Madagascar’s reinstatement to the AGOA trade regime good news for Energizer Resources
Madagascar will be re-admitted to the list of beneficiaries of the African Growth and Opportunity Act (AGOA), a preferential trade regime granted by the United States. In 2009, in response to an unclear political situation following the coup that led to the overthrow of President Marc Ravalomanana, the USA excluded Madagascar from AGOA. On June 26, Barack Obama signed a presidential order to restore Madagascar to AGOA. The restoration should help Madagascar improve its overall economic situation, especially as far as companies operating in free zones are concerned. This is good news for Energizer Resources (‘Energizer’, TSX: EGZ | OTCQX: ENZR) because it means that when it enters production it will be in a position to take advantage of much better trade terms for its graphite, meaning it can compete very effectively in the rising Li-Ion battery market against all future North American graphite producers. Indeed, AGOA, first introduced in 2000, aims to facilitate the access of Southern African products to the United States through favorable tax treatment – exemptions from customs duties for more than 70% of revenue.
Washington updates the lists of beneficiary countries each year, based on criteria such as commitment to liberal economic policies, efforts to reduce poverty and to maintain the rule of law. Madagascar’s reinstatement to the AGOA trade regime is an important new step in the normalization of the country’s foreign relations. It comes just weeks after the resumption of relations between the IMF and Antananarivo after five years of suspension, through the approval of an emergency loan of $ 47 million. The World Bank has announced the resumption of its aid to the country and the mobilization of funding $ 400 million over three years.
Energizer is developing its Molo project, as part of its Green Giant property in Madagascar, which has extensive graphite (as well as vanadium) deposits. Energizer had further assets in the area but it last year it decided to concentrate solely on the Molo project, which has shown to hold one of the largest crystalline graphite deposits in the world. Last April, Energizer consolidated its ownership in the Molo graphite project, buying the 25% portion that was held by its joint venture partner Malagasy Minerals. This transaction means that Energizer now owns 100% of the Molo project property along with all the rights over industrial minerals identified on the property covering 94,011 hectares. However, the Molo deposit itself, as has been outlined, accounts for only 1%, or 62 hectares of the land. Energizer regards this acquisition as a “milestone” that has enabled the Company to pursue off-take negotiations and funding agreements with strategic partners. The project is expected to begin a large-scale production in the second quarter 2016. Molo contains 84.04 Mt of Indicated Mineral Resources at 6.36% and inferred 40.34 Mt at 6.29% carbon crystalline flake graphite.
Energizer Resources has already completed the scoping study for the project and began the comprehensive feasibility study which should be completed in the fourth quarter 2014. In early November, Energizer announced that the graphite that was identified was of a very high purity level, having a 99.9% graphitic carbon content by additional purification upgrading. Energizer can achieve very high purities of 97.7%C
with simple flotation, which is excellent in itself. Energizer said that this represents the single largest graphite discovery in Madagascar while the deposits have shown very high purity levels, easily able to meet the requirements for Li-ion batteries destined for the growing electric automobile industry and beyond.
Energizer has established partnerships with DRA Mineral Projects, a South African mine development firm that has also worked with Rio Tinto (RIO) and Vale (VALE), which helped speed up the PEA process and begin graphite production within two years time. The Green Giant project, overall, includes 29 drill holes, 20 trenches and regional sampling with 670 samples. Energizer is also developing the Fotsy and Fondrana deposits at the Green Giant property. In these areas, Energizer has announced that samples have indicated grades ranging from 5.19% to 12.16% up to depths of 138 meters, which suggests that Green Giant should support multiple stand alone deposits; however, the exploration and engineering will be focused on Molo for the time being in order to speed up development.
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