THE INSIDE STORY: Resource-focused investors who keep a close eye on the daily announcements from the Australian Securities Exchange (ASX) cannot have ignored how often lately the commodity graphite rates a mention.
Many pundits consider the rise in graphite’s prominence to be merely a distraction to the focus market-watchers usually save for more mainstream commodities, gold or iron ore, whose fortunes have recently suffered.
The reality though, is that graphite’s rise in providence and reputation should come as no surprise.
The European Commission included graphite amongst 14 materials it considers to be high in both economic importance and supply risk, while the British Geological Survey listed graphite as one material most likely be in short supply globally.
A number of analysts are starting to appreciate the potential of graphite, guided by data suggesting future demand is most likely to be driven by new technologies, in particular lithium-ion batteries.
The lithium-ion battery market, for which graphite demand has grown from virtually zero five years ago to almost 100,000 tonnes per annum, now represents 20 per cent of the flake market and continues to grow at 20 per cent annually.
Kibaran Resources (ASX: KNL) is positioning itself to become a major player in the emerging graphite sector.
The company’s key project is its 100 per cent-owned Epanko graphite deposit, located within the broader Mahenge project area in Tanzania.
The project has a total JORC Mineral Resources Estimate of 22.7 million tonnes at 9.8 per cent total graphitic carbon (TGC) for 2.22 million tonnes of contained graphite.
Kibaran recently completed a Scoping Study at Epanko based on Indicated Mineral Resources of 12.8 million tonnes at 10 per cent TGC for 1,281,200 tonnes of contained graphite.
The results from the study concluded Epanko to be an economically robust graphite deposit capable of producing premium quality large flake graphite with no industrial limitations boasting an NPV of US$213 million with plenty of upside through both resource and planned production expansion.
A key to the project is the quality of the graphite concentrate – testwork indicates the production of low contaminant, ultra-high purity (99.98 per cent) large flake graphite suitable for all applications, including the production of the value added expanded and spherical forms, which should command a premium price.
To put this into perspective it is worth noting China, India and Canada are currently responsible for most of the world’s graphite mining and processing, with China producing the lion’s share of between 70 to 80 per cent; however China’s production comprises 70 per cent amorphous and lower-value, smaller flake graphite.
Having recently completed a Scoping Study, activities are now concentrated on moving to feasibility and then construction in early 2016.
Kibaran recently appointed GR Engineering Services to undertake a feasibility and project evaluation study.
“Our main focus, at present, is the Epanko deposit at the Mahenge project,” Kibaran Resources executive director Andrew Spinks told The Resources Roadhouse.
“The appointment of GR Engineering is important as it is a highly-reputable and recognised successful engineering firm with a significant track record of building mines in Africa.
“We have signed them up to do the Feasibility Study and, ideally, they will build the plants at Epanko and at Merelani and carry out all expansion works to come.
“Our strategy is to become the largest producer of graphite in Tanzania and be able to increase production when demand increases.
“We are now finalising the schedule for the Feasibility Study.
“It is likely we will have the mining lease for Epanko finalised in March 2015 and that should concur with the Feasibility Study.
“We are anticipating production at Epanko by early 2016, which is only 18 months away.”
Kibaran signed a binding off-take agreement in 2013 with a European graphite trader for Epanko graphite sales.
The deal meant Kibaran became the first ASX-listed company to sign a graphite off-take and the first company globally to sign a binding off-take for the European graphite market.
As things currently stand, the company remains the only one of its peers with such a deal in place.
“The validation of the potential of the Epanko graphite project is confirmed by having a binding offtake agreement in place,” Spinks said.
“Many of our peers proclaim to have Memorandums of Understanding in place for hundreds of thousands of tonnes – we have an actual binding offtake agreement.
“Our test work during the recent Scoping Study has shown – through flake size distribution and high-purity – that there is absolutely no limitation in our application, or concern regarding our product.
“That is supported by the binding offtake agreement.”
The company’s second project, Merelani-Arusha, is located adjacent to the previous producing Merelani graphite mine
Kibaran is currently in negotiation with the owners of the mine, TanzaniteOne Mining Limited, which is a wholly-owned subsidiary of AIM-listed Richland Resources and Tanzania’s State Mining Corporation (STAMICO) via their STAMICO-TML Joint Venture, with a view to combine the relevant companies’ assets by way of a JV and restarting graphite production.
Having one offtake agreement in place at Epanko, with a second likely to be struck at Merelani, places Kibaran in good stead, especially in a sector such as the industrial minerals markets.
“It is a challenging sector and it is not just about tonnes and grades – there is a lot more depth to it than that,” Spinks explained.
“We are looking – in enormous detail – at why we have an offtake agreement and nobody else has and we believe it comes down to a number of factors.
“One significant aspect is our flake size distribution – 50 per cent of our distribution is greater than 180 microns, but we also have very low fine material with 15 per cent being less than 75 microns.
“That makes us commercially viable and designates our product as being very much highly in demand.”
Kibaran is highly-motivated to bring Epanko through to production as soon as possible and it has the Board structure to attain that goal.
Spinks has had a 13 year association with Africa, during which time he co-founded Tanzgraphite Pty Ltd.
Non-executive chairman John Park was founder and executive director of TSX-listed SAMAX Gold, which developed and operated the Merelani graphite mine, which remains the largest historical producer of graphite in East Africa.
The company’s other executive director, Grant Pierce has held a number of management roles in Africa including time with Perseus Mining, Resolute Mining, Africo Resources, and with Barrick Gold in Tanzania.
“We have all the right ingredients in our view in terms of the management of the company,’ Spinks said.
“We recently restructured the Board and we now consider we really have the capacity to deliver the objective to become a major graphite producer with the management box expertly ticked.”
Kibaran Resources recently reached an agreement with the CSIRO through its part-owned subsidiary 3D Graphtech Industries to investigate research opportunities in the application of graphite and graphene inks in 3D printing and fused filament fabrication.
“We’ve just engaged with the CSIRO – and it is absolutely mind-boggling what research is being done in the emerging field of 3D printing,” Spinks said.
“We are focused on becoming a graphite producer, however we can’t overlook the possibility of becoming involved in some of these other aspects of the industry.”
Kibaran Resources Limited (ASX: KNL)
…The Short Story
388 Hay Street
Subiaco WA 6008
Ph: + 61 8 6380 1003
Fax: +61 8 6380 1026
John Park, Andrew Spinks, Grant Pierce
Strategic Resource Management 4.67%
UBS Nominees 4.19%
GP Securities 3.27%
SHARES ON ISSUE
Approx. $33.7 million (at 25/9/14)