Shares in Toronto-based Energizer Resources (TSE:EGZ)(OTCBB:ENZR) advanced after it unveiled Monday an NI 43-101 resource estimate for its giant Molo graphite deposit in Madagascar, part of its aptly-named Green Giant project.
Graphite is a mineral form of the element Carbon (C), and forms in veins inside metamorphic rocks as a soft black material. It has many applications today, ranging from refractories, brake linings and steel-making uses, to lithium-ion batteries and fuel cells. Demand for the industrial mineral is projected to grow as lithium-ion battery adoption continues.
Indicated resources at the Molo deposit consist of 84.04 million tonnes, grading 6.36% carbon (C), above a 2% C cut-off grade, with inferred resources totalling 40.34 million tonnes grading 6.29% C.
The junior miner recently grabbed the attention of Euro Pacific Canada, with the Toronto-based brokerage adding Energizer to its watch list last month and rightly predicting between 80 to 100 million tonnes of graphite at Molo.
Energizer said Monday that mineralized zones in the resource estimate start from surface and continue to a maximum depth of 385 metres, with the zones remaining open along strike and at depth.
Two high grade zones occur on the western and eastern flanks of the Molo deposit, with a combined total indicated resource of 60.17 million tonnes grading 8.1% C, above a 4% C cut-off grade.
The company released final assay results from the remaining drill holes and trenches at its Molo graphite deposit in November, reporting intercepts including 246 metres at 8.19% carbon in hole MOLO-12-33.
Energizer said it now expects a preliminary economic assessment (PEA) by the first quarter of next year, which will be completed by DRA Mineral Projects. The release of the report has been delayed slightly from year-end 2012 due to the re-engineering of plant operating parameters.
"The calculation of our graphite resource is a significant accomplishment for the company, and impacts the next milestone for Energizer, which is the release of our PEA study," said president and COO, Craig Scherba.
"The original mine design parameters were based on an assumed head-grade of 6% C, and with the quantification by CCIC of significant tonnage at a much higher grade (9% vs 6% C), we believe a head-grade 40-60% higher than originally designed for is obtainable.
"Consequently, since less material will need to be processed to obtain the same volume of graphite flake, the capital and operating requirements for the mine should be significantly reduced in relation to the original design."
As a result, DRA has been authorized to begin redesigning the mine based on these new parameters. DRA, which has built more than 200 mines, took a 1.6 per cent equity investment in Energizer earlier this year through a strategic partnership. The African company has the right to acquire up to 5 per cent of Energizer.
The mineral resource estimate reported today, which was prepared by independent consultants together with Caracle Creek International Consulting (CCIC), is based on 48 drill holes, or a total of 9,551 metres, as well as 18 trenches drilled by Energizer. Three mineralized zones were modelled for the resource calculation.
The Molo deposit is part of the joint venture with Malagasy Minerals Limited in Madagascar. Energizer has a 75 per cent stake in the venture, and is the operator of the project.
The company has wasted no time in developing what it calls a “world class” graphite resource, having first identified graphite as a potential mineral of interest on the Green Giant property in December 2011.
Euro Pacific noted in its research that the Molo deposit is a massive, 2km long multi-folded graphite trend, which has the potential to be one of the world’s largest known sources of high-grade graphite.
Flake graphite - the most actively pursued type and associated with next-generation technologies - is made up of layers of graphene, which is the minerals' base structural element. The global supply of the mineral as of 2011 was 1.019 million tonnes, of which 565,000 tonnes was the flake variety. Metallurgical tests confirm that Energizer’s Molo deposit is 100% flake, including jumbo and large flake at an average grade of 93% C.
According to industry sources, over 65 per cent of the world’s graphite supply comes from China - the majority of which is of the amorphous variety - used for more traditional applications and for which consumption is falling.
But China has been experiencing declining production and increasing costs, recently imposing a variety of protective measures on graphite exports - including 20 per cent export duties, 17 per cent value added tax, and an export licensing system.
Companies like Energizer are taking advantage of what is perceived as a huge potential for graphite demand.
The Molo deposit is located strategically in the centre of the key graphite demand markets, which include China, India, South Korea and Japan.
The deposit, which boasts immediately serviceable infrastructure, is also in close proximity to specialty finishing battery producers in both Korea and Japan, where most producers send their spherical graphite for specialty coating.
Industrial mineral graphite has the highest natural strength and stiffness of any material, along with the lightest weight of all reinforcements. It is also an excellent conductor of electricity and heat, as well as strong lubricant.
The need for graphite in lithium-ion batteries is projected to grow dramatically, with these batteries found in several electronic devices, including the electric vehicle.
Shares in Energizer were lately up over 2.9 per cent, trading at around 35 cents late this morning. Its stock was halted earlier pending the news, and recently resumed trading after the release of the resource estimate.
The company's shares exceeded their 50-day average trading volume, with around 437,400 shares lately changing hands, compared to the 50-day average of 95,931.
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