Canadian commitment

By Jessica Roberts
Published: Tuesday, 28 February 2012

As interest in graphite has grown, so too has the number of developers looking to bring new projects into production – with several exploration hubs, including Canada, emerging. IM sought the views of four of the country’s promising prospects

Kearney Mine project, Ontario Graphite Ltd

Tom Myatt, president and CFO, Ontario Graphite Ltd

Originally established in 1989, the Kearney mine was operated by Cal Graphite Corp. for five years until its closure in 1994, owing to under-utilisation and falling global graphite prices. In 2006 the project was acquired by Ontario Graphite (formerly iCarbon Canada) with the aim of reactivating the site. IM spoke to president and CFO, Tom Myatt.

What stage is the Kearney project currently at?

The major processing components and refurbishment of the mill facility is pretty much complete. That work is going well and the long lead time items have been purchased, so now we’re working on developing the construction contracts and schedule. The schedule we have now points to a commissioning of the refurbished plant in September 2012, which is close to the schedule we’ve had for the last six months.

We’ve submitted our closure plan and that was approved and filed in early February 2012. We’re very happy about that as it’s a big step in the permitting process - it’s the gatekeeper in many ways, as you really can’t get approval for any other permits until you have a closure plan filed.

Right now we’re also working on some alternatives between contract mining and internal mining options. We should have a decision on that within a few weeks.

What adjustments did you make for the reactivation?

We went through the process flowsheet and decided to make a few modifications that we think will increase the recovery and the product quality. The biggest change that we made is the addition of a flash flotation circuit. Looking at past records, the recovery from the previous circuit flotation cells was 80% at best. With the flash flotation circuit we can get recoveries up close to 90%, so that would be a significant improvement.

The other significant change is that we’re looking at a different dryer system that hooks off the exhaust heat, which will be used for generators. We think that has opportunities for cost savings but also for improving product quality in the drying system. We’re looking at other things we can do past the dryer that can improve quality levels in the product.

What product mix will you offer?

Most of the market today talks about a +80 mesh size and close to 60% of our product will be in that category. We will probably have about 25-30% falling within the -100 category, 10-15% in between the +80 and -100, we will also be able to produce a +50 product - maybe as much as 30-35%. But it depends on what markets we find and what products they are looking for.

Which markets are your main focus?

We’re looking at a broad range of the graphite market. We have a lot of interest from the traditional value-adding and processing companies, but also from refractory companies. We’ve talked to some battery producers, but qualifying products for the battery market is a fairly long process; we’re in the early stages of doing some purification on our samples so that they can be further tested down the line and made eligible for that application.

There are already a lot of markets out there interested in our material. What we’re finding is that people are interested in diversifying their supply and securing graphite outside of China - because of some of the uncertainties there.

We were able to raise private financing for the project, and I think the fact that the market is looking for diversification was an important aspect of this, because we provide a solution.

Is there room for multiple new graphite producers?

If the hopes for the Li-ion battery market and some of the other markets materialise, I think there’s room for much more capacity going forward.

Bissett Creek, Northern Graphite Corp.

Greg Bowes, CEO, Northern Graphite Corp.

The Bissett Creek project in Ontario underwent a full feasibility study in 1989 (pre-dating National Instrument 43-101), undertaken by Kilborn Engineering and others, but development was postponed after graphite prices sharply declined during the 1990s. However, the project was revived in late 2009 when Industrial Minerals Canada Inc. entered into a joint venture with Rattlesnake Ventures Inc. to form Northern Graphite Corp. - giving the latter ownership of Bissett Creek. IM spoke to CEO, Greg Bowes.

What stage are you at with Bissett Creek?

The pilot plant test was two months late starting because the project before us at the research facility overran. That pushed back our bankable feasibility study (BFS) by a couple of months, but we still hope to have the BFS by the end of the first quarter. We expect to have full permitting by the end of Q2 2012, and then we would be in a position to start construction in the third quarter, subject to financing.

Our plan is to get financing after the BFS is completed. We’ve started on a number of fronts already but many people are waiting for the BFS, which is being conducted by G Mining in Montreal.

Where are you looking to obtain financing?

