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AMG Graphite, formerly known
as Graphit Kropfmuehl, began mining graphite in
Bavaria, southern Germany, over 100 years ago
(source: Romtomtom)
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Nestling amid the rolling green hills and medieval towns of
southern Bavaria in Germany lies the quiet village of
Kropfmuehl, home to one of the world’s oldest and
most significant graphite companies.
Demonstrably proud of its pedigree, AMG Graphite,
formerly known as Graphit Kropfmuehl and now rebranded in
recognition of its takeover by Netherlands-based AMG Advanced
Metallurgical Group NV, was formed in 1870 to mine graphite
from the Bavarian hills. Next year will be its 100th
year as an industrial player in the graphite industry.
"We have been in this business a long time and we
consider ourselves to be leaders in graphite processing," says
Frank Berger, president of AMG Graphite.
The company mines around 10,000 tpa of its own
graphite from sites in Hauzenberg, Zimbabwe and Sri Lanka and
buys in extra material – around 15,000 tpa –
mostly from China, where it operates a processing facility near
Qingdao, plus a handful of other countries. AMG also has an
exploration project in Ancuabe, Mozambique, which it expects to
be up and running by April next year.
Aside from Qingdao, the company has two
processing plants in Europe, AMG Graphite’s
biggest regional market, located at Kropfmuehl (Hauzenberg) and
Tyn in the Czech Republic, where it receives, refines and
distributes material from its various mines.
He also stresses that the company is "not in the
commodity business", that is to say, it is not a volume trader
of homogenous products, but rather a niche market operator
– a speciality processor of one-of-a-kind graphites.
Berger says that the company’s depth of experience
in processing sets it a long way ahead of newer entrants in the
graphite sector. "Processing is a bottleneck," he said. "You
can say you are going to open a mine and buy a flotation plant
and a mill, but you need to have the know-how to make it
work."
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AMG Graphite’s
markets by end use
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The company estimates that
the global graphite market is worth around
$14bn, of which 9% consists of natural graphite
products, accounting
for $1.3bn and 1.2m tpa.
Source: AMG Graphite
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Located approximately 15km northeast of the chocolate
box-pretty Danube town of Passau and nudging the Austrian
border, Kropfmuehl to the south of Hauzenberg is the original
home of Graphit Kropfmuehl now AMG Graphite’s,
mining operations.Kropfmuehl mine
Largely shielded from the view of the few
surrounding houses and roads, the company has one mine operated
by 12 miners in the area and expects Hauzenberg to produce
around 1,000 tonnes graphite concentrate this year.
AMG’s plant is modern, clean,
compact and quiet, with a covered mine shaft bringing up 20 tpd
from an underground mine on a single eight-hour shift, five
days per week.
The ore, which grades at between 25% C and 35% C,
is crushed, floated, screened, milled (micronised) then
chemically and/or thermally purified. It can then be separated
out into different fractions for further processing into
products including a range of high purity (>99.99% C) flake
sizes, expandable graphite, dispersions and parts.
The company keeps a significant amount of
inventory and "safety stock" onsite in Kropfmuehl for supply
flexibility enabling it to meet the demands of its customers at
short notice.
The graphite is stored in bags and packets in
wooden-roofed sheds to stop condensation dripping onto the
product – a touch of what Berger calls "Bavarian
intelligence" – from where it can be loaded onto the
company’s own trucks and be on a main European
highway within a matter of hours.
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AMG Graphite has a supply
agreement with the Lynx Graphite Mine in Zimbabwe. The
company’s chairman, Frank Berger, told IM
that the Lynx mine was a "very secure source" of
graphite for AMG and has been supplying the company for
50 years (source: AMG
Graphite).
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"If a customer is kept waiting for two weeks, or
even one week, for their order then they will quickly
substitute with another supplier or go to a trader. We want to
maintain our links," Berger explained.
AMG estimates the global graphite market to be
around 2.7m tpa, consisting of 1.2m tpa natural graphite, worth
approximately $1.3bn, and 1.5m tpa synthetic material, worth
considerably more at around $12.3bn, owing to its predominantly
high-value end markets.
Of the natural portion, AMG believes that around
80-85,000 tpa consists of high-value grades. AMG
Graphite’s own output in this category comes to
approximately 20,000 tpa, giving it a 25% share of the global
high-end graphite market.
The largest consuming segment for its graphite is
heat insulation materials, which takes around 28% of its annual
sales volumes. This is followed by carbon brushes at 11% of its
output, chemistry, 10%, lubricants, 9%, powder metallurgy, 8%,
friction pads, 8% and dispersions, 5%. A further 8% is sold to
traders for untracked end markets, while the remaining 14% is
accounted for by a handful of other, smaller uses.
AMG Graphite’s customers include
Austrian insulation materials specialist Sunpor, Germany-based
chemicals producer Henkel, Swedish powder metallurgy company
Hoganas and US multinational silicon materials supplier, Dow
Corning – among a host of other buyers too many, or
too secret, to list.
According to Berger, graphite typically accounts
for just 3-5% of the end use materials its customers make, but
being unable to source this highly specific fraction of raw
material could mean a hugely expensive overhaul of an entire
manufacturing recipe. "Customers ask us for a plan B," Berger
said. "That’s why it’s important to
guarantee reliable supply to the exact specifications the
customer needs."
Corporate strategy
AMG completed its takeover of Graphit Kropfmuehl
in 2012, acquiring first 80% then 93.5% of the capital, which
enabled it to squeeze out and compensate the remaining minority
stakeholders, having taken an initial 60% equity stake in the
business in 2008.
