a graphite project of giant proportions

Here is another article I found on another board, hopefully our share price holds above 7 cents until the QR comes out.


http://www.indmin.com/Article/3063483/A-graphite-project-of-giant-proportions.html

A graphite project of giant proportions

August 2012

Madagascar could replace China as the world’s next bulk producer of graphite as Canada’s Energizer Resources fast-tracks development of its Green Giant graphite project in the south of the country, Jessica Roberts reveals

Graphite is an industrial staple. Its various properties - including high refractoriness, corrosion resistance and flexibility - have cemented its place in markets such as foundries and refractories, where stable, long-term growth appears to be assured.

Yet for this traditional mineral, times are quickly changing. The last three or so years have seen a sharp rise in market interest, owing to the collision of several factors: falling supply and quality from China (the world’s largest natural graphite producer), increasing prices, and booming interest in new applications which serve the hitech sector.

Natural graphite (and in particular, large flake) has seen a surge in interest similar to the peak in the late 1980s. Yet the market situation today is vastly different: China - then an emerging low-cost supplier - has turned its back on bulk exports in favour of consolidation and the development of high-value, domestic industries. As a result, numerous developers in Australia, Canada, the US and elsewhere are looking to capitalise on this.

It is no surprise that this has occurred just as graphite’s profile has risen as a key mineral in the green energy market. As the world aims to reduce its dependence on hydrocarbons (particularly oil) graphite looks to gain a significant market share in several areas, notably new energy sources, solutions for energy storage, and energy control.

Perhaps the most high profile of these applications is energy storage, and particularly lithium-based batteries. Lithium-ion (Li-ion) batteries - today found in a host of portable technologies including electric and hybrid electric vehicles (EV and HEVs), laptops and smart phones - generally use a graphite-based anode. Additionally, graphite is found in the majority of batteries today either in the anode or the cathode.

By weight, around 13 times more graphite than lithium is needed in a Li-ion battery (theoretically this figure should be 10.4 times, but inefficiencies increase this). Thus graphite is as, if not more, important than lithium in this application.

This is one of the key markets that Canada-headquartered Energizer Resources Inc. is looking to supply, via its Green Giant graphite project in Madagascar.

Massive Molo

The Green Giant project in Fotodrevo, southern Madagascar, has been under development by Energizer since 2007, although the company’s graphite exploration programme only commenced in November 2011.

Geologically, the entire area is part of the Ampanihy transpressive lithospheric shear zone - one of only a few several shear zones that exist worldwide formed during the continental collision and formation of Gondwana some 500-600m years ago. The shear zone A graphite project of giant proportions is indicative of very unique geologic conditions. Extremely high pressure and high temperature resulted in the metamorphism of the rocks, which upgraded the graphite present in the system.

This shear zone extends from surface level about 160 km down, deep into the mantle and extends over 180 kms north-south in strike length. Energizer’s 120-km long property straddles the majority of this shear system. The company’s focus is on the development of Green Giant’s largest graphite deposit, Molo, situated along the eastern edge of the property.

Energizer is working towards a NI 43-101 compliant resource for its Molo graphite, and drill results already obtained for Molo indicate a potential resource of 100m tonnes graphite, grading 6-10% C (7-10m tonnes graphite concentrate). If confirmed, Molo alone would enable Energizer to produce enough graphite to meet current and expected demand for decades.

The strike zone of the Molo is impressive, stretching over 2km, with a graphite zone over 400 m wide and drill-tested to at least 300 m deep.

Key to recognise is that the graphite begins immediately at surface, an important aspect of Molo, as it will clearly bring down mining costs. Energizer is expecting assays shortly on a spectacular 434-metre drill intersection of continuous new graphite.

World production of natural graphite is around 1m tonnes, with around 600,000 tpa of this amorphous(microcrystalline) graphite and 400,000 tpa being flake graphite. Estimates vary, but Euro Pacific Capital believes natural graphite demand could hit 2m tonnes by 2020 - leaving a gap of 1m tonnes by today’s levels.

Of the three main natural graphite types (microcrystalline, flake and vein), flake is the most tied to the battery market, for which it is processed and converted to spherical graphite. Initial results from Energizer indicate that it will be able to supply a range of grades including large flake (+80 mesh), jumbo flake (+50 mesh) and a +20 mesh flake size, depending on processing.

