The grade unknowns: graphite mining projects under the radar

By Laura Syrett
Published: Thursday, 29 November 2012

IM looks at graphite developments that have not hit the headlines

With graphite prices reportedly stabilising after falling throughout most of 2012, relative calm has descended over an industry which exhibited a striking degree of flux, both in terms of pricing and investor sentiment, during the past two years.

This serene period has given the graphite market an opportunity to pause and take stock of developments in the sector to date. Looking back over 2012, graphite news has been dominated by Chinese policy, on the one hand, and the relentless charge of junior explorers on the other.

The well-oiled PR machines of mining companies exploring in Canada, Australia and Africa have ensured that there has been no shortage of information on the graphite potential of these regions.

Scandinavia and Brazil have also claimed a significant amount of attention, as juniors vie with one another for investment in what has recently been a rather shallow financing pool.

Graphite projects in other parts of the world have received less consideration, without quite going completely unnoticed.

This month, IM turns the spotlight on some of these “under the radar” graphite developments.

Breach of the peace: Huelva’s tranquil Mediterranean landscape could see the return of graphite mining within a few ears.
Image: Lex

A Meteoric rise for Spain?

In October 2012, Australian multi-mineral explorer Meteoric Resources NL lodged a 65km² investigation permit application to explore for coarse-flake graphite in the Aracena Metamorphic Belt, in Huelva province, southwest Spain.

More commonly associated with Baroque architecture, artisan ham and Spain’s oldest football club (named Recreativo de Huelva and founded in 1889 by British miners working for Rio Tinto’s copper and pyrite operations in the area), Huelva province is home to two of four known volcanogenic massive sulphide (VMS) graphite-containing deposits in the country, according to the US Geological Survey (USGS), the other two being in Pontevedra on Spain’s northwest coast.

The region, situated 80km northwest of Seville, has a history (albeit a modest, rather primitive one) of graphite mining, but the deposits have remained dormant for the best part of a century.

“The area was last mined in 1918,” Roger Thomson, Meteoric CEO, told IM. “The old workings appear to be generally less than 100m in length, and worked to depths of less than 25m. Significantly, no drilling or modern exploration has been carried out on this old mining area.”

Promising geology

Some records of historic mining activity exist, and geological research produced by universities in Madrid and Huelva has identified several graphite occurrences and three former graphite mines over an 10km strike length.

Analysis of this information indicates that the graphite bodies worked during the early part of the 20th century were between 1 to 8 metres thick, although deposits up to 24 metres thick have been reported.

Average grades mined from the deposits ranged from 13%-18% C, with more recent academic studies recording samples grading as high as 45% C.

Archive images of the past-producing San Carlos graphite mine, Aracena: a) mine buildings; b) remains of processing mill; c) old mineral washing plant; d) gallery entrance.
Image: JC Fernandez Caliani 2010
Collated geological data has indicated four types of graphite occurrences in the area: strata-bound graphite (which make up the majority of the occurrences) related to gneisses and quartzites; disseminated graphite flakes within gneisses; graphite associated with quartz-feldspar rocks; and graphite veins.

The graphite in each of these occurrences is reported to be highly crystalline, with graphite crystals in the strata-bound mineralisation ranging from 0.25mm to 1mm in size.

Meteoric’s 100%-owned permit application covers all of the available known graphite occurrences in the Aracena Metamorphic Belt, together with prospective areas of potential mineralisation yet to be explored.

“The multiple occurrences of coarse-crystalline graphite are mostly within a well defined 10km-long corridor,” Thomson said. This pattern indicates that the Cortegana graphite field has the potential to host high-quality graphite deposits amenable to open pit mining, he added.

Negotiating with nature

The eastern part of Meteoric’s permit application covers the margin of the Sierra de Aracena nature park, an undulating landscape of olive groves, livestock farming and natural woodland.

Thomson stressed that mining permits are allowed within this park, however, subject to certain conditions.

“An Investigation Permit requires a written application followed by a geological and environmental report with a proposed work programme, which are currently in preparation,” he told IM.

“Meteoric has been advised by the authorities that it now has ‘priority of application’. We understand it may take a while - possibly a few months - to process the application and grant the permit,” Thomson added.

Meteoric is carrying out a search of historical records to identify areas with size and grade potential for sampling and mapping, if, and when, the permit is granted.

Assuming Meteoric’s application is successful, the company plans to use airborne electromagnetic surveys to identify graphite bodies and assess the potential of the 20km-long prospective corridor within the permit, in the hope of finding large, thick, near-surface graphite deposits.

