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Understanding High-Grade Lump Graphite

Commodities / Graphene Nov 19, 2013 - 03:04 PM GMT

By: The_Gold_Report

Commodities

Four graphite ore samples are placed on a conference room table. Straight from the earth, which one can be used to write on a piece of paper? Answer: the lump graphite sample. In this interview with The Gold Report, Paul Ogilvie, CEO of the newly formed Saint Jean Carbon, explains the distinctive advantages of lump graphite from a mining and marketing perspective and describes his plan to create a profitable company from an uncommon form of high-grade graphite deposit. Read how the company is educating investors on this highest-grade form of graphite while restarting world-class mines using modern technology and an experienced business team.


MANAGEMENT Q&A: VIEW FROM THE TOP

The Gold Report: Saint Jean Carbon Inc. (SJL:TSX.V) is unique in focusing exclusively on "lump graphite." What is lump graphite and what does it mean to Saint Jean Carbon?

Paul Ogilvie: At Saint Jean Carbon, our goal has always been to develop that most elusive, high-grade form of graphite known as "lump graphite." Since 2006, my team and I have worked to attain that goal by focusing on the two best-known areas in the world for commercial lump graphite production—Sri Lanka and southwestern Québec.

Chemically, all graphite is the same—it's all carbon. From a structure perspective flake and lump are very similar in that they have ordered crystalline makeup. The structure of amorphous graphite reflects its name in that it's much of a jumbled crystalline arrangement. The real differentiation stems from the deposit that produces the ore. The most common graphite deposit is disseminated flake graphite. Disseminated graphite flakes are size minus 35 to plus 50 screen size. Amorphous graphite, which is very fine graphite, is typically associated with carbonates or other impurities. Amorphous carbon is very small, entirely minus 100 screen size.

In contrast, lump graphite is basically formed as a solid, nearly pure mass. One way to see this is in the typical ore grades in a graphite deposit. Flake graphite ore typically grades 2—3% Cg (total carbon in graphite form) but can range up to 10—12% Cg. Amorphous graphite deposits might even be as high as 12–17% Cg. On the other hand, lump graphite grades at least 89% Cg and sometimes 99% pure graphite.

TGR: Does the high grade of lump graphite deposits present challenges from a mining point of view?

PO: Lump graphite is actually easier to mine. The best way to think about it is to first consider the mass of rock that needs to be mined and processed in a deposit of 4%, 5% or even 10% Cg grade. Let's say this mass is the size of the room you're in right now. You've got to crush, grind and float-process that entire mass simply to extract from 2% to 10% finished material. Now, think about the room as being a solid block of ore with a 90% Cg grade of lump graphite. The amount of material handled to produce a unit of product is dramatically different. Lump graphite is the only graphite that you can mine, put on a truck and sell with very little primary processing.

In fact, that's how it used to be done in southwestern Québec and Sri Lanka in the 1920s—they mined it and shipped directly to the end users. Even the lower grades or "waste" that the old timers left behind at Saint Jean's mines was of higher grade than the final product we see from new flake graphite mines. In the 1920s, the cutoff was in the 40–50% Cg range and that's because in those days, they were only interested in taking the stuff that was 90% pure. They'd actually go right to the vein, take out the 90% Cg material and use it in that raw state.

Today, we instead use a lower cutoff to maximize the graphite produced from our deposit. We estimate that it's more efficient to use a cutoff between in 30–40% Cg in order to maximize the economic return.

TGR: Can you describe your processing methods?

PO: The first step in processing any type of graphite ore is crushing. Whether your material is more than 90% pure or run-of-mill at 4–5% Cg, the first step is to crush, followed by sizing and then floatation processing to make a product that meets a specific customer's requirement. The process works well for all lump graphite ores.

TGR: Is there anything else that is unique about lump graphite processing?

