great graphite supply shakeup & funding

This may have been lost under the previou post. I should have put in a new thread, Apologies to anyone who has read it already.

Maybe not what we want to hear, but at least it is recent news about MEGA.


The Great Graphite Supply Shakeup: Simon Moores
BY ALEC GIMURTU
September 26, 2012 • Reprints



TCMR: Speaking of Australia, do you want to give us an update on Strategic Energy Resources Ltd. (SER:ASX)?


SM: It's gone a bit quiet. It was making good progress at the start of this year, but I think there have been some changes at the corporate level of MEGA Graphite. The last six months have been very quiet for many resource companies, however. Most likely, it is probably a case of the commodity cycle taking a break.


TCMR: Do you see any catalysts coming up for MEGA/Strategic Energy Resources?


SM: Funding is key. The Uley mine has a stockpile of approximately 10 Kt of graphite that the company says is almost ready to go. It needs to be reprocessed however, and building a functioning processing plant is most of the battle. Luckily, getting tonnages to the market is easier for MEGA/Strategic than a lot of companies – the key is getting it accepted by end-users that have been using the same supplier for many years.


Consistency is key for Mega and for all new graphite suppliers. Graphite is a specialist product, not a commodity. Buyers want a consistent product with impurities they can manage. Knowing what to expect when you buy graphite is more important than producing the highest quality and purity.

Ultimately, with the global financial situation the way it is, funding is critical for all these companies. It's been difficult.


TCMR: Are the capital costs high for graphite processing?

SM: It depends what you want to do. Basic processing methods include crushing, grinding, flotation and sizing. Flotation is the most expensive part, depending on the desired level of purity. It's much more expensive to get the float graphite – known as graphite concentrate – above approximately 97%. Generally, it is not worth it because the market accepts 94%–97% as the highest quality. Now, if you want to then take it up to the high-purity material that's used in batteries (in the 98%-99.99% range), you have to build a new plant. It's a whole different ballgame of mechanical processing and chemical purification. You have to do it all over again with special techniques, which is very expensive. For that reason, companies will shy away from the top end of that market.


TCMR: Where might some of those new suppliers come from? Are there any geographies that look especially good – maybe Africa or Canada?

SM: Canada has a chance to develop new graphite mines. There are some good projects there. However, there is a unique challenge that Canadian companies face—the companies are bogged down with the stock market, putting out results, trying to woo investors and raise funds. That's the game in Canada, and I understand that. But it concerns me in that it is a distraction to exploration and mine building.

However, if you look outside of Canada, exploration is nowhere near the same level.


TCMR: Are there any other Canadian companies that you like?

SM: Northern Graphite Corporation (NGC:TSX.V; NGPHF:OTCQX) and the Bissett Creek project is a very strong prospect. It's the most advanced graphite project out of all of them. Northern has just completed its bankable feasibility study, beating everyone else to the punch. The efforts that the company took in the 2000s, when graphite wasn't on the radar, are now paying off.


Focus Graphite Inc. (FMS:TSX.V) and its Lac Knife project is also a strong prospect. The company is also looking at the technology and processing side more than other companies, which is a positive sign.