Hey Cazz...I read the announcement and it is a bit confusing as the sales agreement is with and distributor earning a 5% sales commission, yet also acting as a European distribution point. I would assume that there is language in the agreement that sales are contingent on successful qualifying of the graphite concentrate.
This would not be considered an offtake in the traditional sense as an offtake applies to a natural resource such as a bulk mineral (lithium), oil, gas, gold, silver, or copper as examples. These examples can be contracted as an offtake with financing or transfer of funds taking place prior to any mining or plant construction activities. The raw resource can then be sold to a process customer who will in turn process the raw resource into a finished product for sale such as steel, gold copper, petrol, natural gas, diesel, etc.
Offtakes do not exist in graphite as all concentrate has to be qualified in a specific application or market, and no customer or application will risk millions in R & D on a product that has not been processed, or yet to be commercially produced. There are many nuances in metallurgy and chemistry of a graphite signature source with elements in the graphite flake that may have negative affect on a product or application. There are many producers of flake graphite the negate any need for a customer or application to take on significant risk of investing millions into a graphite mine that may or may not produce a useable or viable concentrate.
Valence Industries is an excellent example of a company that experienced a difficult time in processing high carbonate ore as well as processing and managing the high level of clay ore slims. They were not able to achieve higher than 92% LOI with any significant yields. How would you think a customer would react after investing millions in an Offtake agreement hoping for 95% or higher LOI then faced with the knowledge it could not be achieved? Not happy...hence no offtakes in natural flake graphite...way to risky.
I have been working with refractory customers for a couple of decades and not one refractory manufacturer has ever agreed to begin purchasing any graphite product, sight unseen (unqualified). There is a significant liability involved with supplying any refractory customer from their end users if any refractory fails and directly responsible for product loss...meaning the qualification begins with the lab samples, then a trial order (20 to 40 MT) of commercially product graphite flake (not lab or pilot plant), this is where a batch of refractories is produced with the trial order of graphite, sent to their end user for testing and product performance comparison and verification of meeting customer specs.
The same qualification metrics apply for crucibles which takes even longer to qualify up to 6 months depending on the type of crucible and manufacturer. Crucible applications use a variety of multi-blended mesh flake graphite products that can be difficult to produce as well as meet the lower purity requirements (much less than 95% LOI). Prices are more attractive, but the cost to produce are higher.
Foundry is less stringent, yet the prices for foundry grade fines graphite is considerably lower due to graphite flake purities less than 90% LOI.
BSM Price at posting:
1.8¢ Sentiment: None Disclosure: Not Held
