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Exclusive interview with Graphite One management

Exclusive interview with Graphite One management

Short intro:

Few days ago (Mar. 25, 2014) Mr. Gareth Hatch (Independent research firm analyst) published very well researched article on Seekingalpha.com >> http://seekingalpha.com/article/2108313-going-natural-the-solution-to-teslas-graphite-problem

Seekingalpha.com Article Summary:

– Tesla Motors recently announced plans to build a “gigafactory” for the production of 50 GWh of battery capacity, with a 30%+ reduction in production costs compared to current levels.
– This capacity will be enough to service the needs of 500,000 Tesla electric vehicles by 2020, in addition to other initiatives in which Tesla Motors’ CEO Elon Musk is involved.
– The production of these batteries will require the consumption of almost 103,000 tonnes of graphite/year, almost certainly derived from natural rather than synthetic graphite, to reduce costs.
– Of the more than twenty advanced natural-graphite projects currently under development, two stand out as being particularly well-positioned to capitalize on the opportunity that the gigafactory may provide.
– New processes being developed by these companies for making battery-grade natural graphite could improve current production yields, reducing the actual quantities required to less than 44,000 tonnes/year.

In a shell, Tesla Motors Inc. (TSLA) announced details of its long-awaited “gigafactory,” an ambitious plan to build a facility to manufacture lithium-ion batteries in large enough quantities to meet the needs of the 500,000 electric vehicles [EVs] that the company plans to produce in 2020. Main question that is making a lot of buzz around graphite industry is – who can supply this battery-grade graphite? Mr. Gareth Hatch has made comparison between 3 companies that are currently capable to meet the primary criteria, several factors used by Mr G.Hatch to determine who can cover the high demand on battery market.

One of the Graphite mining companies – Graphite One Resources Inc. (North America’s largest known large flake graphite deposit) is not included in this analysis due to the lack of information available to the public. Since GPHOF is relatively young mining company and many points and questions are not addressed earlier, we (GPHOF Reports) have approached to Mr Anthony Huston (Graphite One president and CEO) and Mr Dean Besserer (Vice President of Exploration) and we have an exclusive interview, revealing all of the information about the points mentioned and suggested by Mr Gareth Hatch (in green color) like the main criteria for Tesla’s GigaFactory project.

POINTS AND ANSWERS:

•             The project should have as a minimum, Demonstrated mineral resources [i.e. Measured + Indicated];

GPHOF Management: We are planning to have at minimum 100 MT put into the Indicated and Measured & Indicated Category.  Obviously this is scalable but the summer program has approximately 10,000 meters of drilling planned.

•             The project should have a completed Feasibility Study [FS], or have one underway;

GPHOF Management: Our summer exploration campaign as well as planned Metallurgical work and Engineering studies will form the basis for our PEA (Preliminary Economic Assessment).  We are planning to have a PEA completed by the end of the 1st quarter 2015.

•             A purification process for getting to battery-grade [>99.9% Cg] should have been defined and successfully tested [preferably without using the wet acid method];

GPHOF Management: GPH is still early in the process of developing a purification process for getting to battery-grade (>99.9%Cg), and we have thus far used wet chemical methods which is what is readily available at Canadian and American analytical laboratories.   Our initial tests utilized rough concentrates only.  We are in the process of: 1)systematically processing samples of our near-surface high grade ore (>10% Cg) as this is what we envision our initial ROM to be; 2) developing bench scale process for treating ROM ore.  Once 1) and 2) are complete we can then explore other (Thermal) purification methods.

Based on high level conversations we’ve had with Graphite end users, we envision Thermal purification methods as the process of choice since that is certainly more environmentally friendly.    Our Metallurgy is ongoing and we look to have results that speak to this over the next 12 months.

•             A spheroidization and micronization process should have been defined and tested.

GPHOF Management: We understand the need to define and test spheroidization and micronization processes.  This will be part and parcel of our ongoing Metallurgy.