Meteoric’s investigation of the area is still at an early stage, and no information is presently available regarding potential resource size, production estimates or a timescale for developing the site, Thomson said.

He added that the area is serviced with power, roads and a nearby railway, which will help to speed up mining development, if the project goes ahead.

India: China’s understudy?

Accounting for 35,000 tonnes (3.43%) of global graphite supply in 2011 against China’s 780,000 tonnes (77%) share, according to IM Reasearch’s Natural Graphite Report 2012, it seems impractical to suggest that India can expect to soon rival China’s supply monopoly.

But the potential for India to increase its standing in the world graphite market is huge. India, currently the globe’s third-largest graphite supplier, is home to eight significant graphite mining companies in three major graphite producing regions.

With mining operations in the eastern states of Jharkhand, Odisha and Tamil Nadu, in addition to massive and, as yet, untapped reserves in Arunchal Pradesh, Jammu and Kashmir, India has been a consistent supplier of graphite since the 1960s.

Headquartered in the city of Ranchi, Jharkhand province, northwest India, Tirupati Graphite, the mining arm of Tirupati Carbons & Chemicals Pvt Ltd, is one of the later additions to India’s eight major graphite players.

Tirupati Graphite

Established in 2006, the company began as a provider of warehousing and processing facilities for natural graphite concentrate sourced from Indian mines belonging to other companies.

Tirupati started mining its own graphite in November 2010, and its operational arrangements with other mine owners ceased in June 2012, leaving the company entirely self-sufficient from its own resources.

Located in the Palamau district around 140km northwest of Ranchi, Tirupati owns two producing graphite mines - the Rabda and Gaura deposits - in addition to the Ekta advanced exploration project.

“We are expecting to get 50% [80,000 tpa] of our production from Ekta, 30% [50,000 tpa] from Rabda, and 20% [35,000 tpa] from Gaura for our targeted total output of 165,000 tpa by 2013,” Shishir Poddar, Tirupati’s managing director, told IM.

The company aims to reach a total output of 400,000 tpa by 2016 by ramping up production at all three mines, Poddar said.

Rabda presently produces around 30,000 tpa graphite ore, and development of the mine is in progress with a target of bringing output up to around 50,000 tpa within the next few years.

Full-scale mining at Gaura commenced in September 2012, with planned output of 20,000 tpa up to Q2 2013, increasing to 35,000 tpa from Q3 2013.

Beneficiation studies and development of process flow sheets completed to date have established that graphite from the Ekta deposit can be beneficiated to a purity of greater than 96% C, at a lower cost than graphite from either of Tirupati’s other deposits.

Tirupati is now in the process of obtaining statutory clearances from the Indian government to begin mining operations at Ekta, with a view to begin developing the mine in the first quarter of 2013, and commencing full-scale production by Q3 2013.

The company has also identified three new graphite deposits in Palamu, and applications for mineral concessions for these areas are now under consideration by the state government.

Further afield, Tirupati is conducting geological surveys to outline additional resources in some districts of Andhra Pradesh, in south-east India.

Product development

Tirupati is also working to develop technology for manufacturing an extensive product mix, including spherical graphite, expandable graphite and high-purity flake graphite, to target the full spectrum of flake graphite applications, Poddar said.

“We are presently selling most of our output in the Indian market. With the planned increase in our capacity, we shall be looking additionally at markets mainly in Europe, the US and Japan.”

Poddar is confident that India has the potential to surpass China’s graphite dominance, if not in overall scale, then through the quality of its deposits and the efficiency of its operations.

“India will surely be a global source for flake graphite in view of the size and quality of its resources,” he told IM. “The ability of China to supply the world’s flake graphite requirements at unmatchable prices, as it did until a few years ago, no longer exists.”

India is also at an advantage compared with many other parts of the world, having had more than four uninterrupted decades of experience in mining and processing graphite, Poddar added.

In Poddar’s view, price movement in the natural graphite market will largely depend on consumption growth from new applications.

“The consumption of flake graphite in conventional applications is saturated, and only moderate future growth is expected from these uses. Increased consumption can be expected from newer applications, mainly energy storage, composite materials for different applications and the commercialisation of graphene.”

“In my estimation, the global growth in consumption will be in the range of 7-10% per annum from 2013 to 2018,” Poddar added.

