Carbon footprints: graphite’s new mine to market routes

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Published: Wednesday, 30 October 2013

Over the course of the last century, volatility in the graphite market has forced mines across the world to open, close and then reopen again.

By Bruce McMichael

Over the course of the last century, volatility in the graphite market has forced mines across the world to open, close and then reopen again.

This cyclical business is common within the natural resources industry and thanks to a recent price spike and supply concerns, graphite is currently enjoying an exploration boom.

Market estimates suggest that demand for graphite for use in batteries alone could increase from 125,000 tonnes in 2010 to 320,000-640,000 tonnes in 2020; a growth rate of 10-18%. However, this optimism has been tempered by prices halving since 2011, driven down by poor demand from consuming markets.

Even though prices have fallen away considerably from their 2011 peaks, many deposits are still considered viable development targets at present market values.

It is estimated that there are over 82 companies managing 150 graphite projects in 13 countries today, compared with fewer than 10 listed on the Australian, London AIM and TSX-Venture stock exchanges in January 2010.

China currently dominates graphite demand and supply, benefiting from the relative proximity of production and consumption centres as well as low labour and manufacturing costs.

Elsewhere, owing to their high-volume, low-value metrics, graphite mining projects could live or die by their logistics, with developers seeking to maximise their use of existing nearby infrastructure while minimising the costs of getting product to market.

Calculating the cost of moving a tonne of raw material or processed product from mine head to a port, rail or truck head is a critical part of a miner’s financial calculations and help form the basis of economic analyses on which shareholders are encouraged to invest.

Graphite trading

Graphite is not an openly traded mineral, and prices and volumes are generally negotiated between producers and end users on an annual or multi-year basis.

The mineral is used is a range of products including refractories, lubricants, brake linings, oil drilling additives, batteries and fuel cells, powder metallurgy and pencils, with major consumers in different markets located all over the world.

With such a diverse range of uses and geographical consumers, and no open market, it is important for producers to work closely with customers and accurately plan output for specific requirements and organise appropriate shipping arrangements for timely deliveries.

While existing graphite miners have well-established shipping arrangements, most new market-entrants are yet to finalise their logistics plans.

And with many new projects working from mine sites in remote locations - such as northern Canada, rural Africa and the Australian Outback, for example - they are at a considerable distance from potential buyers.

Canada: New mines in Quebec and Ontario

Long famous for its mining industry, Canada has been at the forefront of the graphite exploration boom with dozens of juniors piling into the market in the last three years.

Within the crowded junior space, a handful of TSX-listed juniors have emerged to become particularly prominent and are therefore having every aspect of their projects scrutinised in fine detail, not least their logistics plans.

Speaking to local reporters recently, Benoit Gascon, chief executive of Quebec-based junior Mason Graphite said that a key issue for the industry was not the availability of graphite in deposits but rather whether or not it can be “economically produced” - taking into account all costs from labour and machinery to transport.

Mason’s Lac Gueret graphite project lies in north-eastern Quebec in the province’s Plan Nord region, approximately 660km north of Montreal and 300km north of the main service centre of Baie-Comeau.

The deposit can be accessed year-round by a logging track and connected to a metalled highway, meaning that infrastructure costs are minimal.

The mine is expected to be in production by the end of 2015, and the company believes that Lac Gueret’s location and access are part of the project’s “solid fundamentals for success”.

Nearby (by Canadian standards), Focus Graphite is preparing to start feasibility study designs for the mine and plant at its Lac Knife project, located in the Cote Nord region of north-eastern Quebec, 27km south of the town of Fermont. It expects to have these completed by mid-2014.

“Detailed design can begin at this time if we have not started prior to publication of the feasibility study,” says Don Baxter, president and chief operating officer at Focus.

Plant construction is expected to start in spring of 2015, rolling over into production later that year or early 2016. Limited mine site warehousing will be available to maintain some inventory, but will not require a large facility to offset seasonal production.

Once the graphite concentrate is dried, it will be moved pneumatically from the dryer to screens and then to bins prior to bagging.

Packaging equipment capable of mitigating flake damage will be purchased ‘off the shelf’, and the bagging system will fill one tonne bags. Product will be bagged at the site and transported by rail cars to the port of Sept Illes, Quebec, approximately 400km to the south-east.

Focus is planning to market its flake graphite product into the existing industrial markets in North America, Europe and Asia.

No decision has yet been made on which shipping line the company will use, with a conclusion expected to be reached during feasibility studies. “We anticipate selling FOB Port at Sept Illes, Quebec,” says Baxter.

The company currently estimates packaging and shipping to port accounts for about 3% to 4% of operating costs.

In neighbouring Ontario, Zenyatta Ventures is exploring the Albany graphite deposit north-east of Nakina in the province’s so-called Arc of Fire.