PO: Another significant advantage of lump graphite is that milling can be done offsite versus at the mine location. This dramatically reduces the environmental impact of mining. The ore comes from the mine and is transported to an industrial park. One benefit of this approach is that the non-graphite material removed from the ore is used for industrial purposes like road-building aggregates. There are no tailings, impoundments or waste ponds created in the processing of our ore.

Furthermore, processing the ore in a centralized industrial facility reduces infrastructure investment. The net result is that a lump graphite mine is similar to an old-fashioned gravel pit—a little blasting, some material handling and that's about it. The environmental impact and the future environmental legacy are very minor compared to hardrock mining.

TGR: Are your lump graphite deposits surface or underground mining?

PO: Most of the successful mines are no deeper than a typical open pit. Our concession in Sri Lanka has had many mines in the past, something like 53 or 54, though most were not big operations. Some of these were two-man operations. In that case, they're simply digging out the vein. Today, we have better methods, with open pit being much more effective than artisanal hand digging. With a properly planned open pit, in some cases there could be 75 or 85 veins open for working at a time, which is both safer and more efficient for moving material around the site.

TGR: Some references describe extensive underground workings in Sri Lanka's graphite mines.

PO: There is documentation that some mines in Sri Lanka follow veins for thousands of meters, but that may be just below surface or it may wind its way down to 100m. Compared to a gold or platinum mine, that's not very deep. In Québec, lump graphite has really only ever been surface mining.

TGR: You have mentioned both Sri Lanka and Québec. Are those the most well-known lump graphite deposits in the world?

PO: The best-documented lump graphite deposits in the world are in southwestern Québec and Sri Lanka. Other parts of the world are known for flake and/or amorphous, but Sri Lanka and southwestern Quebec are most widely recognized for their lump deposit. In Québec, the book of graphite occurrences from 1907 notes the Walker region, where our Walker and Wallingford mines are located. On the other hand, all graphite industry insiders know that more than 95% of the world's lump graphite supply comes from Sri Lanka.

The notable feature of Sri Lanka's graphite mining has been the small scale of most of the operations. Sri Lanka has a couple hundred of these little mines operating and selling to India and to China. This network was the original inspiration for Saint Jean Carbon. With properties in Sri Lanka and southwestern Québec, we set out to build a modern graphite producer based on the geological and human resources of the best graphite districts in the world. There is a lot of efficiency to be gained by running numerous small operations under a single corporation.

TGR: Which property is your flagship?

PO: The company splits its resources evenly between the Québec and Sri Lankan properties. For 2014, we are putting half of our financial and human resources on the Walker project and the other half on our six best targets in Sri Lanka. We can't find a quantifiable reason to give one region preference over the other. From a branding and corporate identity point of view, Saint Jean Carbon is clearly a Québec graphite mining company, but we find equally strong opportunities in Sri Lanka.

TGR: Can you give us some context for the recent news releases concerning the Walker project?

PO: The recent sampling program at Walker summarized the current resource. We verified historical data, performed site inspections and did extensive mapping. Next, we sampled and put the samples through traditional crush, grind and float processing. We then analyzed the material flow, adjusted retention time, and monitored the resulting material. That's what it takes to confirm the quality of the deposit. The results from the last set of tests from Walker were very detailed and showed our retention times, our leaching processes and so on. We do it this way so we can educate investors and make sure they understand that they're dealing with a real graphite company. We are demonstrating to investors that we are a company that understands what it takes to make a quality product that a customer will pay for.

TGR: What is your timeline for restarting production at Walker?

PO: We estimate that we should be in production at Walker in approximately 16 months, though it could be as soon as 12 months. Development depends on multiple factors, but because our water permits are simple and because we won't be doing any on-site milling, the overall timeline could be relatively short.

The engineering team at Saint Jean Carbon is working on a release that will detail our next four months of work, including completing a historical NI 43-101, airborne work and drilling work. We will even be channeling to do bulk sampling. Toward the end of that timeline, we're going to start looking for an operations center. Both the Walker and Wallingford projects will be managed from the same location to achieve an economy of scale.

