IM Graphite News in Brief 29 May – 4 June

By Laura Syrett
Published: Thursday, 04 June 2015

Zenyatta publishes PEA to mixed response; Syrah confirms feasibility of Balama.

TSX-V-listed Zenyatta Ventures Ltd has released the results of the long-awaited preliminary economic assessment (PEA) on its Albany graphite property in Ontario, Canada, which concluded that the project should be advanced to the prefeasibility stage.

The PEA, which excluded the feasibility of underground mining, estimated that an open pit operation at Albany would have a mine life of 22 years, based on less than 50% of the indicated and inferred mineral resources at the deposit, at a 3,000 tpd rate for 30,000 tpa high purity (>99.9% C) graphite.

The study assumed a selling price of $7,500/tonne for purified graphite, with operating costs of $2,046/tonne, yielding a margin of $5,454/tonne. Gross revenue from the mine is pegged at $4.8bn, with an after tax annual average cash flow of $110m.

Albany’s base case after tax net present value (NPV) is estimated at $438m at a 10% discount rate, with an after tax internal rate of return (IRR) of 24%.

The stock market reacted negatively to the news, with Zenyatta shares closing down 13.9% at Canadian dollar (C$) 1.98/share ($1.59/share*) in Toronto following the release of the PEA.

Analysts commentating on the outcome of study that much of the viability of Albany will depend on Zenyatta’s ability to consistently attain a purity of >99.9% C at a suitable flake size and on the realisation of high prices for the product.

In Mozambique, ASX-listed Syrah Resources Ltd has published the findings of a feasibility study on its Balama graphite project, which estimated an initial capex of $138m for the 81m tonne (proved and probable) ore reserve, with a payback period of less than two years after beginning production.

The maiden JORC reserve at Balama is sufficient to support operations for over 40 years at 380,000 tpa concentrate (95% C) production, with an average head grade of approximately 19% C, the study said. Average unlevered project free cash flow is estimated at $160m during the first 10 years.

Average operating costs are stated at $286/tonne on an FOB Port of Nacanda basis, while Balama’s IRR is calculated at 71% with an after tax NPV of $1.1bn.

In Australia, Valence Industries Ltd has increased the NPV of its Uley graphite project on South Australia’s Eyre Peninsula by 38% to $90m, simultaneously increasing the property’s IRR to 47%.

Valence also said that Uley’s mine life had been extended to more than eight years, based on a higher ore reserve of 2.9m tonnes, with total ore mined estimated at 2.92m tonnes at an average head grade of 12.1%.

The increases were based on a revision of the feasibility study for Uley, originally published in January this year.

Nearby, Oakdale Resources Ltd has intersected graphite mineralisation over a 2km area at its Oakdale graphite project, also located on the Eyre Peninsula.

The graphite was identified in four "lenses", which are up to 275 metres wide and 2,000 metres in length, Oakdale said. It added that the mineralisation is mainly within 50 metres of the surface, with around 20 metres of overburden.

According to the results of the company’s latest drilling campaign, which commenced in March this year over 113 drill holes covering 6,469 metres, the average thickness of the saprolitic graphite-bearing clays in the site’s oxidised zone averages 18.9 metres.

Fellow ASX-listed Triton Minerals Ltd has announced that a review by Shenzen Qianhai Zhongjin Group Co. Ltd of its graphite assets in Mozambique will now include the company’s Ancuabe project in the west of the country, as well as its Nicanda Hill site at the Balama North project in eastern Cabo Delgado province.

Triton signed a letter of intent (LOI) with Qianhai Zhongjin, a Chinese equity firm and trading house, at the end of April for funding of up to $200m to build and develop a 200,000 tpa graphite concentrate operation at Nicanda Hill.

In an update released this week, Triton said that Qianhai had "received inquiries from the Chinese Ministry of Commerce and the Ministry of Land and Resources (…) about Triton’s graphite projects and as such, [Qianhai Zhongjin] considers [Triton’s graphite] to potentially be of strategic importance for China.

"As a result of the [ministries’ queries, Qianhai Zhongjin] considers the Ancuabe graphite project could hold additional significant strategic value and wishes to include the Ancuabe project in the scope of their due diligence," Triton said.

In Tanzania, Magnis Resources Ltd has received formal approval from the country’s National Environment Management Council for the first stage of its application for a mining licence for the Nachu graphite project.

Australia-based Magnis said that following the submission of a scoping report and terms of reference by the company’s consultants at the end of April, the council has cleared Magnis to proceed to the environment and social impact assessment (ESIA) stage.

The company expects the ESIA to be completed by the end of June and said that exploration work, mine planning, infrastructure design and government and community relations are progressing on track.

Back in Canada, Mason Graphite Inc. is to partner with the Manicouagan-Uapishka Biosphere Reserve (RMBMU) respecting the development of its Lac Gueret graphite project in Quebec.

TSX-V-listed Mason said that the main objective of the partnership is to implement a sustainable and socially acceptable mining project with sensitivity to the environment and the concerns and expectations of the local community in the Baie-Comeau region, where the project is located.

"We attach great importance to the environment and sustainable development and we want to establish lasting ties with the people of Manicouagan," Mason’s CEO, Benoit Gascon, said.

Activities to inform the local population about the development will commence shortly and be followed by a consultation process over the coming months.

Saint Jean Carbon Inc. has filed an NI 43-101 report outlining the exploration potential at its Clot graphite property, which is located 150km northwest of Montreal in Quebec.

According to the report’s findings, the property merits additional work to advance it towards production, via a three step process, involving a surface exploration programme, a drilling programme and metallurgical testing.

TSX-V-listed Saint Jean has earmarked a budget of C$395,800 to complete the three stages.

Also in Quebec, Cavan Ventures Inc. said that preliminary results from an initial beneficiation test on samples from its Buckingham graphite property have yielded grades of up to 95.3% C.

According to Cavan, 21.1% of the sample’s flotation concentrate fell into the +48 mesh (jumbo size) fraction with a purity of 94.1% C. A further 16.4% fell into the +100 mesh fraction and assayed at 94.2% C, while the remaining 48.3% fell into the -100 mesh category and assayed at 95.3% C.

The company said that the results, which were based on a 20.7kg surface sample taken from trench 22C at Buckingham, will be used by fellow TSX-V-listed Caribou King Resources to evaluate Cavan’s property, which lies contiguous with the northern boundary of Caribou’s own Buckingham property for a potential joint venture at the site.

In graphene news, one of the Nobel Prize-winning physicists credited with the discovery of graphene, Sir Andre Geim, has criticised the UK’s new National Graphene Institute (NGI) as an example of money being invested "in the building industry, rather than science".

Speaking at the Hay Festival in Wales last week, Russian-born Geim said that the £61m ($93.5m) NGI was "a good facility but you shouldn’t exaggerate it", noting that during the time the UK has spent building the centre, "other countries have progressed" with graphene science.

The comments will come as a blow to both the UK and Manchester, which proudly styles itself as the "home of graphene", as the material was first isolated by Geim and his colleague, Konstantin Novosolov, at the University of Manchester in 2004.

Since then, concerns have been mooted that the UK is falling behind in the global graphene race, with its number of patents in the science numbering in the tens, while the US and China each have several thousand.

*Conversions made June 2015