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Tuesday, 24 September 2013
Mason Graphite takes Quebec project to next level as nearly fully pure graphite results revealed in first round of tests
Mason Graphite (CVE:LLG) (TSX.V:LLG) has unveiled some outstanding preliminary results testing the purity of graphite from its flagship Lac Guéret project in northeastern Quebec, opening up the size of its potential customer base to applications that require extremely high purity levels.
According to a company statement released Tuesday, Mason announced purities of 99.9% graphitic carbon from preliminary tests using a conventional hydrometallurgical process concentrated at SGS Canada in Ontario, improving on results seen in the preliminary economic assessment study of the project.
The company said the trials were carried out on three coarse size fractions of graphite, ranging up to +150 mesh, which yielded the 99.9% graphitic carbon.
"These are first trial results, and are without any type of optimization," says president and CEO Benoît Gascon, in an interview with Proactive Investors. "This opens up a range of additional applications for our graphite. The higher the purity, the higher the prices that will be commanded," he adds.
Indeed, the high-purity applications the chief executive is referring to includes several industrial uses, from electrochemical applications like lithium-ion batteries that are used in electric vehicles -- a market set to expand exponentially -- to portable electronics and cordless power tools. The mineral is also used for refractories, brake linings and steel-making uses.
"Going forward, we will further optimize the process and then eventually blend these results into the feasibility study," says Gascon, adding that the larger scale testing on bigger samples will be designed to improve on the purification process by evaluating the end product and the remaining impurities, however tiny they may be.
"Even if the impurity level is 0.1%, when you reach such high purity, each market has its specifications, and the customer will specify what type of impurity they need or don't need," the CEO affirms.
Gascon highlights that reaching the 99+ level of target markets means additional volumes for when the company completes its feasibility study, which is due to begin in the fall of this year. Currently, Mason is working on a request for proposals to select an engineering firm for the report. It anticipates wrapping up the study by the final quarter of next year.
First up though, the company is expecting to release an updated resource estimate for the project by November this year, with additional drilling from 146 holes since the last resource report was released in July 2012. All the data from the 2012 drilling campaign has now been obtained, with 3D modeling of the mineralization currently underway.
At the moment, Mason's project, which is located near the city of Baie-Comeau with a road running straight up to the deposit and all other services nearby, has 0.3 million tonnes of resources at 24.4% graphitic carbon (Cg) in the measured category, and 7.3 million tonnes grading 20.2% Cg in the indicated category. The project’s estimated average grade is 27.4% for the first 22 years of mine life, according to preliminary economic results released in April.
The company is wasting no time in capitalizing on the anticipated growth in demand for graphite -- a mineral form of the element carbon that forms in veins inside metamorphic rocks -- as lithium-ion battery adoption continues.
Its cash position is some $7 million, quite comfortable for a Canadian junior miner, but the company still needs to raise more funds to complete the feasibility study and pilot plant phase of the project, which will produce enough material to start the process with some customers and optimize the design of the plant.
The pilot plant phase is expected to start next year, after a bulk sampling program this fall to collect enough ore for the preliminary plant. In October, Mason will also undertake additional drilling to further test mineralization at the current boundaries of the deposit, with results so far showing mineralization goes beyond these borders. "We want to make sure we have all the information for the feasibility study," says Gascon.
But even the preliminary economics are good, with the metallurgy results released today promising even better results in the next round of studies. In the preliminary economic assessment released in April, initial direct capex was projected at a low cost of $89.9 million, while production costs were seen at $390 per tonne of finished product, which the chief executive calls "very low for the industry". Net present value for Lac Guéret was estimated at $364 million pre-tax, at an 8% discount rate, with a 33.7% internal rate of return and a payback period of two and a half years. The average sales price considered in the study was $1,525 per tonne.
Despite a recent drop in the graphite market due to a slowdown in the world economy, Gascon is confident that demand will pick up its strength again next year. "It's all related to the steel and car industries. If you look back 20 years, even if there are some down cycles, they only last one or two years, with overall growth from existing applications.
"This growth will continue, and potential applications from graphene and other uses will require more and more graphite," he concludes.
Mason, of which management and insiders together hold a 40 per cent stake, closed Monday with a share price of 33 cents, giving it a market cap of just over $22 million.