EDITOR: | February 22nd, 2013

The Global Destination for Graphite Investors

| February 22, 2013 | No Comments
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lac des ilesGraphite investors have their pick in Quebec; more interestingly, the proximity of the properties and the availability of expertise and perhaps the best mining regulatory environment in the world, make the province  ideal. Quebec is mining friendly; graphite projects in Quebec are close to very good roads and infrastructure; the projects feature the highest grades facilitating the purification process to address the current sources of demand; finally, the companies are managed by world experts in the area of mineral graphite and all operating close to Timcal one of the sole suppliers of natural graphite in the world. The key concept is vicinity. Everything is ‘close’; one might coin the term ‘close-ology’ or “vicinology” for those who like Latin to describe the serendipitous combination of factors that are turning Quebec into the premiere graphite destination. This ‘closeology’ also has the potential to spur a number of mergers and acquisitions as the various properties run into each other geographically and geologically.

Lac-des-Iles, 20 miles south of Mont-Laurier, in Quebec, is one of many beautiful lakes in Quebec as are Lac Knife and Lac Gueret. The lakes are deep and some are marked by the presence of a number of uninhabited islands from one shore to the other attracting boatmen and fishermen, who explore it for its famous pike. However, the Lakes could also be called less picturesquely, ‘Lacs du Graphite’, because the region is fast becoming one of the most important graphite mining regions in the world. A number of mining companies have been converging around Lac to launch new mines and many of the properties are side by side. Mineral graphite has attracted considerable attention in the past two years and it would not be an exaggeration to suggest that over half the new graphite plays are located in this area of Quebec.

The old Stratmin deposit has attracted much of the attention to the area, whose mineralization is characterized by dome shaped graphite conductors with geological resources estimated at some 25 million tons, with inferred reserves of 5.2 million tons at an average 7.42% graphitic carbon. The area is very mining friendly and Quebec in general has been one of the friendliest mining jurisdictions in the world. New paved roads and good forest roads and excellent overall infrastructure have further facilitated the discovery of new opportunities in the graphite sector. Lac Gueret also has tremendous graphite potential and the development of a deposit first discovered in 2001 is all the more attractive because of the existence of highways and ample hydro power as it is located some 50 km west of the Daniel-Johnson hydroelectric generating station and less than 300 km from Baie-Comeau, which offers a deep water port open almost all year round.

Mason Graphite is based near Lac Gueret and Lac Gueret is said to have as much as three times the graphite as Lac des Iles. Mason has already accumulated a total of 12,000 meters of drilling activity and the rock is softer than elsewhere, making it easier to drill and test. Mason Graphite, which has traded under the symbol TSXV: LLG is targeting 7.59-million tons, 20.4% carbon, measured and indicated resources while the inferred resource is 2.8-million tons at a grade of 17.29% carbon. Significantly, the resource promises to be especially rich in large and medium crystalline flake graphite, the most desirable variety of graphite for applications in clean energy, lighter and more powerful batteries, super capacitors for wind turbines and pebble-bed nuclear reactors. Large flake graphite, which is cheaper to process than the amorphous variety, has seen sharply rising demand, accounting for a fivefold price increase from USD$ 500/ton to USD$ 2,500/ton since 2005 with the steepest price increases occurring over the past two years. On February 22, Mason announced very attractive recoveries, exceeding 96% carbon purity for the +150 mesh flake size and a cumulative average (based on four mesh sizes) of 92.6%. Such results – high grades, recovery and flake size – show promise for commercial viability will be used in the Preliminary Economic Assessment, scheduled for completion in the coming months.

Mason acquired the property from Cliffs Natural Resources last April after arduously courting the previous owner for over three years. While Mason is certainly targeting the emerging green technology market, as battery technology advancements trickle down from the lab to the shop and dealer ‘at the mall’ over the next few years, the Company is interested in generating short term revenue as well. Therefore, Mason wants its own piece of the current graphite market, tapping into traditional demand sources in the steel industry as a refractory material for furnaces and as a carbon enhancer in steel alloys and as lubricants. Mason believes the high-tech batteries will become more commercially relevant in a few years’ time.

Graphite can be classified in four general varieties; there is the ‘basic’ amorphous kind, in loose form that while ‘cheap’ is necessary to make steel and to make brake linings or clutch plates types. Amorphous graphite is a powdery material at the bottom of the price scale but essential to steelmaking. Then there is the crystalline or flake graphite, which is the one gathering much of the interest now, given its applications in ‘future’ technologies from batteries to the spheres in pebble bed nuclear reactors. The highest grades of flake – such as those being explored by Focus Graphite (TSX: FMS; OTCQX: FCSMF) – are proving idea for the production of graphene. Then there is vein or ‘Sri Lankan’ graphite, a rare variety able to achieve very high purity levels. Finally, there is synthetic graphite, deriving from oil production, and this is the kind that could eventually be displaced – due to very high cost – once high grade deposits come on line.

Undoubtedly, the presence and promise of the Mason play influenced Berkwood Resources (TSX: BKR.V) to start exploring the adjacent Lac Gueret East Graphite property. Mason has “measured & indicated mineral resources of approximately 7.6 [7.9 million as of February 22] as of result  million tonnes grading 20.4% Cg (Carbon as Graphite)”. In October, Berkwood identified “the graphite bearing zone, which is traceable at surface extends a minimum of 55 metres, has a mean true width of 4-5 metres and trends northeast”.

Focus Graphite made a significant graphite discovery 10 kilometres north of the Lac Gueret graphite deposit, hosting NI 43-101. Mason, Focus, Berkwood and a others such as Galaxy Graphite Corp (‘Galaxy’, TSXV: GXY) – operating the Buckingham Graphite project not far from Lac Gueret, in the same Grenville geological province – may soon join Timcal, which produces up to 25,000 tons of graphite at Lac-des-Iles in operation since 1989. As Benoit Gascon of Mason Graphite has suggested, there has been no increase in graphite supply since 1990; however, demand is rising as is the number of technological applications demanding high quality graphite.

The Province of Quebec itself will be generating a substantial portion of that demand. Hydro-Quebec has signed an agreement with Focus to use purified graphite (at battery grades: 99% +) to make anodes; Grafoid (40% owned by Focus), is developing a commercial graphene production process and its headquarters are located in nearby Ottawa. And then there are other Quebec based specialty battery manufacturers:  Sud-Chemie (taken over by Clariant) has 100% ownership of Quebec’s Phostech Lithium and very recently launched one of the world’s premier facilities to produce carbon coated lithium iron phosphate for electric and hybrid vehicle batteries and stationary storage. Hydro Quebec is also on the cutting edge of fast battery charging systems that will help improve the viability and demand for electric vehicles. And then there are the Lithium miners and the list goes on…


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