Energizer Resources: US Vote of Confidence for Madagascar is Good News

Madagascar got some good news last week when US President Barack Obama reinstated its eligibility for benefits under the African Growth and Opportunity Act (AGOA), a preferential trade program aimed at assisting the economies of sub-Saharan Africa.

The country had been without those benefits since a 2009 coup d’etat, but since then has gotten its act together. In late 2013, it successfully held democratic elections, the final results of which were unanimously validated by the African Union, the World Bank and the United Nations’ secretary-general, Ban Ki-moon. It’s those developments that inspired Obama to reinstate Madagascar as a US trade partner.

Thus far, it’s the textiles industry that seems the most excited about the news. As a recent IRIN article states, that’s hardly surprising given that Madagascar was “an AGOA success story” prior to the coup, with half of its textile exports, valued at $600 million, going to the US.

However, a conversation with Brent Nykoliation, Energizer Resources’ (TSX:EGZ,OTCQX:ENZR) senior vice president of corporate development, reveals that the impact of the announcement spreads much farther than that industry.

Speaking to Graphite Investing News (GIN), Nykoliation, whose company is focused on developing its world-class, Madagascar-based Molo flake graphite project, said, “it’s another verification that countries are once again eager to do business with Madagascar.”

Continuing, Nykoliation explained that Madagascar is viewed as a very strategic country due to its mineral wealth potential. He pointed out that the US Embassy already has a commanding presence in the country’s capital city, Antanarivo, and is the largest building in all of Madagascar. That’s because countries like the US regard Madagascar as a very important country for potential strategic initiatives, with certainly one of those being its mineral wealth. Indeed, Madagascar is home to the world’s largest nickel mine, an $8-billion project majority owned and operated by Canada’s Sherritt International (TSX:S).

However, Madagascar is still very enigmatic, so the announcement “really helps legitimize Madagascar in terms of foreign investment and trade infrastructure – here we have one of the largest and most economically important countries in the world saying, ‘Madagascar is now back on our to-do-business-with list,’” Nykoliation said.

Of course, even more encouraging is the fact that the US isn’t the only entity that’s recently expressed support for Madagascar. As mentioned, a number of important bodies validated its elections, and since then, the International Monetary Fund and the World Bank have resumed funding initiatives to Madagascar. The World Bank will reportedly spend US$400 million over three years on infrastructure enhancements in the southern region of the island, where Energizer’s Molo project is located.

All that is to say that for Energizer, the recent US endorsement is welcome and timely news. “The United States’ reinstatement is another global ‘shout out’ validating Madagascar as a place to do business. It is great for the country and its people, which rely heavily on agriculture and mining as key sources of revenue to help lift it out of poverty. It further de-risks Madagascar from a geopolitical standpoint,” said Nykoliation.

An update from Energizer

Interested in hearing more from Energizer? In the video below, Nykoliation speaks with GIN about the timeline of the feasibility study for Molo, also touching on why it’s so important that the deposit is 100 percent flake graphite.

Nykoliation also addresses two big factors currently impacting graphite supply: China’s graphite industry clean up and Tesla Motors’ (NASDAQ:TSLA) gigafactory announcement. He said, China is “running out of flake graphite, so the large and the jumbo is becoming more difficult [to find], and it’s also lower quality versus what they’re used to putting out. So China will be forecast to be a net importer of large and jumbo flake, so if you have large and jumbo flake” — as Energizer does — “then that’s what China’s looking at.”

In closing, Nykoliation offers investors advice on what to look for in a graphite company.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Energizer Resources is a client of the Investing News Network. This article is not paid-for content.

Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.