Triton Minerals Ltd has signed a binding offtake
agreement to supply China’s Yichang Xincheng
Graphite Co. with 100,000 tpa graphite from deposits in
Mozambique, Madagascar, Tanzania and Malawi for a period of 20
The terms of the deal, which was inked at the
start of April, state that Yichang Xincheng will pay a floor
price of $1,000/tonne for material with a minimum flake size of
150μm,, equating to +100 mesh (medium flake), with a purity
of 90% total graphitic carbon or above, making the contract
worth at least $2bn to Triton.
The ASX-listed explorer, which so far only has
graphite assets in Mozambique, said that although the deal
provides Yichang Xincheng will source its graphite concentrate
exclusively from Triton, the offtake does not prevent Triton
from selling graphite to other customers.
"We wanted to lock them down so that they have to
go through us if they want to source graphite from these
countries," Triton’s managing director, Brad
Boyle, told IM.
Execution of the contract terms requires Triton
to begin producing graphite commercially, and to notify Yichang
when it intends to start deliveries, within 36 months of
signing the agreement.
Boyle explained that the 100,000 tpa figure is an
annualised average and that the company is unlikely to commence
deliveries at this level. "We could start at 20,000 or 30,000
tpa – the structure of this deal allows us the
flexibility to scale up."
"In the next six to 12 months, we will have more
clarity on how we will service the deal," Boyle said.
He added that Yichang Xincheng had agreed to pay
a premium price of $1,000/tonne for Triton’s
graphite based on the product’s quality and
guaranteed security of long-term supply.
Privately-held Yichang Xincheng is a supplier of
high purity engineered graphite products, including
micro-powders, expandable graphite, graphite sheets, gaskets
and flame retardant materials, and has contracts with companies
in the petroleum, steel, automotive and technology sectors.
Yue Bin, Yichang Xincheng’s
chairman, said that Triton’s graphite "performed
well beyond our highest expectations" in laboratory tests. "We
feel that [Triton Minerals] is ideally suited to support and
build our range of expandable graphite products," Yue
News of the offtake was given a mixed reception
by analysts, some of which questioned the minimum sale price,
while others queried why Yichang Xincheng, which reportedly had
a turnover of around $230m in 2012, would sign a deal for
$100m-worth of graphite annually.
Duncan Hughes, mining and metals analyst for GMP
Securities, called the deal "an excellent result for Triton and
a potential game changer".
"I think the floor price is certainly favourable,
but realistic," Hughes told IM. "I believe
there is likely more demand for graphite, especially expandable
graphite, out of China than is generally appreciated."
Other analysts have cast doubt on the projected
value of the contract, however.
"The price they are quoting looks a bit on the
high side," one London-based analyst told
He speculated that Triton may need to mine 3-4m
tpa graphite ore to fulfil its order from Yichang Xincheng and
that the company’s quoted capex of $315/tonne FOB
to the Port of Pemba from it Nicanda Hill site in Mozambique
could double as a result.
According to IM Data analyst,
Shruti Salwan, the $1,000/tonne floor price is well above
current market levels.
"By way of comparison, prices for 94-97% C, +100
– 80 mesh material on a CIF Europe basis are presently
hovering at $1,050-1,150/tonne – it is not clear why a
buyer would agree to pay more than this, even for security
reasons," she said.
One US-based market observer said that logistics
and transport could make up a "meaningful part" of the price
Yichang Xincheng has agreed to pay for Triton’s
He added that the agreement’s
condition precedents were not "too onerous" for Triton, which
is a positive for the company.
Triton’s share price jumped from
Australian dollar (A$) 0.24/share ($0.18/share*) to $0.57/share
in trading on the ASX, following the release of the news.
The Yichang Xincheng offtake was announced a day
after Triton revealed that it has teamed up with Germany-based
AMG Mining AG to explore graphite deposits in the Ancuabe
region of Mozambique, where both companies hold mining
The deal locks Triton into an initial two-year
exclusive agreement with AMG’s subsidiary, GK
Ancuabe Graphite Mine SA, to create what Boyle described as a
"joint task force" to examine the potential to restart graphite
mining in Ancuabe.
Triton currently holds a 60% interest in three
exploration licences and two licence applications in the area.
AMG was granted a 15-year mining concession for Ancuabe in
2012, which included a past-producing open pit mine and a
processing plant, presently on care and maintenance.
AMG has previously estimated that its portion of
Ancuabe was capable of producing 6,000 tpa medium-flake
graphite concentrate. Under its previous owners, Ireland-based
Kenmare Resources Plc, the mine had a peak production of 7,500
tpa flake graphite, with a capacity of 10,000 tpa.
AMG declined to comment on the deal.
*Conversion made April 2015