We’re talking to a lot of different partners in the industry. There’s no single specific roadmap for us - it depends on what the industry wants to do, what the finance sector wants to do, and also on what we are prepared to do.

There’s a lot of short-term concern due to volatility in the market. But I think the longer term thinkers continue to be sold on the fact that the long-term view for China and emerging markets is still strongly upwards. There will be blips along the way, obviously, and ups and downs, but the world needs commodities.

What are Bissett Creek’s highlights?

At almost all graphite mines in the world - with exception of ours and one other that I know of - over 50% of production is -150 mesh, low carbon stuff - which is not the growth market. These mines are coming on stream to meet demand from lithium-ion batteries, expandable foil, refractory markets and so on, but their economics depend on being able to sell that other stuff.

That creates uncertainty until other companies can demonstrate they have come up with an economic flowsheet that produces saleable concentrate. Graphite is not like gold or copper where everybody sells it at the same price. Everybody gets different prices based on quality, so grade is only one of many factors that have to be taken into account with industrial minerals.

What is more important for emerging producers - having the right product or producing at low cost?

It’s not just a question of cost. If you take our base, we’re 50% +40 mesh, 98% C; we’re going to have far and away the highest value concentrate in the industry. Our costs are $1,000/tonne so we’re going to have the highest margin in the industry per tonne of concentrate.

The other big ‘but’ here, is that other deposits that are higher grade are talking about operating costs of $4-500/tonne, which is based on being able to sell their -150 mesh. If they can’t, those costs are going to be much higher.

Going forward, if every new mine that comes online is producing more of the -150 than it is of the high value material, that lower value market is going to head into oversupply and make the problem worse.

Is oversupply of natural graphite a concern?

Basic flake demand is growing at 5% a year, so I think the market can easily absorb a couple of new mines on the flake side. New production is going to be spread over a few years, so if you look at the mines that are close to production - and there are very few - the market can absorb that. If 20 new mines came on stream then we would need the Li-ion battery growth to materialise to absorb that many, but I think four-five mines over the next three-four years is easily absorbed.

What should graphite developers be aware of?

Building a new mine today takes a lot of time, and money, and it’s a professional process. Because the graphite business hasn’t been involved in mine building for so long there’s a disconnect. It’s not like the old days when you could throw something up in China very quickly. We’re a modern, professional mining company doing it properly; it might cost more than you expect but that’s the way the world is these days.

Lac Knife, Focus Metals Inc.

Gary Economo, CEO, Focus Metals Inc.

Focus Metals acquired the Fermont-based Lac Knife project in August 2010 from gold producer Iamgold. The project has been evaluated numerous times for various markets, including fuel cell plates, but competition from China kept the deposit out of production - until now. IM spoke to CEO, Gary Economo.

What are the latest developments at Focus?

We recently secured a number of claims in Quebec. We’re trying to build out our portfolio of graphite properties, not only in Quebec but around the world. We are in search of and looking to acquire claims and/or properties, projects in development, or even existing operating mines.

Our goal is to become the largest graphite supplier in the world, and one way to do that is to build out the Lac Knife property and through acquisitions. So we’re looking in every area across the globe that has showings of graphite, and we’re picking though the best quality ones that we can find and adding them to our portfolio.

One of the key things for us is we’re spending a lot of time, money and effort in developing technologies for processing graphite which will continue to drive our operating costs way down. If we can process a tonne of lower grade graphite from, say, Brazil at much cheaper cost than everyone else then we want to play that game and generate those revenues - not necessarily just supply large flake.

What is your main focus right now - supplying graphite or graphene?

It is a simultaneous project. Focus’ jv, Grafoid Inc., is separate company, funded and run separately, and it will continue to develop graphite processing technologies as well as become a world-class supplier of graphene to the market. Those initiatives are ongoing right now.

Focus Metals’ main goal right now is to get Lac Knife into production. The other acquisitions and activities will continue, but Lac Knife is our main focus.

We’re also working to get our scoping study completed around April-May time, at which point we’ll file for all of our permits. So by the end of 2012 we’ll have our scoping study, permits, mining plan, processing facilities figured out, and then construction on those facilities should be able to start by the end of this year.