“This being the case, and assuming new resources take the minimum projected time to develop, there will be upward pressure on the prices for at least the next three years. Thereafter, it will depend on how future consumption shapes up and how new resources develop.”

Turkish delight

Turkey has been an irregular producer of low-grade amorphous graphite since the latter part of the 20th century. The country’s most productive period was in the late 1980s, and output peaked in 1991 at around 26,000 tpa.

Graphite production plummeted after 1991, however, owing to a combination of political and market factors. But with the output of amorphous graphite from China set to decline sharply in the near future, Turkey’s role in supplying the market may become more important.

In a note on graphite prices published in November, House Mountain Partners founder, Chris Berry, commented: “The consolidation of amorphous graphite mines in [China] in the name of minimising environmental impact, will no doubt curtail amorphous supply, with the Chinese goal of keeping an eye on the industry and ensuring domestic resources serve domestic needs first and international needs second. This should be supportive of pricing going forward.”

No Turkish company is presently producing graphite, Sait Uysal, a Turkish mining consultant who has worked on a number of graphite projects in Turkey and around the world, told IM.

There are, however, at least three companies involved in developing graphite mining projects. These are: Karabacak Mining (also known as Oysu Graphite), Bilginer Mining and a German-owned company, Zelda Resources.

Unlike some other European countries, such as Sweden, Turkey has not been a beacon of interest for foreign exploration companies.

“Because most foreign companies focused on flake, amorphous is not so attractive for foreign investors,” Uysal said.

Local companies set to reboot

Karabacak ceased production in 2008. Prior to this, the company owned and worked a graphite mine in Kutahya city, Altõntas province, and had a flotation plant with an input capacity of 100 tonnes/day.

The company is now looking for a partner with whom it can restart production from the Kutahya mine, Uysal said.

If the restart is successful, the project could potentially produce up to 500 tonnes/month of amorphous 80-85% C grade graphite concentrate.

Bilginer Mining operated graphite-producing mines in Turkey during the 1980s. It was sold to a new owner in 2012, and is planning to restart operations in the near future, Uysal told IM.

Earlier this year, Zelda Resources signed an agreement with a Turkish company to develop the graphite mine in the Anamur/Mersin region. But inaction on Zelda’s part makes it unlikely that the project will take off, according to Uysal.

“It is almost six months [since] their agreement (...) and if they do not start exploration work within the first six months of their agreement, then the contract will automatically cease.”

Despite apparent teething problems for companies attempting to enter, or re-enter, graphite production in Turkey, the attractions of mining in the southern European nation remain strong.

The cost of producing graphite in Turkey is considerably cheaper than elsewhere in the world, Uysal said.

This is helped by the fact that the Turkish government gives substantial incentives for mining companies, including tax exemptions for up to seven years, and firms are entitled to receive a reimbursement for up to 50% of their electrical costs.

Low costs are one of the most important factors underpinning the success of a graphite project, Uysal said, adding that be believes that the higher prices the market has seen during the past two years are not sustainable.

Grade advantage

“The most important advantages of the amorphous graphite in Turkey is grade,” Uysal told IM.

“The majority of the deposits have a run-of-mine ore grade of over 25% C, and some of them have ore grades of between 50 to 60% C,” he added.

“This means you have to process smaller amounts of ore to produce the saleable amorphous grade of 85% C. Working with lower grade ores - such as 5% C material [as some Chinese producers do] - can be five times as costly as working with 25% C ore,” he said.

Table 2 shows average ore grades in some of the main graphite reserves in Turkey. It shows the fixed carbon content of each deposit, and an estimation of the size of each reserve, based on surface information and data compiled by Turkey’s General Directorate of Minerals Research and Exploration (MTA).

Turkey’s geographical position also makes it an inviting prospect for would-be miners seeking to supply the major consuming markets of Europe and Asia.

Amorphous Turkish material could be supplied to major industrial markets of lubricants, paints, refractories and casting.

“For Turkey, Europe is the main target,” Uysal said. “The continent is importing more than 150,000 tpa of graphite, of which 50,000 - 100,000 tpa is amorphous,” Uysal said, adding that Turkey has very important competitive advantages for Europe.

It would take less than a week for Turkish material to be delivered to the furthest part of Europe, and logistics costs are relatively cheap, he said.

Trading is also helped by the fact that Turkey is part of the EU Customs Union.

Despite graphite’s designation by the EU as a “critical mineral,” Uysal believes it is unlikely that Turkey would ever join the EU as a member.

