Australia’s Walkabout Resources (ASX:WKT) is quickly developing its Lindi Jumbo graphite project in the East African country of Tanzania. Its goal is to start production in Q1 2018, in time to benefit from forecast demand for large- and jumbo-flake graphite.
Walkabout’s most recent news came on Wednesday (May 10), when it concluded a non-binding memorandum of understanding (MOU) with European graphite trading house Georg H. Luh. According to a press release, the MOU opens talks for the sale and purchase of between 10,000 and 12,500 tonnes of graphite per year. The companies will also work together in other areas.
Offtake agreements are key for graphite companies, and the news sent the company’s share price up 13.11 percent, to $0.069, by the end of the day.
“Georg H. Luh GhmB is an established graphite industry player in Europe with an impressive track record of operating in the premium end of the graphite market. We are delighted to have established initial business relations with the Company and look forward to growing the alliance forward,” said Allan Mulligan, the company’s executive director.
The news follows the release of a definitive feasibility study (DFS) for Lindi Jumbo, as well as a maiden ore reserves report. Based on test work, Walkabout anticipates that about 50 percent of the graphite produced will be in the super jumbo or jumbo categories, and will come from three high-grade zones.
Tom Murrell, one of the company’s directors, recently told Modern Mining, “[a]s explained in our DFS, these zones can be extracted with minimum contamination from lower-grade material and will allow us to achieve a high-grade feed to the mill which will be in excess of 17,5 % Total Graphitic Content (TGC) for the first three years of the mine life — with the life of mine average mill feed grade being above 16 % TGC.”
He also acknowledged that many graphite projects are under development, and said that could lead to oversupply in the market. However, he believes that demand will remain strong for the type of graphite that Walkabout has.
Graphite demand is expected to be driven largely by the still-emerging electric car industry. About 50 kilograms of graphite is used in the battery of each electric car, and as these vehicles become more common the need for graphite is expected to grow swiftly.
Walkabout has a 70-percent stake in four licenses at Lindi Jumbo, and intends to acquire the remaining 30-percent share. As mentioned, the company plans to start producing graphite near the end of Q1 2018 — however, it will first need to secure financing for the project.
Other graphite companies operating in Tanzania include Graphex Mining (ASX:GPX), which was granted a 10-year mining license for its Chilalo project in 2016; according to a feasibility study, it plans to produce 69,000 tonnes of graphite annually. Armadale Capital (LSE:ACP) discovered high-grade graphite at its Mahenge Liandu project last year.
Magnis Resources (ASX:MNS), Volt Resources (ASX:VRC) and Kibaran Resources (ASX:KNL) also hold graphite projects in the country. Currently Tanzania is not a top graphite-producing country, but in 2015 the country’s Ministry of Energy and Minerals said that could soon change.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Magnis Resources is a client of the Investing News Network. This article is not paid-for content.