At the same time we’re working with a number of graphite users around the globe, and will probably have three or four off-take agreements signed by the end of 2012 - around one agreement per quarter. One of these is specifically for purification of graphite for lithium-ion battery applications, which will be a fairly large agreement. Another will be with a graphite distributor for a variety of industries.

What are the major challenges for developers?

I want to stress that keeping costs low will be such an important factor going forward, because prices for graphite are not sustainable at current levels. Prices coming out of China have dropped 20% in the last two months. Long-term prices for flake graphite will be in the $1,500/tonne range for 98% large flake material. I think that’s where it will stabilise.

Companies really need to work on keeping their manufacturing costs low in order to participate in the graphite industry. It’s going to be huge aside from the Li-ion battery applications - every day I’m finding new uses for graphite.

At the same time, there are a huge number of new deposits being developed, and new material scheduled to come to the market, so prices will stabilise. No one wants to hear that prices will fall because some of the deposits being developed are just not viable at lower prices, also financial markets don’t want to hear it - but it’s reality.

Uley graphite project, Mega Graphite Inc.

Paul Ogilvie, CEO, Mega Graphite Inc.

In August 2011, Mega Graphite Inc. acquired 100% of the Uley project on the Eyre Peninsula in South Australia from Strategic Energy Resources. The company began mining in late 2011 and expects to produce around 12,000 tpa graphite in 2012.

In addition to Uley, Mega has a number of projects in the pipeline; it is developing several properties in Ontario, Canada, including the Bedford and Burgess sites. In September 2011, Mega also entered into a joint venture with Chotanagpur Graphite Industries to produce purified graphite from CGI’s properties in Jharkhand, eastern India. IM spoke to CEO, Paul Ogilvie.

What are the latest developments at Uley?

For 2012 we’ll produce about 12,000 tonnes graphite and the mill itself will be starting up in about a month from now [mid-March 2012]. Our sales department has been working on the project for quite some time; we’re 100% sold out of material for the next three years.

We are a high-grade facility, so we’re not too interested in selling concentrate - because of our proprietary technologies - so most of our production is going into high grade applications.

These are very fine, high quality materials - for batteries, stainless steel, water filtration, metallurgy, aerospace applications, and so on. There’s a small amount going into lubricants and refractories but it’s not really our big concentration as a business. We’re mining specifically for our customers.

What stage is your joint venture in India at?

There is an active operation in India right now, but our jv is to build a new operation and high grade facility.

The Indian mill will produce about 5,000 tpa of very high quality materials, and as it stands right now all of that material will be sold to one customer only for lithium-ion batteries. All of the Indian material is presold to one customer that we’ve worked with for a long time and we have engineered specific materials for them.

You’re also working on graphite projects in Canada. How are these progressing?

One of our properties, Burgess, was an operational mine in the 1950s. Because the area is so geographically desirable [between Montreal and Toronto], we take a lot of materials off the property that we use to build battery grade materials with. From an operation standpoint it will be a couple of years before any sort of regular production is started at the Canadian sites.

We have finished an analysis of the operation at the Kingston properties, and the materials being brought into the Kingston site where we will be doing all of the milling. Instead of operating through one large mine we’ll be operating through six or seven smaller pits and then bringing that material in.

Most importantly, we’re working in Montreal this year to build our pilot upgrade facilities for battery grade material.

When will your Initial Public Offering take place?

We’ll be public at the end of March 2012. We’re fairly different to everybody else in this space because of our sheer size and by actually being in the market. The biggest thing that the finance industry has had to get its head around is that we’re half a mining, half a technology company. We’ve had fully independent valuations of our company, which no one else has ever done, as that was the best way for our investment bankers to get their heads around how they value our technology.

It’s interesting because companies say that they will, eg. make battery grade materials, but if you haven’t done it yet you can’t say you’re going to. It’s taken us three years. Number one, we hold the patents. Number two, once you’ve got the patents you have to make them into an actual pilot facility that builds hundreds of tonnes.

So until you get these certifications you can’t really say you’re going to make this material. We have proprietary technologies that nobody else has; now maybe other people can figure them out but it will take them years.

What are the other major challenges for entering the graphite industry?

I think anybody getting into this space has to be very cautious of why they’re getting into it. They should also be customer-centric and find a customer that they’re actually building materials for.