Prospectors and Developers Association of Canada
Convention in Toronto, Canada, was better attended than in 2015
and the general mood was more optimistic, despite the lack of
investor confidence in higher risk investments.
|Sentiment at PDAC was
more positive in 2016 than it was a year ago, although
investors continue to be shy of investing in the crowded
junior mining industry against a backdrop of low mineral
prices (source: IM).
Simply ticking off the necessary components of an early
stage mining business –acquiring valuable assets,
using funds to advance exploration and delivering positive
feasibility studies, have left many companies stuck and
strapped for cash, unable to proceed further.
"Today the market doesn’t want to see a
preliminary economic assessment (PEA), that’s not
what’s important now," Kiril Mugerman, CEO of
TSX-V-listed rare earths development company GeoMega
Resources Inc., told IM.
The company is bypassing – at least temporarily
– what it calls "the mountain" of building a rare
earths mine, opting to develop its separation technology first,
meeting customer specifications and working to streamline its
Proof of concept is reassuring for mining investors, but
arguably the most compelling way of getting financiers to put
their hands in their pockets is evidence of downstream demand
growth. Applications for minerals that failed to deliver on
promises of being the next big thing have spooked many
potential backers of new projects.
Graphene, the two dimensional carbon layer that can be
derived from natural graphite, has been a rather painful
example of this. The palpable excitement surrounding the
material four years ago has since died down, as developers have
so far failed to make the anticipated commercial
One PDAC attendee told IM that they
"wouldn’t touch graphene with a barge pole".
Others criticised some graphite companies for pushing graphene
just to obtain project funding.
"They build this picture of a project that’s
tens of thousands of tonnes per year, just to make the
economics work and all of a sudden they realise they
can’t raise the money, which is why, all of a
sudden, they start talking about graphene," one delegate
Many companies however insist that graphene is good iron to
have in the fire of a graphite project, as long as there are
other business propositions to run alongside it.
Although the chances of turning it into a significant
revenue spinner may be slim, several of those with the capacity
to produce graphene from natural graphite do not want to be
left behind, if and when the material does take off
TSX-V-listed Flinders Resources Ltd, which owns the
currently mothballed Woxna graphite mine and plant in Sweden,
is focusing on two initiatives.The first is working with a
Chinese technology partner to design a graphite production
process for Woxna. The second is its Swedish graphene project,
a government funded programme to research and commercialise the
production of graphene using Woxna material.
The company’s CEO, Blair Way, is realistic
about the impact of graphene on the market, saying that even if
the material is successfully commercialised, it is unlikely to
have a large impact on the natural graphite market.
For the company’s high purity graphite project,
Flinders recently received positive results from test work on
product from Woxna, which means that, after Easter the company
will be in a position to approach end users with samples.
A number of companies have expressed an interest in
receiving graphite from sources outside of China, but Flinders
has so far struggled to place its material in the market and
low prices forced the company to put its mining operation on
However, Way believes that the company's work with a
strategic Chinese technology partner with a well-established
design, build and operate capacity in high purity graphite
production will give it an advantage going forward.
"China has the experience and are doing it well. Why
wouldn’t we get technology from China?
We’re working with an engineering company and as
long as performance is high, we will keep using them," Way
Kevin Watson, of processing company, KPM, which has
developed a way of producing the battery material, spherical
graphite, told IM that many juniors are
underestimating the complexity of upgrading graphite for the
The company works with juniors and existing producers to
streamline production, improving production processes and
cutting costs and is now looking to provide a package
technology to the mining industry, focusing on graphite.
"A lot of juniors have a long hard process to carry out
requiring them to develop large production capacity and
projects and they need a lot of funding," he said.
DNI Metals Inc., another Canada-based exploration company,
is tackling the graphite market in a different way. DNI is
buying graphite from Brazil and processing it, before selling
it to end users in small quantities to build up a customer base
for its own graphite project in Madagascar.
Importing graphite from Brazil allows DNI to build
relationships with customers and other market heavyweights,
which according to its CEO, Dan Weir, is an important part of
making it in the business.
"It’s not about producing large quantities,
it’s the sales and it’s the marketing
that counts. Also being able to supply a lot of different specs
and products to a lot of different people," he told
Weir said that the company chose Madagascar as the location
to develop a graphite project, owing to its geology and the
availability of good quality large flake graphite, which Weir
says is not widely available in Brazil.
"The big reason why Madagascar can compete with China is
because the geology of the graphite means it requires less
processing. We're not starting with hard rock and so it doesn't
need to be crushed and ground, meaning that the capex is going
to be a fraction of the cost of other projects," he said.
DNI plans to start output at 12,000 tpa, which Weir says
will enable the company to be extremely competitive in the
current graphite market owing to its lower capex and opex costs
as the ore can go straight into the flotation process following
"We are not as concerned with the graphite prices going up
because, at these prices, with these operating costs, we can
still be profitable," Weir said.
The next step for the project, which is already fully
permitted, is a drilling programme which is to begin in May.
DNI's intention is that, by this time next year, it will have
the funds to build a processing plant in Canada.
With only part of the graphite needed to be upgraded to
battery grade, DNI decided it was more economical to build a
facility in North America for processing to higher grade
graphite. The facility will also enable DNI to conduct all of
its own testing.
Funding the project has, however, not been entirely
straightforward and in January the company announced plans to
acquire 100% of the shares of CR Capital Corp. and 100% of the
shares of a privately owned Canadian company operating in
The completion of the acquisitions provided DNI with copper
and zinc properties in Canada, and, more importantly, $2.2m in
cash and working capital.
Batteries still driving demand
As demand for batteries continues to grow around the world,
so will demand for lithium, but according to Stormcrow Capital
Ltd president Jon Hykawy, other applications will also drive
Speaking at PDAC, he outlined that rechargeable battery
demand is pegged at 29% but other markets also remain
important, such as the manufacture of ceramics, fritz, glazes,
greases, thermal glass and metallurgical powder.
"All of these markets are growing – or shrinking in
the case of aluminium – at various rates. But the
battery side of this equation is growing at the largest rate,"
Hykawy estimated that total battery demand increased 11%
between 2014 and 2015, with a dramatic rise expected for
battery materials such as graphite, lithium and cobalt out to
Current demand for lithium remains in the region of 200,000
tpa with global nameplate capacity estimated at around 231,000
"Why then is the price going crazy? There are some issues
with the supply in China which is why some Chinese companies
were recently trying to find buyers at prices as high as
$30,000/tonne but that is exclusive to China. We do however see
prices going higher even in the
West," Hykawy outlined, pointing to recent price
increases by US-based FMC Corp.
Out to 2025, Hykawy expects demand in excess of 400,000 tpa
and supply of around 425,000 tpa, with new projects coming
Hykawy cautioned that the 25,000 tonne overlap is not a
large margin of error, however. "Some of these [new lithium]
projects aren’t completely financed and there
should be some concern about supply but not all lithium goes
into batteries. Some of it is lower value and used for things
like greases and there is some elasticity in market segments,"