EDITOR: | June 4th, 2013 | 7 Comments

Inside look at China’s graphite industry; Uley graphite OK for graphene; Verde appointment backed

| June 04, 2013 | 7 Comments
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Chinese producers do not have enough flake graphite in low-cost, accessible areas to meet the expected growth in global demand. This is the conclusion drawn by a team from Mozambique graphite hopeful Syrah Resources after an inspection of several mines in China. In addition, environmental rule tightening has led to some 200 mines closing.

Syrah, in an assessment of the state of the graphite industry, says specialist research firms that follow the graphite market have estimated the present size of the global graphite market to be around 1 million tonnes a year. The marketing team set up by Syrah, however, has been in talks with various major graphite buyers for the past eight months. Based on the feedback from these buyers, Syrah says it is convinced that the market could be considerably larger than that 1 million tonnes.

As they point out, China supplies about 77% of the world natural graphite market and its domination resulted from its relatively low costs, labour particularly, which have enabled the country’s miners to undercut non-China producers. Furthermore, China has had ample graphite resources located near infrastructure to meet global demands.

Syrah’s team reports that most of the flake graphite comes from Shandong and Heilongjiang provinces. In the case of Shandong, this province contains most of China’s graphite processing plants. However, most of the mines in Shandong are considered to be close to the point of exhaustion. As Syrah points out, mines are typically deep and, consequently, water inflows are a problem. Furthermore, the average grade is low at between 2% and 3% total graphitic carbon (TGC). The company adds: “The graphite is associated with clays and processing is costly and environmentally damaging because mines use acids in the process. In the past, acid-rich tailings were deposited direct into local river systems.” You can see why mines are being closed.

Syrah reckons that the Shandong mines are struggling to make a profit with operating costs getting the graphite just to the mine around $900/tonne.

So far as Heilongjiang province, in far northeast China, is concerned, many mine owners there transport their ore about 2,000km to the processing plants in Shandong. The miners in the north also have weather challenges. Temperatures in January can drop as low as -31C. The extreme cold weather can prevent graphite mining for up to six months a year. Syrah says the graphite grades between 12% and 18% TGC but there are problems with clay content.

There is also a problem for buyers of Heilongjiang graphite: they must purchase all their winter needs before the mines close which ramps up warehousing and insurance costs.

The report notes that, as much of China’s flake graphite is of poor quality, it is often sold to U.S. or European buyers who upgrade it.

Syrah argues that the problems in China are the main drivers that have sent graphite prices from about $800/tonne in 2005 to the current $US1,450/tonne (97% TGC +80 mesh).

In terms of amorphous graphite, this is mined mainly in Hunan province in the south. The graphite is mined underground with tunnels extending beyond 2,000m in length. However, the grade is exceptionally good at up to 85% TGC.

Now the industry is facing environmental controls, a 20% export tax and 17% value-added tax. Notes Syrah: “It is possible that the Chinese government may decide to further limit exports of graphite in order to focus on downstream processing and value-added graphite products within China”.

GRAPHITE: University researchers have concluded that graphite from a mothballed mine in South Australia is suitable for production of ultra-light and multifunctional graphite.

Strategic Energy Resources (ASX:SER) has been working with a team based at Monash University in Melbourne to study the graphite at the Uley mine, closed in the 1990s after being forced out of business by falling prices due to China’s flooding the world graphite market.

The year-long university study found that the natural graphite samples were chemically and physically very similar to benchmark artificial graphite. It was concluded that Uley graphite could easily be exfoliated and made into high surface area graphene-like material..

As SER notes, graphene is attracting big research money at present: the European Union has put up Euros 1.35 billion, South Korea $350 million and the United Kingdom £50 million in commercialisation hubs.

SER says its graphite mining cost will be around $300/tonne.

POTASH: Ocean Equities in London is reassured by the appointment to its board of directors by Verde Potash (TSX:NPK) of Leonardo Moretzsohn, former CFO at Vale Inco.

The analysts say this appointment should go a long way to reassuring investors who may have been spooked by the delay in Verde’s kiln with the manufacturer unable to confirm a performance guarantee. Moretzsohn spent 30 years in project financing for projects such as the Carajas iron ore mine and Alumorte alumina refinery. Ocean says he will be able to steer Verde in the right direction because he is so well known to financing partners working in South America.


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Comments

  • Dr. Copper

    I suppose for some Australians sitting in colorful Melbourne that it may be difficult to understand that mining during -31c is usual for
    us Canadians. Quebec sits on the same latitude 44-62deg to Heilongjiang 43-53deg and endure similar winters. Open mining in cold temperatures even transport on ice covered roads is not an issue.