Additional considerations relate specifically to potential costs of production, and include:

•             Initial grade of in-situ graphite [relates to beneficiation costs];

GPHOF Management: Obviously we are targeting our near surface (very low strip ratio) ore which fortuitously is also our highest grade material  (8.6Mt @ 12.8% Cg and 96Mt @ 7.2% Cg).  It has and always will be our aim to be a low cost producer.    The fact that our deposit is literally at surface, should help us achieve competitive operating costs and robust project economics. As resource nationalism across commodities and across the globe appears only to be getting worse, safe supply (Alaska) is becoming increasingly valuable.

Like most companies, we are biased in liking our own jurisdiction, but we are not alone. The latest version of the Fraser Institute Survey of Mining Companies, 2013 ranked Alaska #1 in a key category, “Mineral Potential.” In order to find minerals, it’s best to go where they’re most abundant. Increasingly, (remaining) mineral abundance is found in places one would hesitate to do business in, places like Indonesia and the Democratic Republic of Congo, also scoring relatively high on the list of Mineral Potential.

•             The resulting purity levels of the resulting run-of-mine [ROM] concentrates after beneficiation [relates to subsequent purification costs];

GPHOF Management: We know from initial bench scale tests that we will be able to get our rough concentrates well above 90%.   Obviously, we are exploring purification processes,  spheroidization and micronization processes and whether or not we will do this ourselves onsite or at a secondary facility owned by Graphite One or others.

•             The proportion of smaller flake materials with higher purity levels after beneficiation [related to subsequent spheroidization and micronization costs and yield levels];

GPHOF Management: Flake size and purity levels all are part and parcel of my previous comments whereby  “GPH is still early in the process of developing a purification process for getting to battery-grade (>99.9%Cg), and we have thus far used wet chemical methods which is what is readily available at Canadian and American analytical laboratories.   Our initial tests utilized rough concentrates only.  We are in the process of: 1)systematically processing samples of our near-surface high grade ore (>10% Cg) as this is what we envision our initial ROM to be; 2) developing bench scale process for treating ROM ore.  Once 1) and 2) are complete we can then explore other (Thermal) purification methods.  Based on high level conversations we’ve had with Graphite end users, we envision Thermal purification methods as the process of choice since that is certainly more environmentally friendly.    Our Metallurgy is ongoing and we look to have results that speak to this over the next 12 months.”

•             Whether or not a coating process has been developed and tested for the spheroidal graphite

GPHOF Management: Based on high level conversations we’ve had with Graphite end users, we envision Thermal purification methods as the process of choice since that is certainly more environmentally friendly.  We understand the need to define and test spheroidization and micronization processes.   We also understand that the coating process is part of the process.    This will be part and parcel of our ongoing Metallurgy.  Our Metallurgy is ongoing and we look to have results that speak to this over the next 12+months.

•             Proximity of the project to the southwestern US, proposed home of the Tesla gigafactory.

GPHOF Management: We are well positioned to service both the southwestern US as well as all major end users from a shipping perspective.  Industry leader Industrial Minerals’ analyst Simon Moores wrote an interesting and informative article titled, “Tesla battery plant will need 6 new flake graphite mines.” I guess that title says it all. I think 6 new mines is the most we might see in the next few years. And, I doubt companies like Syrah and Energizer Resources with deposits in Mozambique and Madagascar, respectively, will be key suppliers to Tesla’s southwestern U.S. plant. Graphite One will be able to offer both security of supply and just-in-time inventory, with deliveries from Alaska to the southwest U.S. taking 1-2 weeks. Deliveries from China would take 4-6 weeks.

graphite mining locations

I know there’s a lot going on in the Graphite sector. Interest in our company is currently high. If Credit Suisse is correct in their assessment of the Syrah Resources situation, large, high-quality projects like ours could attract strategic and financial players sooner than we imagined just a few weeks ago. Make no mistake, we are still 3-4 years from production, but so is Syrah. We look forward to updating the market on our progress in coming months.

Credit Suisse states an order of magnitude of graphite switching that could occur into the aluminum anode market. Upwards of 4 million tonnes of graphite could migrate to aluminum production. In my opinion, this could be nothing short of a paradigm shift in natural graphite demand.

Hopefully this interview has shed some light on Graphite One’s activities and you have a more detailed analysis based on additional information and insights given directly from GPHOF management.

 GPHOF Reports

 

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