“I think that critical minerals are irrelevant in this issue. But our co-operation and transaction with European companies will increase in this area,” he said.

Amorphous prices

Despite his optimistic assessment of Turkey’s potential to supply graphite, Uysal was conservative in his pricing outlook.

“Most probably we will [eventually] see the same prices as those before the price boom. And this will be a big problem - even now it has started to make problems for juniors - because of the gigantic amount of projects under development,” he said.

“The price boom that we have seen in past two years was not because of the demand; it was because of the supply,” he added.

Uysal pointed to United Nations statistics, which show that world total graphite exports in 2007 were around 750,000 tpa. China accounted for 88% of this, with exports of 670,000 tpa of natural graphite. In 2009, world total graphite exports dropped to roughly 500,000 tpa and China accounted for almost 90% of it with 458,000 tpa.

“This means export volumes decreased by 30% in two years, and this created price hikes as demand for natural graphite remained the same,” he said.

“But today, we see an interesting situation developing: export quantities are still low, but prices are also decreasing. This means that demand has weakened. So, any recovery in production, or any increase in production, will have substantial effects on prices in the market, especially for flake graphite.”

Prices before the boom could be the benchmarking for market balance, Uysal said.

“Estimations higher than those price levels are really a very big risk. My estimation of amorphous graphite normal market prices for 85% C contented concentrate is $400-$600/tonne. There could be some fluctuations below or over this price level, but I do not think that it will be sustainable.”

Mexico: Big North looks south

Mexico is a medium-sized producer of amorphous graphite accounting for 0.11% of total world output, equating to around 12,000 tpa of amorphous material in 2011.

The country hosts one of the world’s first commercial amorphous mines in the Sonora region, which began producing graphite in 1881.

Historically, Mexico has been a supplier of amorphous graphite to neighbouring US markets, but the country’s output has waned in recent years as Asian producers have usurped Mexico as a low-cost supplier.

But with amorphous supply from China in decline, Vancouver-headquartered Big North Graphite Corp. (BNG) is the latest foreign company to see an opportunity in reviving Mexico’s graphite fortunes.

By looking to restart amorphous production in some of Mexico’s dormant mines, BNG will be joining the likes of US-based Asbury Carbons and Superior Graphite, which already have a significant presence in the country’s graphite mining sector.

Past production

The mines BNG are looking to develop are located in Mexico’s Sonora state, about 40km away from the city of Hermosillo in northwest Mexico. ÊAt the time of writing, the company was in the process of acquiring the Aki Wiki concession, containing two past producing graphite mines, and a joint venture in the Nuevo San Pedro (NSP) mine.

According to Spiro Kletas, BNG CEO, the company expects to have completed the acquisition by early December 2012.

“The NSP mine is in the process of being re-started. BNG intends to help accelerate this re-start; timelines are to be determined, as is the size of the operation,” Kletas told IM.

“The company has not [as yet] finalised any sales agreements as such, we are leaving it open.”

Kletas said that it was difficult to estimate what the costs of production for NSP would be until the mine is in operation.

“The mine was operated privately previously, and as such BNG does not have exact figures. That being said, our aim is to improve efficiency at the mine by implementing modern mining techniques and equipment, which will definitely have the effect of lowering costs.”

Despite amorphous graphite’s reputation for being the poor cousin of the higher value flake material, BNG believes that there is a significant and growing market for amorphous graphite.

“There is a market for final product amorphous graphite both in Mexico and the US; approximately 60% of the graphite market is amorphous graphite, and the vast majority of worldwide amorphous production in from China,” Kletas noted.

“BNG hopes to provide some diversity of supply, and the projects are near one of the largest consumers of amorphous graphite - the USA - that currently doesn’t produce any graphite of its own.”

Although Kletas could not give a definite start date for operations at NSP, he told IM that he hoped to be in production by the end of 2012.

Springboard for flake

In terms of BNG’s wider focus, Kletas said that the company’s intention is to capture some of the graphite market as soon as possible through the Sonora amorphous projects, and continue to explore its Canadian projects, which are large flake targets.

Kletas added that, in BNG’s view, amorphous graphite presents a great opportunity in the near- to medium-term.

“The amorphous graphite market is large and growing, and most new mines coming online are flake graphite projects.”

“To the best of my knowledge I do not know of any new amorphous projects coming online. We are excited by the fact that the NSP mine gives BNG the opportunity to enter the market in the near term and provide supply.”