TGR: What is the situation in Sri Lanka?

PO: We have our exploration and development permits in place in Sri Lanka, but there is still some work to be done. A level of paperwork and permitting will need to be completed. Just like any other country, Sri Lanka has some environmental concerns. It will take time to hire, to set up the holding companies, and to fund the business entities. Additionally, we'll need to set up a bagging mill to prep the ore for shipment. A realistic target for reaching the production stage should be 12 months.

TGR: How's the business and political climate for mining in Sri Lanka?

PO: We don't have any indications of trouble. Other than graphite and some other minor minerals, there isn't a lot of mining in the country. The Ministry of Mining and President Mahinda Rajapaksa have all stood up and been very clear that they're looking to grow the country's mining industry. In the past, Sri Lanka had a long-running civil war, but everything has been back to normal for a number of years now. Resource development has benefitted the people of the county, including several successful hydroelectric plants. The country has a lot of pro-growth economic policies and the capital, Colombo, is geared toward international commerce. Saint Jean Carbon is serious about operating our facilities in Sri Lanka. The country has excellent shipping infrastructure and lots of educated people. The total cost of development for a facility including land, improvements and labor is very competitive.

TGR: Sri Lanka probably has cost advantage on labor in particular.

PO: We are still quantifying the exact labor cost structure. Another positive factor is that Sri Lanka employs the English legal system, so there is a similar approach to corporate culture. From what we've seen so far and heard from trusted and experienced legal and business contacts, Sri Lanka is a good place for a mining company to do business.

TGR: What are your short-term goals for Saint Jean Carbon?

PO: In the industrial mineral space, the most important success factor isn't the quantity of minerals produced. The most important success factors are the quality of the material and the relationship with the customer. These crucial factors are at the core of Saint Jean Carbon's business model.

Beyond that, we have four clearly defined goals—revenue, distinction, profit and execution. First, we will generate revenue in 2014. Second, from an investment and a marketing standpoint, we will show the distinct advantages and differentiation of our lump graphite projects over all the other graphite projects in the world. Third, we will reach profitability in the shortest practical time. The last goal involves our ability to execute, which is based on what we believe will play out in the micro-cap sector over the next few years. We expect a difficult market for revenue-starved junior miners for the next couple of years and we will address that by targeting near-term, low-capex projects that will rapidly lead to revenue.

Revenue could come directly out of the ground by our own production, or from acquisitions or joint ventures. In selling our production, our sales and marketing teams are aggressively pursuing new customers. We're working with a high-profile graphite company to review possible joint ventures and they're helping us find companies to potentially purchase revenue streams.

Of these goals, the 2014 revenue is the most important in the short-term. Clarifying the distinctive advantages of lump graphite and creating a profitable company will follow.

TGR: It has been great to talk to you and learn more about the graphite market.

PO: Thank you.

Paul Ogilvie, the CEO of Saint Jean Carbon, brings a wealth of knowledge to the graphite sector. He has been extensively involved in several start-ups, including emerging graphite companies, for over 33 years. He most recently served as chief executive officer and director for both Mega Graphite Inc. and Canada Carbon. Prior to this, in 2007 Ogilvie led a private investment group in the redevelopment and turnaround of Industrial Minerals Inc., now known as Northern Graphite Corporation (NGC:TSX.V), a junior mining company that is presently developing one of the largest large-flake natural graphite deposits in the world. Ogilvie has direct experience in the development of technologies related to the production of graphite ores and the operation of global graphite markets for base and high purity graphite products.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:
1) J. Alec Gimurtu conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) Saint Jean Carbon paid The Gold Report to conduct, produce and distribute the interview.
3) Saint Jean Carbon had final approval of the content and is wholly responsible for the validity of the statements. Opinions expressed are the opinions of Saint Jean Carbon and not Streetwise Reports or The Gold Report or its officers.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

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