Investors following Kibaran Resources (ASX:KNL) likely know that the Australia-based company has got a lot on its plate.
Indeed, since Graphite Investing News (GIN) spoke with Executive Director Andrew Spinks midway through July, Kibaran has released more results from the Epanko deposit, located at its Tanzania-based Mahenge graphite project, as well as its quarterly cashflow and quarterly activities reports.
In the interview below, Spinks discusses what Kibaran is doing to generate all that news, also touching on what makes Tanzania such an appealing graphite jurisdiction. In closing, he explains why Kibaran is interested in 3D printing and how the company has managed to achieve success in today’s tough markets.
GIN: I have some questions worked out for you, but would you like to start by talking about Kibaran’s July 14 news?
AS: The results we released on July 14 continue to confirm that our Epanko deposit is a substantial graphite occurrence. The drill results certainly exceeded our expectations in terms of width, but most importantly, they demonstrate potential upside in tonnage and grade continuity along strike.
The key aspect of the recent drill program is that it will allow us to upgrade our resource estimate into the higher confidence categories of measured/indicated in accordance with the 2012 JORC code. This resource increase will allow us to release our upgraded scoping study.
GIN: So that’s what you’re doing this summer?
AS: We’re very focused on advancing our Epanko graphite deposit to a production decision. We have also been working in parallel to consolidate the Merelani graphite province, which is located at the northern end of Tanzania. This consolidation will provide us with access to another significant graphite province with historical production.
GIN: Backing up a little, from what I understand, Kibaran has three graphite projects — Mahenge, Merelani-Arusha and Tanga — all of which are located in Tanzania. What is it about the country that’s appealing?
AS: Tanzania has a history of commercial-scale production, and we believe it is unique due to its higher metamorphic gradient, which is a major contributor to flake size distribution and the crystallization of graphite. Essentially, the higher the metamorphic gradient, the larger the flake distribution. Indeed, the most favorable aspect of Tanzania is its flake size distribution — at Epanko, over 50 percent of our product is greater than 180 microns, which makes the graphite saleable.
Very importantly, we’ve also got a low portion of fines, less than 75 microns. We believe this is low value and likely to be unsaleable in the future. These factors, combined with robust, near-surface mineralization, assist commercial viability.
I should point out as well that Tanzania has a very successful history of mineral investment, with proven mineral development under a western standard mining act. These aspects provide compelling advantages in terms of quickly advancing to production.
GIN: Given that Tanzania has so much good graphite, do you have a lot of competitors there?
AS: There are certainly other companies looking at graphite in Tanzania. It was our view four years ago that Tanzania would be a significant producer of graphite in the future, led by the Epanko and Merelani provinces. Our projects are now significantly well advanced given the exploration efforts we have carried out over the past three years.
GIN: And you’ve already seen some interest in your graphite — Kibaran signed an offtake agreement with a major European graphite trader at the end of last year. Why is that significant for the company?
AS: We took the view last year that accessing the graphite market for sales was going to be one of our biggest challenges; there are clearly large graphite endowments at both our projects.
The graphite market is terminal, which effectively means that once all the buckets are filled in terms of demand, it doesn’t matter how much graphite you have, you won’t be able to sell it. We’re very focused on accessing the existing market and being able to sell our product into it those markets. We remain the only company globally with a European offtake agreement. So that puts us in a very unique position and it gives our investors a level of comfort as we move toward a development decision.
GIN: That offtake agreement was for 10,000 tonnes of Epanko flake graphite concentrate per year for five years. Is that a substantial amount of the deposit’s anticipated yearly production?
AS: The future demand for graphite is enormous; however, our strategy is to fast track to production on existing demand. At this stage, the offtake is only part of our planned production. We are expecting to increase our sales agreement and offtake component to support higher production levels in the near future.
GIN: More recently, Kibaran signed a memorandum of understanding to look at graphite and graphene opportunities in 3D printing. Those materials, particularly graphene, have many exciting potential applications — why did you choose 3D printing?
AS: Graphene is an exciting new potential use of graphite. The impact it could have in the future is just at its infancy, particularly the impact it could have on 3D printing. The Chinese have already built the first small house from 3D printing. It’s not unrealistic to think that expanded graphite will be used to build products using 3D printing in the not-too-distant future.
We were very much drawn to that sector on that basis as nothing stays the same; it’s our view that the way we produce building products in the future will be dramatically different to how they’re produced today.
GIN: Expanded graphite — how do you get that or make that?
AS: Essentially, you immerse natural flake graphite in a sulfuric hydrofluoric acid bath at very high temperatures. Graphite has a layered mineral structure, and the acid mixture delaminates this layered structure. The expansion is quite incredible to view and will expand in the order of 300:1 through the delamination process; from this product, graphite foil is produced.
Graphite foil is used in a number of high-tech industries and industrial uses. The future demand for this product is significant given its current use in thermally efficient building products. SGL Carbon, one of the largest end users, is producing building products with expanded graphite that are lightweight and thermally efficient in terms of heating and cooling. Given the impact of global warming, we expect building codes will require more energy-efficient building products and believe that demand on graphite may in fact be higher than other future demands.
It’s important to note that not all graphite is capable of being expanded through this process and that acid processes are largely patented by end users.
GIN: One factor that prompted me to get in touch with you was a recent Motley Fool article that says Kibaran is up about 87 percent in the last year. How has the company achieved that success in today’s markets?
AS: We identified the potential of graphite mineralization in Tanzania over four years ago, and we’ve been diligently working through the exploration phase and now fast tracking our projects to production. The results we have achieved to date demonstrate that we’ve got significant graphite deposits that are commercially viable and flake graphite that is saleable. That’s given us a level of confidence that we can advance to production. At the end of the day it’s a race to production and securing graphite sales agreements.
GIN: Graphite is clearly Kibaran’s main focus, but the company also has a nickel project in Tanzania. With nickel prices doing so well, has there been any talk of putting greater emphasis on that project?
AS: That’s a very good question, as the company was founded on a Tanzanian nickel project. We’re currently looking at a number of divestment opportunities to create value for our shareholders.
GIN: Anything you’d like to add?
AS: Stormcrow recently modeled graphite pricing for 2020. This modeling very much supports our company’s strategy and view on the graphite market. That is, new production of graphite will need to be cost competitive or have a larger flake distribution. The conclusion Stormcrow reached is similar to our own research, and the reason why our project has attracted a sales partner and offtake agreement. It clearly highlights the competitive advantage of having a high proportion of large (>180 micron) and jumbo (>300 micron) flake distribution combined with a low proportion of fine (<75 micron).
The modeled prices by Stormcrow provide Kibaran with a 50-percent increase in basket price value over the current graphite price. This is a compelling example of why flake size distribution is a key aspect in determining commercially viable graphite occurrences. Grade is not related to flake size, and in fact flake size is related to metamorphic gradient and crystallization.
Finally, Kibaran remains significantly undervalued on a technical basis, and we’ll have a significant flow of news over the next month, including a mineral resource and upgraded scoping study for our Epanko deposit.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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