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