Benoît Gascon, President and Chief Executive Officer of Mason Graphite Inc. (TSXV: LLG), and his team have been busy working on the Feasibility Study for the company’s 100% owned Lac Guéret Graphite Project in northeastern Québec. A variety of factors, including the favourable economics, the geological make-up of the mineral and the geographical location, all contribute to the attractiveness and uniqueness of Lac Guéret; however, Gascon’s extensive experience in graphite (he has, literally, spent his entire professional life in the commodity) and his focus on client relationships — graphite end users — is quite unique too.
An essential and highly desirable product, graphite is different from most commodities in the sense that it is not an openly traded mineral. Prices are negotiated between end users and producers for annual and, sometimes, multi-year contracts. Prices for graphite vary according to different parameters, such as carbon content (purity), size, impurities and shape. As a result, in order for a graphite producer to be successful, the company must have continuous contact with its customers. And Gascon has wasted no time in preparing for this. Presently, a market study is underway by Mason to identify all graphite end users in all market segments.
What separates Gascon from the rest of his counterparts is what he brings to the table — over 20 years hands-on experience running the biggest graphite asset in the world, which just happens to be the only North American graphite mine, in operation. That project began in 1990 and Gascon was there from day one. It was eventually purchased by Imerys-owned, Timcal, one of the largest graphite producers in the world.
Gascon was also instrumental in helping save his previous employer during challenging times (the ’90s were a difficult period for graphite producers, having to combat a steady year-over-year decline in the price of graphite) and assembled and a world-class management team to restore the company to profitability. The key to success for Gascon in achieving the turnaround was simple. He realized that in order to succeed, he had to connect directly with his customers. Gascon met virtually all the major graphite buyers in the world. He knew that was the only way he could produce exactly what graphite customers needed, as they needed it. Through engaged communication, Gascon was also able to anticipate and accommodate what his customers needed in future. Not just having, but also maintaining, building and fostering those client relationships was and is paramount in order to succeed in any graphite operation.
Mason’s senior management team possesses many decades of graphite expertise from their combined experience at Imerys/Timcal; including Gascon (who is also a CPA, a CA and has held executive positions for 20-plus years, serving over 6 years as President and CEO); Jean L’Heureux, Eng., Executive Vice-President, Process Development, with over 20 years of experience; and Luc Veilleux, CPA, CA, Chief Financial Officer and Executive Vice-President, with over 8 years of experience. The management and technical team at Mason has expertise in graphite mining and processing, but equally important, Mason’s team understands what’s most important — customer relationships and sales.
Gascon’s position as a major player in the graphite industry has afforded him a solid understanding of all the graphite assets in the world. As such, he and his team visited numerous graphite operations and carefully reviewed all available graphite deposits worldwide. Gascon chose Lac Guéret for a number of reasons. For starters, its high-grade graphite content is anomalous. On average, the resource is over 20% carbon-as-graphite content (Cgr). Almost all the graphite mines today are below 10%… at least the ones in operation. The mine Gascon previously managed was at 6%. Therefore, having over 20% Cgr is very unique and has a direct positive impact on the project economics. The tremendous size of the deposit asset was another factor. The Lac Guéret deposit is significant. Today, with only a portion of the deposit analyzed, Mason has a resource with over 7.6 million tonnes, which means a long life of mine, based on just that small part of the deposit as its resource. Next, was the particle size distribution of the deposit. Lac Guéret has a very good proportion of coarse material, which is worth the most in terms of pricing. Again, positively impacting the project economics. Finally, Lac Guéret is located in a friendly mining jurisdiction in the Province of Québec. Gascon knows Québec like the back of his hand. Perhaps being, born, raised and managing the only graphite operation in the province’s history may have something to do with it.
Moving forward with its Feasibility Study, Mason recently filed the company’s robust NI 43-101 Preliminary Economic Assessment (PEA) report and the numbers and the numbers are quite promising:
- Initial direct capital costs of $89.9M
- Production costs of $390 per tonne of finished product
- $364M pre-tax NPV (8% discount); $283M pre-tax NPV (10% discount)
- 33.7% pre-tax Internal Rate of Return
- Payback period of 2.5 years
- 22-year mine life
- Average sale price of $1,525 per tonne
- Annual production of 50,000 tonnes of graphite concentrate
- 27.4% average life-of-mine (LOM) carbon-as-graphite content Cgr in the mineralization
- Graphite recovery above 96%
- Up to 96.4% Cgr of finished product purity
- Stripping ratio of 0.76:1
With 7.6 million tonnes of exceptionally high-grade ore, grading over 20% carbon-as-graphite (in the measured and indicated categories), Mason Graphite’s Luc Guéret Graphite Project is one of the highest-grade graphite deposits in the world.
Further exploration potential exists as the current mineral resource is based on exploration of only 17% of one well-defined zone. Mason’s graphite is 100% flake, which is highly desirable as it is the form most commonly used in high-value applications. Coarse flake pricing is anticipated to remain strong, as there is a scarcity of this product in the market. Demand is not expected to be met by supply additions in the coming years. According to Michael Goldberg, analyst at Stonecap Securities who is covering Mason, “Due to high grades at Lac Guéret, we believe that Mason Graphite could be a bottom-quartile cash cost producer when production begins.” Mason anticipates graphite production at Luc Guéret to begin in late 2015.