EDITOR: | September 22nd, 2015

South Australia’s big graphite push

| September 22, 2015 | No Comments

graphiteAccording to the latest global survey of mining companies from Toronto-based Fraser Institute, the state of South Australia is the world’s nineteenth most attractive jurisdiction (wedged between Arizona and Idaho in the rankings). It contains at least 30 known graphite deposits, some being historic mines, and for many years the state has been considered to have one of the world’s largest resources of graphite.

And most of that is located within the Eyre Peninsula region, close to the towns of Port Lincoln and Cleve.

But, with the headlines grabbed recently by big discoveries in Mozambique, the emergence of Tanzania as a very promising graphite play, and Sri Lanka asserting its historic importance in the graphite space, the South Australian plays have tended to be shoved into the background; not in Australia, where they still attract plenty of attention, but on the global graphite scene.

Yesterday saw the release of the annual report from one of the South Australian companies, and it reminds us of how advanced the operations there are. The company, Archer Exploration (ASX:AXE), has a sales pitch unlike any other graphite play I have come across: it is aiming both at the lithium-ion battery market and at farmers.

There is the Campoona deposit where Archer has developed an ultra-high purity graphite that can be used in lithium-ion batteries. For the nearby Sugarloaf project, testing at the University of Adelaide shows the graphite there may be suitable as a fertilizer and soil conditioner. Wheat trials at the University of Adelaide have proven that the addition to soil of natural unprocessed graphite had  improved water retention and released nutrients (this graphite contains high levels of carbon). So all AXE has to do is mine it, crush it and bag it.

Archer chairman Greg English says, in the company’s annual report, that demand for graphite is continuing to increase. “Further growth is expected as more and more uses are found for graphite, and natural graphite starts to replace higher cost synthetic graphite,” he adds.

He then goes on to make a basic point but one that many people outside the sector have not quite gotten their heads around: he argues there is no such thing as “standard graphite”; it comes in many shapes and sizes and the ultimate application will depend on the physical characteristics of each type of graphite. “Therefore, while investors have tended to focus on large flake graphite projects, this graphite is not suitable for all graphite markets”.

Yes, I know, that is fairly basic but a point he says many investors do not understand; certainly, much of the reporting in the general media also shows that the complexity of graphite is not too well understood there, either.

The other players on the Eyre Peninsula are:

Valance Industries (ASX:VXL): This week the company reported its treatment plant at Uley was producing 94% grade concentrate. Its main buyers are companies in the traditional graphite space, such as makers of lubricants, drilling fluids, expandable graphites and fire retardants. However, the plant will be working at 50% capacity until April next year while improvements are made to lift grade, and 60% of the staff has been laid off in the meantime.

No doubt this will be seen as a disappointing development when so much hope and expectation has been invested in the graphite story, especially as the company’s Uley mine has only just been revived after being put out of business by Chinese dumping in the 1990s. Valence shares lost 10.2% on the news.

Lincoln Minerals (ASX:LML) is awaiting its mining licence for its Kookaburra Gully project, located 35km north of Port Lincoln. The company claims to be in the Top 10 worldwide in terms of grade. Lincoln also owns the historic Koppio mine, which was worked intermittently between the early 1900s and 1946, producing a total of 97 tonnes of graphite.

Then there’s Oakdale Resources (ASX:OAK): This company is still in the exploration phase, having only listed last November. It is aiming to produce low cost graphite.



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