Photo by: Northern Graphite
TORONTO (miningweekly.com) – The TSX-V-listed stock of Ontario-based project developer Northern Graphite on Tuesday ended the day on a high note after the company updated the preliminary economic assessment (PEA) on its flagship Bissett Creek project to include an expansion scenario.
The Ottawa-based firm’s stock rose 12.5% to C$0.72 apiece, after it revealed “robust economics” for building a process plant with twice the capacity of the plant considered in the company's feasibility study.
Northern Graphite said recent developments in the lithium-ion battery industry and strong buyer interest in the extra-large flake, high-purity concentrates that Bissett Creek would produce using the company’s proprietary purification technology had prompted it to expand the project’s potential scope.
Among these developments counted US automotive giant Tesla’s recently revealed plans to build a new $5-billion lithium-ion battery ‘gigafactory’ that could potentially increase natural graphite demand by up to 37% by 2020.
“It has been reported that multiple new graphite mines will be required to supply proposed lithium-ion battery manufacturing plants because graphite deposits typically produce a high percentage of nonbattery-grade material, and two-thirds of the material that is battery grade is lost in the manufacturing process,” CEO Gregory Bowes said.
He added that Bissett Creek might, however, be the only mine required to meet market demand thanks to its extremely high percentage of battery-grade material, lower manufacturing losses and future expansion potential.
At an average price of $1 800/t of concentrate, which Northern Graphite believed reflected current market conditions, the PEA placed an after-tax net present value of C$178.9-million at an 8%-discount rate on the project, with an internal rate of return of 26.7%. Cash operating costs were estimated at C$736/t of concentrate.
The PEA estimated development capital costs at C$134.1-million, for an operation that would produce an average of 44 200 t/y of graphite concentrate over the first ten full years.
Northern Graphite boasted that almost 90% of the project’s output would be made up of large and extra-large flake and battery-grade graphite, which it said was “by far the highest ratio in the industry”.
The firm also pointed out that the PEA did not include any of the project’s 27.3-million tonnes of measured and indicated resources in the current mine plan, as well as 24-million tonnes of inferred resources. With the project also not having been closed off by drilling yet, further production expansions were possible.
Northern Graphite said graphite prices had fallen 50% or more from their 2012 peak as a result of the economic slowdown in China and a lack of growth in the US, Europe and Japan. Current prices were at the marginal cost of production for many graphite miners, which should limit further declines.
The company said the weighted average price it could realise for Bissett Creek concentrates in the current market would be boosted by the high percentage of large-flake graphite. It expected about half of the project’s output to be +50-mesh, extra-large-flake graphite and another 40% of the total output to comprise +80-mesh, large-flake graphite.
Typical graphite deposits, which only had about 15% extra-large-flake graphite, would realise average prices in the range of C$1 000/t to C$1 200/t of concentrate.