GéoMégA launches exploration effort to build graphite resources in Quebec

GéoMégA (CVE:GMA) is a junior exploration and development company that is based in Quebec. The company is focused on defining, evaluating, developing, and mining elements that are essential to the growth of clean technologies in North America and across the globe.  

The company’s flagship project is the Montviel Rare Earth Elements deposit with a NI 43-101 compliant Indicated and Inferred Resource of 250,600,000 tonnes at a grade of 1.45% TREO for a total of 3,645,887 tonnes of TREO, and is the third largest TREO deposit outside of China.

In situ TREO values within the Montviel deposit are currently worth $2,201 per tonne of resource, and are located approximately 500 kilometres north of Montreal.

The Quebec Government has unveiled the “Plan Nord” which aims to invest $80 billion over 25 years in the development of infrastructure and employment opportunities for communities that are located to the north of the 49th parallel. This plan may assist with the development of Montviel.

GéoMégA has staked 293 claims over 14 properties that are located 50 kilometres east of Mount-Laurier, and 250 kilometres northwest of Montreal, Quebec.  The Curières Graphite Project covers an area of 2,465 hectares that hosts quartzite, biotite gneiss and graphitic gneiss, and was previously explored by Resources Graphicor in the early 1990’s.

This historic exploration effort saw the completion of an electromagnetic survey along with a systematic campaign of mapping, sampling and digging of 32 trenches to collect large grab samples for assaying and resource definition. Resources Graphicor identified a dozen graphitic horizons that were traced through trenches and surface outcrops that ran from north to south, and northeast to southwest.

The individual graphitic horizons are traceable over strike lengths that extend from 1 to 9 kilometres, and have a measured thickness of 2 to 3 metres at a number of points where surface outcrops occur. The graphite contained within these horizons is described as flaky and comparatively coarse.

Graphicor collected 32 grab samples, with all samples carrying graphite values, and included 5 samples grading over 20% graphite, with a high of 28.36%. Southwestern Quebec is known for hosting graphite resources, and includes the TIMCAL operated graphite mine that is located at Lac Des Iles, which is approximately 65 kilometres to the southwest of the Curières Graphite Project. TIMCAL has been in production since 1989 and produces graphite products of various sizes and purities.  

Northern Graphite (CVE:NGC) is planning to establish a graphite mine at Bissett Creek, which is located on the Ontario border, and is approximately 100 kilometres to the southwest of the Curières Graphite Project. The Bissett Creek Mine has an estimated capital cost of $70 to 80 million and a planned throughput rate of 2,500 tonnes per day of ore. The open pit mine is expected to produce 19,000 tonnes per year of graphite at a cash cost of $1,000 per tonne.

The Kearney Mine, which is located along the same mineralized trend, and is 300 kilometres to the north of Toronto, is being re-opened by Ontario Graphite in mid 2012. Kearney is one of the largest graphite resources outside of China and North Korea, and will process 1 million tonnes of ore to produce 20,000 tonnes of high grade graphite.

The global market for graphite is currently around 1 million tonnes per year, and approaches the size of the nickel market that produces approximately 1,280,000 tonnes. Annualized production for nickel and graphite dwarf the markets for rare earth element oxides at 124,000 tonnes, and lithium at 23,000 tonnes.

Graphite demand is driven by Asian steel makers and motor vehicle manufacturers, and that is followed by production of carbon brushes, batteries, automotive parts and lubricants that have produced a growth rate of 5% per year over the last decade. Graphite provides the highest natural strength and stiffness of any material at a very light weight, and is corrosion and heat resistant, as well as an excellent conductor of both heat and electricity.

Newly emerging technologies that use graphite include lithium ion batteries that require 20 to 30 parts of graphite to 1 part of lithium. Current demand for these type of batteries is estimated at 30,000 tonnes per year, and currently exhibits a growth rate of 20% to 30% per year. Lithium ion batteries are deployed as rechargeable units in a number of applications that include power tools, electronic devices and motorized vehicles. 

Samsung notes that global demand for lithium ion batteries reached $11 billion last year, and predicts that demand will reach $32 billion by 2015, and has committed $359 million on battery production for the current year.

Large scale fuel cells utilizing graphite are also being developed by companies such as Honeywell (NYSE:HON), Siemens and Ballard Power. Toyota (NYSE:TM) predicts that the commercial introduction of fuel cells into motor vehicles will start by 2015, and will require 80 kilograms of graphite to power a typical fuel cell system.  

Nuclear pebble bed reactors represent a third and potential market for graphite. Pebble bed reactors are an evolutionary step in the production of nuclear power in terms of higher safety, smaller size, and being less costly to permit build and operate. A 1,000 MW pebble bed reactor power unit requires 3,000 tonnes of graphite at the commencement of operations, and then needs to be replenished at a rate of 600 to 1,000 tonnes per year to maintain power output. 

The Chinese have already constructed a prototype nuclear pebble bed reactor and are building 2 small 200 MW reactors, with 30 more reactors planned by 2020.

China currently produces 70% of the global graphite supply, and has imposed taxes and export controls to exert tight market control. Development of North American resources in this situation becomes an economic imperative for the development of new technologies and materials.

Both Roskill and Industrial Minerals Magazine report that this has led to a dramatic strengthening in world wide market pricing, with  +80 mesh 94 to 97% C graphite advancing from a price range of $550 to $750 per tonne in 2004, to range of $2,500 to 3,000 per tonne in 2011.  Current pricing for medium, large and extra large flake is now in the $2,200 to over $3,000 per tonne range. 

GéoMégA is valued at $29.0 million, has cash of $3.9 million, and is ranked as the most undervalued company relative to its peer group of 10 other rare earth oxide developers. Comparable peer group resource developers include Frontier Resources (TSE:FRO) carrying a valuation of $120 per tonne of TREO, Rare Earth Elements (TSE:RES) carrying a valuation of $340 per tonne of TREO, measured against GéoMégA, which  carries a significantly smaller valuation of $15 per tonne of defined TREO.

The push into graphite resource development provides GéoMégA with an opportunity to break into a much larger and fast growing global market, and allows the company to economically develop assets that are located very close to its current resource base, and area of operations.