Processing & infrastructure

One of the major advantages of the Green Giant graphite is the ease of liberation from the ore. Tests confirm Molo is largely comprised of a broad range of flake graphite, making the deposit ideally suited for a host of applications.

Testing also confirms that the more desirable jumbo flake graphite (averaging 93% purity) can easily be extracted simply by crushing the ore (see figure 2). This fact is critical for Energizer as it greatly reduces the capital and operating costs of the future mine while potentially reducing the timeline for mine completion to within two years.

The host country, Madagascar, is already home to Canadian mining giant Sherritt International’s $5.7bn Ambatovy Project, slated to be the world’s largest nickel mine and Rio Tinto’s $1bn minerals sands project.

The company has demonstrated that a simple crushing and processing circuit would enable production of a +50 mesh flake grading 93% C.

This is a significant benefit for Energizer, allowing rapid project development through the pilot plant stage and also reducing the project’s reliance on water for wet flotation and energy required for drying. Economical production costs could be the key advantage for Energizer, given forecasts that graphite pricing is starting to drift lower following three years of price hikes.

Another major advantage for Energizer is Green Giant’s proximity to the Sakoa coal project, around 30 km north-west of Energizer’s camp, which is currently under development by Thailand-based Asia Pacific Mining Resources (APMR). The group plans to install a coal processing facility and a power plant near to the Sakoa coal mine - opening up potential synergies for energy, water and rail.

APMR is also constructing a new deepwater port to the south of the existing port of Tulear (around 160 km away) on the west coast of Madagascar, in addition to road and eventual rail network to serve this. Despite the added advantage of having the coal project nearby, Energizer is quick to emphasise it is not at all dependent upon these logistics.

Madagascar is not a new entrant to the graphite market. For decades, Etablissements Gallois SA has been producing from a small-scale operation of about 5,000 tpa. Other producers were active during the 1990s, with a combined output of 16,000 tpa, but were thought to have closed owing to high processing and fuel costs.

With its sheer size, high grades and excellent metallurgy, Energizer has the potential to be a significant, low-cost producer for the rest of the world. Its next step is a bankable feasibility study, targeted for this October the results of which will be eagerly anticipated among market participants.

Spotlight on Molo

Energizer Resources acquired the rights to the Green Giant project near Fotodrevo, Madagascar, in August 2007.

The company has already delineated a NI 43-101 compliant vanadium resource estimate of 49.5m tonnes, grading 0.693% vanadium pentoxide (V2O5), containing 756.3m pounds of V2O5, and an inferred resource of 9.7m tonnes at an average grade of 0.632% V2O5, containing 134.5m pounds of V2O5. This ranks it as the third largest known vanadium deposit in the world.

Energizer expects that battery-grade vanadium pentoxide (V2O5) to be a significant growth market in the next few years owing to its role in flow batteries - used in grid storage and community storage applications.

Graphite camp

The company’s project was boosted in November 2011, when Energizer identified multiple areas of graphite mineralisation. The graphite deposits within Green Giant are currently under exploration, but one deposit in particular - Molo - dwarfs the vanadium resource. Energizer is targeting a resource of at least 100m tonnes grading 6-10% C.

Partnerships

Since the start of 2012, Energizer has secured several significant partnerships. The first, with Australian exploration company Malagasy Minerals (which holds a large land package around Green Giant) has provided a joint-venture agreement (75% Energizer, 25% Malagasy) that gives Energizer the rights to develop all of the industrial minerals in the joint-venture property.

Energizer has also appointed South Africa’s DRA Mineral Projects as its technical partner. DRA has since taken an equity investment into Energizer and will provide the full engineering, procurement and construction management (EPCM) services for Green Giant.

DRA’s director, Johann de Bruin, Pr. Eng, has joined Energizer’s board of directors as project leader for mine development. In addition, DRA’s Robin Borley, Pr. Eng director, has been appointed to Energizer’s special advisory committee overseeing capital projects and mine development. DRA is Africa’s leading mine engineering and construction company. DRA has built over 200 mines and is currently operating 24 mines worldwide.