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AMG graphite
revenues
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Apart from a slight dip in
2012, AMG Graphite has managed to grow
its revenues steadily since 2010. The company said
that prices for
graphite have been more or less stable, with
speciality niche products
retaining their value, despite weakness in the more
"commodity-type"
graphite markets. (Source: AMG
Graphite)
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In December 2014, US investment group Alterna
Capital Partners acquired a 40% stake in AMG Graphite, by way
of a capital increase combined with a 10.33% equity interest in
Bogala Graphite Lanka Plc, AMG Graphite’s Sri
Lankan subsidiary.
The stake was hailed by AMG Group as an equity
injection, which would allow it to "reposition our global value
chain" to take advantage of the projected growth in, and expand
its portfolio of, graphite-based critical materials
products.
Berger says that the company is anticipating
significant demand growth to come from markets such as battery
anode graphite, nuclear waste disposal solutions and graphene
technology – for which its Sri Lankan material is
ideally suited, according to AMG – whereas more modest
organic growth can be expected from the heat insulation,
lubricants, dispersions and expandable graphite markets.
For the more rapid, sizeable growth
opportunities, Berger does not altogether buy into the theory
that the industry is facing a 'supply readiness
gap’, where growth in consumption by new markets
will outstrip production, leading to shortages and price
hikes.
"In my experience, change in demand has always
been gradual," Berger said. "But if it does increase quickly,
then we have the processing know-how to meet it. There may be a
shortage in supply of very special graphites, such as
expandable or vein graphites, but not anything that will risk
industrial development – the shortages will not be in
spot-driven markets."
AMG’s decision to invest in
redeveloping the past-producing Ancuabe graphite mine in
Mozambique is based on its desire to increase its own mine
capacity to supply two thirds of its raw materials by 2020.
Mozambique
At present, the company purchases most of its
additional graphite from China, with prices typically decided
on six monthly or yearly supply contracts – a
situation that leaves the company open to volatility in both
pricing and material availability.
If all goes to plan, AMG’s Ancuabe
mine will be the first of its kind to reopen in Mozambique.
Formerly operated by Irish mining group Kenmare Resources Ltd
between 1992 and 1998, the project has a projected initial
capacity of 6,000 tpa, which can be scaled up to 9,000 tpa. At
first, this will substitute for AMG’s existing
external supply, rather than top up its present 25,000 tpa
volume.
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AMG expects to reopen the
Ancuabe graphite mine in
Mozambique, formerly operated in the 1990s by
Kenmare
Resources, by April 2016 with an initial capacity of
6,000 tpa (source AMG Graphite)
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Helped by the fact that Ancuabe is a brownfield
site with a history of exporting graphite, AMG’s
mine is in a logistically enviable position compared with some
other projects in Africa.
To fund the development, the company has secured
and is in final contract negotiations for $10m financing from
DEG, a subsidiary of German banking group, KfW, which
specialises in sustainable business investments in emerging
economies.
AMG’s plans for Ancuabe involve
redeveloping the site and building new processing capacity.
According to Berger, all the environmental and operational
permitting necessary to begin work at the project has now been
completed and the company is waiting on the first instalment of
cash to begin construction.
AMG also recently inked a deal with ASX-listed
Triton Minerals Ltd to explore the licences surrounding its
Ancuabe site for further graphite mining potential.
Details on the arrangement are sketchy, as AMG
signed a non-disclosure agreement with Triton over the
deal’s terms, however Berger did not rule out a
possible joint venture with Triton in the future, or possibly
buying the licences from the Australian company outright. "It
depends what we find in the ground," he said. "We
wouldn’t buy them just because they surrounded
us."
Ancuabe is the closest graphite mine to
Mozambique’s Port of Pemba, affording the company
a relatively easy route to ship the graphite out, Berger
said.
The company believes it can be cost competitive
with China in Mozambique for graphite raw material, otherwise
it wouldn’t be pursuing the investment.
Following the successful recommissioning of
Ancuabe, AMG is considering turning its attention to the nearby
Nipacue greenfield graphite project.
Preliminary investigations at the site have
yielded a JORC resource of 900,000 tonnes graphite and AMG is
looking at potentially commencing operations at the project in
2020.
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AMG Graphite’s
mine and plant in Kropfmuehl in southern Bavaria is
expected to produce around 10,000 tpa concentrate in
2015 (source: AMG Graphite).
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Zimbabwe and Sri Lanka
As for AMG Graphite’s other captive
sources of graphite, it intends to keep these in hand. In
Zimbabwe, the company has a supply-only agreement with the Lynx
graphite mine in Karoi, in the north of the country. In Sri
Lanka, AMG is the majority shareholder in Bogala Graphite Lanka
Plc for the Bogala vein graphite mine and is the leading
graphite exporter in the country.
Extracting graphite from the deep, old
underground mine shafts in Sri Lanka is a complicated business,
according to Berger, particularly as AMG applies "Western
standards" to the operation.
Despite the recent decline in prices and demand
for vein graphite, Berger said that AMG would not bow to market
pressures and try to dump its material on buyers. The Bogala
mine is staffed by a principally local workforce in line with
AMG’s policy of benefitting the communities in
which they operate.
"We will not just push this material onto the
market at a cheap price, as has happened in the past," he said.
"Sri Lankan vein graphite is a very special material and we
don’t want to undermine its value."