TORONTO (miningweekly.com) – Toronto- and Frankfurt-listed Energizer Resources believes synergies between its Molo graphite project and the neighbouring Sakoa coalfield may be realised sooner than initially believed, and could potentially positively impact the Molo project’s financial metrics.

Energizer on Wednesday reported the findings of a graphite grade and operating cost (opex) sensitivity analysis, which would be incorporated into a preliminary economic analysis (PEA) technical report update currently being compiled by Johannesburg-based DRA Mineral Projects.

The company in February published the results of a PEA for the project, which had found the project to hold an after-tax net present value (NPV), using a 10% discount rate, of $341.8-million, and an after-tax internal rate of return (IRR) of 41%.

The project was expected to cost $162.04-million to construct and would produce about 84 000 t/y of 98% to 98.6% pure flake graphite, which was expected to sell at an average market price of about $1 564/t.

Energizer on Wednesday said it believed this number to be conservative, as it did not reflect optimisation of graphite flake-size distribution through pilot-plant testwork.

Correspondingly, the baseline opex cost of $523.45/t of graphite was believed to be conservative as it assumed all power for the project would be supplied by containerised diesel power generation, and that all road maintenance for the transport corridor to the port would be Energizer’s responsibility.

This opex cost included graphite transport from the plant to the port and onboard vessels.

However, the company believed opex could decrease with the development of the neighbouring Sakoa coalfield projects, which the company expected would provide it with the opportunity to buy ‘over the fence’ power from a new coal-fired power station, as well as opex savings as a result of infrastructure sharing and accelerated port development.

Energizer said there would be coal test shipments to the Port of Soalara starting later this year, which could bring these benefits to the company sooner than expected.

“The sensitivity analysis used conservative baseline graphite pricing and opex costs, yet still illustrates the robust nature of the project. If the graphite price falls off by 25% and there is a 20% opex cost over-run, the project still has very positive IRR and NPV values,” Energizer president and COO Craig Scherba said in a statement.

According to the sensitivity analysis, in a worst-case scenario, where the opex had shot up to $628.10/t and the market price for graphite had fallen to $1 173/t, the project still had an IRR of 23.7%. Using the same parameters, the NPV would decline to $104.8-million.

In a best-case scenario, if the opex fell to $418.80/t and the market price of graphite was lifted to $1 799/t, the IRR rose to 62% and the NPV to $640.1-million.

The Molo deposit had a National Instrument 43-101-compliant indicated resource estimated at 83.99-million tons, grading 6.36% graphite, with an additional inferred resource of 40.32-million tons, grading 6.3% graphite.

The deposit is located in the Green Giant graphite project, and is part of the joint venture property with Malagasy Minerals, in Madagascar. Energizer has a 75% ownership interest and is the operator of the project.

Energizer said it was looking to fast-track project development, and had indeed done so, having completed a technical report delineating the resource in December, and published the PEA in February, all within 15 months of making the discovery in November 2011.

Production was slated for late in 2015.

Meanwhile, the company also on Wednesday said it had closed a C$2.36-million nonbrokered private placement by issuing 12.35-million common shares.

Completion of the offering remained subject to final approval of the applicable regulatory authorities, including the Toronto Stock Exchange.

GRAPHITE ENTERING NEW ERA

Energizer in March reported that US-based research firm House Mountain Partners in January 2012 reported that there were only nine junior exploration companies involved in graphite exploration on the TSX, TSX-V, ASX and the Aim exchanges. Today, there were more than 82 companies managing 150 graphite projects in 13 countries.

Of those 82 graphite companies, nine had a compliant resource; three had a PEA study; one had a full feasibility study; only Energizer was listed on the TSX and none had an offtake partner.

While there had been a surge of new graphite projects over the past year, it was believed very few would succeed in bringing a graphite mine into production. According to industry analysts, there was a shortage of primary sources of economic graphite in the world today. The majority of graphite exploration projects today had been recycled, renamed or resold.

Energizer believed graphite was entering a new era. Graphite was moving from an industrial mineral to a strategic mineral, similar to that of lithium, vanadium and rare earths.

British Geological Service had now ranked graphite in the top ten on its list of critical minerals, and graphite had moved ahead of lithium, cobalt and platinum-group elements on The Critical Supply Index, which had created surfeit opportunity for companies to capitalise on the value-added benefits of a fully integrated supply chain.

Graphite, unlike most other minerals, has multiple layers of demand. Industry analysts expect new demand for graphite would be driven by energy-based technologies.

According to a January report from Pike Research, these developments will translate into strong growth for Li-ion batteries over the remainder of the decade. The study concluded that the overall market for Li-ion batteries in light-duty vehicles would grow from $1.6-billion in 2012 to almost $22-billion in 2020; a 14-fold increase.

Automakers now understood the path to consumer acceptance of electric vehicles (EVs) was first through the adoption of hybrid vehicles. This was demonstrated by the fact that the Toyota Prius was now the world’s third-best-selling car.

The evidence of the growing acceptance of EVs was demonstrated by the announcement of Motor Trend’s 2013 Car of the Year, the Tesla Model S, which was the first time a full electric vehicle had ever won this award.

Paralleling the rapid advancement of batteries for electric vehicles, another important growth segment is the advancement of batteries for large-scale energy storage for commercial and grid-level applications.