Despite the deposit’s relative remoteness, Zenyatta is keen to stress the project’s proximity to infrastructure, being located just 30km north of the Trans Canada Highway, a power line and natural gas pipeline near the communities of Constance Lake First Nation and Hearst, plus an established network of logging roads.

A rail line is also located 70km away and an all-weather road approximately 4-5km from the deposit.

Zenyatta anticipates that its preliminary economic assessment (PEA) of the Albany project will be ready in early 2014, which will outline in detail the company’s plans for transporting its graphite products to market.

Another large flake mine in the same province is being developed by privately-owned Ontario Graphite.

Situated some 300km north of Toronto and accessible through the lumber town of Kearney, the company’s Kearney graphite project is tipped to be the first of Canada’s new graphite projects to enter production.

Logistically, the project has a number of important advantages. From Toronto, there are approximately 270km of highway, 30km of paved municipal road, 10km of all-weather logging and a mine site road to the Kearney mine, which are expected to keep transportation costs relatively low once operations begin.

Mine production is earmarked for export to the US, and is slated to commence in early 2014. The mine last operated in the early 1990s and processed around 17,000 tonnes of finished product.

US: Developing in Alaska

Sharing its latitude with some of Canada’s most northerly mainland regions, the US state of Alaska has also seen some notable graphite exploration activity in the last few years.

TSX-listed Graphite One Resources is pushing for accelerated development of its Graphite Creek project, located 65km north of the town of Nome on the state’s Seward Peninsula.

The project benefits from nearby existing infrastructure, with public roads 20km away, a lake connected by a navigable river to the Bering Sea and an airstrip just 3km distant.

The property is also some 18km from a seasonal road and approximately 30km from a newly proposed deep-sea port on Alaska’s coast west of Teller, close to Port Clarence, which could be accessible by either land or water.

Typically, graphite ore extracted from the site for development purposes is processed into size-sorted, rough concentrate on site using a crushing, grinding, floatation and sieving circuit. Product will be shipped out to end-users by pallet in either 20kg bags, or in bulk.

Australia: Eyre Peninsula

In Australia, which ranks second in the overall graphite junior activity ratings, managing director John Parker is leading junior explorer

Lincoln Minerals’ graphite exploration campaign in the Eyre Penin-sula, South Australia, at Kookaburra Gully.

Despite being a sparsely populated part of Australia, the Eyre Peninsula has a history of graphite mining and Lincoln’s holdings are close to established rail and heavy haulage road networks, shipping ports, base-load electricity supply and water services - all of which are well equipped to serve the mining industry.

Bagged on-site in either bulk or 25kg bags as required, the graphite from Kookaburra Gully will be loaded into containers for road transport to Port Adelaide (about 700km away) for shipment to Asia (mainly China, Korea, Japan and India) and possibly Europe or North America.

Arrangements have yet to be made with any specific company to handle regular shipments, says Parker, but these will be confirmed as Lincoln’s projects near production.

Lincoln is targeting production of 25,000 tpa of high purity concentrate from 2015 at Kookaburra Gully.

Madagascar

Africa has also seen a flurry of interest in graphite exploration, but one area of the continent which already boasts an established graphite mining and export business is the eastern island nation of Madagascar.

There, TSX-listed Energizer Minerals is developing its 75%-owned Molo flake graphite deposit located near Fotadrevo in the south of the island.

Currently known as the Green Giant graphite project, the company’s Molo deposit lies close to several active mines, and Energizer’s mine camp is 30km from the Sakao coal project and only slightly further away from Rio Tinto’s $1bn mineral sands project, operated by QIT Madagascar Minerals.

The company is working closely with Panalpina, a major mining logistics company which has worked on the logistical arrangements for Sherritt International’s nickel project at Ambatovy in western Madagascar.

Graphite from Molo will be shipped to the new port of Tulear, close to the existing port at Soalara from where huge volumes of limestone quarried by mining giants Sherritt and Glencore are already shipped to Italy.

Brent Nykoliation, Energizer’s sen-ior vice president for corporate de-velopment, notes that the road and port development underway for the nearby Sakoa coal field, which is expected to be in production by 2017, offers a significant opportunity to keep operating costs at Molo to a minimum.

Energizer says the current cost of moving graphite from the mine site directly onto a container vessel at Tulear is $105/tonne FOB.

In shipping graphite from Madagascar, Energizer will follow in the footsteps of the likes of local producer Establissements Gallois, which has been exporting material intermittently from the island’s east coast since the 1990s, and UK-listed Stratmin Global Resources which began sending small shipments to Europe in 2013.

Learn more about trends in bulk mineral trading at the Moving Minerals 2013 conference in Amsterdam on 3 December. Contact lsyrett@indmin.com for more information or visit www.indmin.com/MM2013 to download the programme and register.