EDITOR: | March 23rd, 2016 | 2 Comments

Stop the “boast fest” with graphite, warns analyst

| March 23, 2016 | 2 Comments
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cool_heelsCool your heels. That is the advice that graphite hopefuls have been sent at the inaugural Australian Graphite Conference in Perth. Jason Chesters, resource analyst at Patersons Securities (one of the leading mining and oil company broking firms in the West Australian state capital), said companies should drop what he called the “boast fest” about flake size and grade; instead, they should give priority as to whether or not the mineralization in their deposits can actually be used in products a customer wants.

Chesters went on to say that the global graphite market was in a stage of transition: demand from traditional industrial applications was slowing while the prospect of rapid growth in newer, high-tech applications offered promise. He reminded the conference that there is a growing number of hopefuls all seeking lucrative sales in a graphite market of only two million tonnes. “However, the reality is that expectations of required supply response to meet the additional demand may fall short of expectations and almost certainly not be sufficient to accommodate all newcomers,” he added. And then this: “The rapid growth of graphite hopefuls is therefore likely to result in a significant number of disappointments.”

Chesters is not the first to warn about the overcrowding in the graphite sector. But it is clear that the race is on to be among those who make the list of successful players. Juniors in Australia are vying to announce deals and off-take agreements to differentiate themselves from those in the earlier stages of exploring and developing graphite projects.

Meanwhile, Andrew Scogings, principal geologist at Perth-based mining consultants CSA Global, criticised the standard of reporting by graphite explorers. “It is unacceptable, and potentially misleading, to simply report a tonnage and the contained mineral percentage,” he said. “As an example, a hypothetical flake graphite resource reported as 20 million tonnes at 10% graphitic carbon informs the reader only that the resource contains two million tonnes of in-situ flake graphite.” But such a statement conveyed nothing specific about the size, range and purity of the graphite flakes that could be liberated from host rocks, nor the presence and impact of impurities such as sulphides that may affect mineral extraction or product quality, nor possible markets for the product.

Meanwhile, one industry player takes heart from what is happening in the Chinese graphite sector. Andrew Spinks, managing director of Kibaran Resources (ASX:KNL), said that – while China had been the world’s largest producer and consumer of graphite – market sentiment was turning elsewhere.

China dominates the market for natural graphite “yet graphite traders and end users are increasingly seeking diversity away from Chinese supply as well as servicing the growing public and government expectation of greater eco-friendly accountability in graphite supply for green energy and renewables”. This move was being led by the United States, Japan, South Korea, Taiwan and Europe.

The conference heard from some of the leading players.

Talga Resources (ASX:TLG) reminded attendees that it owned three of the top-10 graphite projects in the world. It also set out the considerable downstream progress made at Talga, with its breakthrough technology in liberating graphene from graphite, and that and graphene and micrographite uses are now upon us – and not a distant possibility. Actually, the company’s presentation did cover something that perhaps may not be all that widely known: that is, that micrographite is critical for a range of bulk markets including lubricants, alkaline batteries, building materials, coatings and plastics.

Anson Resources (ASX:ASN) said it expects to be in production in mid-2017. This company is looking at a 25,000 tonnes a year mining operation near Geraldton, Western Australia. The project, which has a construction budget of $56 million, is based on a deposit discovered in 1993 by CRA (the precursor of Rio Tinto).

Footnote: One thing to note about this conference is that it attracted a big attendance number (by Australian standards if not quite in the class of PDAC). Mining conferences in Australia have been struggling to draw business, but it seems that interest in graphite is running hot Down Under.


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Comments

  • charles.1

    Thanks for passing on the valuable comments Robin. The old adage – if it looks too good to be true, it usually is. As a long term participant in industrial minerals, it is often forgotten that the customer holds the power, and has to be given an incentive to change suppliers. The Chinese suppliers and European traders won’t protect their position? Good luck with that…..

    A business is to be had for sure – smaller tailored batches, customer specific, reach downstream with some value add….. Dig up black rocks and try to sell large volume via traders……never.

    March 24, 2016 - 4:10 AM

  • minner.2

    Its is great to read that finally some articles and comments (Charles.1) are point out the real facts. The natural flake graphite mining industry has already seen some disappointments and the fact is there will be many more to come. The total world wide demand is not growing fast enough to support most if not all of these new large volume graphite mines. The investors have been mislead on believing the natural flake graphite market demand is much larger then it really is. Graphite companies market values are way over valued and graphite mining companies who do get the funding to open up new flake graphite mines do not have enough capital to cover all the loss they experience or will experience during the startup phase. The net result is I predict a lot of bankrupt graphite mining companies in the future.

    March 25, 2016 - 10:08 AM

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