Energizer Resources (TSE:EGZ) is rapidly developing its aptly-named Green Giant graphite project in Madagascar, focused on a projected 100 million tonne Molo deposit- enough to lift the company into the ranks of the top graphite mining projects worldwide.
The miner has recently grabbed the attention of Euro Pacific Canada, with the Toronto-based brokerage adding Energizer to its watch list.
"Although it is still early days, we believe the Molo project has the potential for 80 to 100 million tonnes of graphite at an average grade of 6.5% to 7.5%C based on the correlation between the current geophysics, trench work, drill core data and conductors," notes Euro Pacific analyst, Christina McCarthy.
After releasing final assay results on Thursday from the remaining drill holes and trenches at its Molo graphite deposit, Energizer said it expects a NI 43-101 compliant resource estimate this month and a preliminary economic assessment (PEA) by the end of the year.
Highlights from these final results included hole MOLO-12-33, which reported 246m @ 8.19% carbon. Last month, Energizer reported the largest drill hole ever recorded for a graphite project. Hole MOLO-12-01 returned 421.3 meters @ 6.12% carbon.
The company has wasted no time in developing what it calls a “world class” graphite resource. “It was in December 2011 that we identified graphite as a potential 'mineral of interest' on the Green Giant property,” said president and COO Craig Scherba. “Within one year of this time, the company is now poised to release a NI 43-101 resource statement identifying what looks to be the largest known graphite deposit in the world.”
Indeed, Euro Pacific notes 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. Graphite mineralization outcrops directly on surface and has been traced for over 350 meters along strike and to a vertical depth of 300 meters.
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, Euro Pacific notes that over 65 per cent of the world’s supply comes from China - the majority of which is of the amorphous variety, used for more traditional applications and for which consumption is falling.
China has also 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.
According to industry experts, the country has also been forcing industry wide domestic consolidation by forcing mine shutdowns and company mergers, and plans to reduce the number of graphite mines in Hunan province from 230 to around 20 mines.
"This could lead to a significant loss of global supply," says Euro Pacific's McCarthy.
Most recently, Canada has been witnessing a graphite rush; companies have been trying to take advantage of what is perceived as a huge potential for graphite demand.
Cue Toronto-based Energizer Resources. McCarthy lists several investment highlights for the graphite miner, including a "geographically ideal" project. She notes 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 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.
The project also boasts immediately serviceable infrastructure. "The Panalpina Group is one of the world’s leading intercontinental air and ocean freight supply chain and logistics companies and has indicated the current infrastructure for transportation, water and power at the Molo Deposit is suitable for production," the research note says.
McCarthy adds that the nearby Sakoa Coal Field, which is roughly 35 kilometers from Molo, is targeting operations for 2015 and will need significant upgrades to road infrastructure, port infrastructure and on-sight power plants, into which Energizer may be able to tap.
Mineralization at the project is at surface, is open pittable, and consistent over "significant drill intercepts", with continuous trenching traced for more than 400 meters on surface. With mineralization occurring directly at surface, operations can be optimized through a low strip ratio, Euro Pacific's analyst says.
The research note also highlights favourable geology at the site, as the host rock appears to be decayed or “rotten”, resulting in easy liberation of graphite during simple crushing techniques.
"Analysis has confirmed that the Molo deposit contains jumbo (+50 mesh), large (+80 mesh), medium (-80 to +100) and small flake (-100 to -200). The Molo Deposit’s unique geology allows for simple mechanical separation processes which can be easily liberated through simple crushing resulting in 93% purity."
The Green Giant project in Madagascar is part of a joint venture with Malagasy Minerals (ASX: MGY). Energizer has a 75-per-cent stake, and is the operator of the project.
The company recently said the assay data from its final drilling and trenching results is now with Caracle Creek International Consulting of Johannesburg, South Africa, which is authoring the NI 43-101 resource for the deposit.
DRA Mineral Projects, Africa’s largest mining engineering, construction, and management company, has been commissioned by Energizer to build the mine and will incorporate the NI 43-101 graphite resource statement into the PEA for the Molo deposit.
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.
Euro Pacific's McCarthy says that the African partner has developed a preliminary mine design, which will have the capacity for 150,000 tonnes per year of graphite production.
Molo also has plenty of exploration upside. Drilling and trenching have found graphite mineralization to the north and south of the deposit, while there is also a limb immediately east, which mapping and geophysics have suggested may be mineralized. Known as Molo East, this limb has yet to be drill tested, and will not be included in the upcoming NI 43-101 resource estimate due this month.
To maximize the potential of the Molo deposit, Energizer has said it will follow the PEA study with a feasibility study, adding that the results of this work will guide the construction of a mobile pilot plant facility for on-site test work analysis of Molo.
Graphite is a mineral form of the element Carbon (C), and forms in veins inside metamorphic rocks as a soft black material. The industrial mineral 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.
It has many applications today, ranging from refractories, brake linings and steel-making uses, to lithium-ion batteries and fuel cells. 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.
If there is a large push toward electric vehicle adoption, the brokerage firm notes this could result in a large demand for graphite. "Korea’s government initiated a program to build 150,000 charging stations across the country to further expand the EV market. Production of electrified vehicles is gearing up all over the world, and automakers are planning to launch an increasing variety of new models over the next few years."
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