    The clay issues are dealt with solely individually and Imery have their own chemical experts and is producing clean graphite by
    extracting the aluminium in full using mineral acid washes which
    has been developed to suit their particular ore. No graphite concentrate would be produced if acid was not to be used but it is what is left after acid washing which counts. Self evidently those compositions is trade secrets as each ore require different treatments.

    It is the major lack of quantitative chemical analysis in Syrah’s
    announcements which has me very worried. There is no employ to define the changes caused by acid treatment in fact there is no scientifically evidence from Syrah that they know what they are
    doing at all. For that, they are not making the graphite industry
    look unattractive, they make themselves look unattractive.

    I noted today on Broadroom Radio in Australia the vaguely and very avoided discussion on metallurgical studies and testings. Previously
    Syrah had confirmed full liberation of micas yet today it was different.
    Contaminant problems is well known in Mozambique. AMG is only producing 6,000 metric tonnes of concentrate in Mozambique because of high ash levels along the costal plains and AMG having been in Mozambique since 1990 and is well aware of the contaminants around Balama being primarily uranium and roscoelite.

    That is why AMG is continuing to mine graphite deep underground in Europe even when winters gets to -15c.

    June 4, 2013 - 7:01 AM

  • Anonymous Coward

    Uranex Limited (ASX: UNX) has discovered up to 54.7% Cg (graphitic carbon content) from outcrop samples at the wholly-owned Nachu Graphite deposit in South East Tanzania.

    Early stages but potentially could be bigger than Balama. Worth while keeping an eye on this one.

    June 8, 2013 - 3:14 AM

  • Dr. Copper

    Major fizzler out of Australia today from Syrah asking authorities for a trading halt to release a scoping study/PEA then back tracking and releasing zip.

    Affirmative the JORC code do not allow scoping studies to be released on indicated resources. Is Syrah telling the graphite industry they were not aware of their own regulatory frame work ? Just a bit of more embarrassment to say the least.

    However no surprise – when looking at each reported assays from
    East and West – there is major discrepancies in the shallow grades
    in both width and depth (have you seen the topography ?) and even if we consider beyond the uranium backdrop its really not surprising they are back tracking because no consistent testing has been reported on concentrates to garner home the wiffle ball – other than of course in a formed helium balloon.

    Surely a graffiti lesson and not graphite would serve a purpose here.

    Get the transparency right and proving up a trustworthy concentrate
    is really the only way forward for the graphite industry and all the seriously interested parties will steer well clear of the wonderbees.

    Bets still on Zenyatta for a consistent purity.

    June 12, 2013 - 2:17 PM

    • Joe

      Dr Copper,
      What do you think about the following statement from Syrah (from its press release, june 4 2013)?. I am not an expert and I would like to understand whats going on with this company. How can they clain that they can supply for all graphite demand? it seems ridiculous. thanks for your insights.

      “Balama currently has over enough graphite to supply the world for well over 100 years assuming it supplied even 100% of global demand. Initial production will be from the high grade areas and particularly the Ativa zone
      at >20% TGC. These high grade zones are expected to supply enough graphite for several decades worth of estimated global
      demand.
      Also, Balama graphite is exceptionally high quality with simple flotation producing a concentrate grade of >97% carbon. It has very low sulphur content (0.008%) and thus is expected to be in high demand for steel applications which require a low sulphur content.”

      June 24, 2013 - 4:14 PM

  • Austr.

    Comments against Syrah are sure from investors who did not buy the shares when they were quoted at cents. Syrah will produce 200k tonnes a year putting out of the business many graphite mines! the uranium stuff is totally crazy!

    June 28, 2013 - 8:31 AM

  • Dr.Copper

    My interest is in graphite and its extractable format. The Uranium background readings
    is available if you know where to look, the independent geologist’ report over Mozambique was subsequently cancelled by Jacana/Syrah to only curtail a technical report. The Indepentent Solicitors report has also never been disclosed. Therefore there lingers a question mark legally speaking to the procurement of the tenements and Syrah’s
    rightfully disclosure of exploration results.

    The ground was covered by AFE and the uranium backdrops is available.

    Why is it the Syrah has never made referrals to the uranium at all in both graphitic
    gneiss and mica’s and provided very little in extractable evidence of product ?

    As you may know Graphite is a consumable product which is not used in the
    making of bubble gum.

    July 3, 2013 - 3:48 AM

  • June 2-7, 2013: Graphite and Uranium Positive, Rare Earths and Potash Flat for the Week | InvestorIntel

    […] Inside look at China’s graphite industry; Uley graphite OK for graphene […]

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