding process."

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Production from the project is expected to begin by the first quarter of 2017.

Magnis announced an extensive graphite discovery on its wholly owned Nachu tenement in March 2013.

Covering around 199km², the tenement is situated west of the coastal city of Lindi and 200km by road from the port city of Mtwara.

Posco E&C mining plant business group director Peter Lim said: "The quality of the graphite at Nachu is the best in the world and with the huge demand in the battery market, we are excited to be involved with Magnis."