SRG Graphite

Developing a high quality graphite mine and a nickel-cobalt-scandium laterite project

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Overview

SRG Graphite Inc. (TSXV:SRGis a Canadian resource company that aims to become a leader in the exploration, development and production of high-quality, low-cost natural graphite flakes. The company is also working on its wholly-owned nickel-cobalt-scandium laterite project. SRG operates out of the Republic of Guinea in West Africa.

Guinea is a mineral-rich country with an active mining sector that contributes to over 15 percent of its GDP every year. Guinea holds approximately 25 percent of the world’s bauxite reserves, and also hosts significant amounts of iron ore, gold, diamonds, gemstones and more. As a mining-friendly jurisdiction, the Guinean government has ensured that the mining permitting process is straightforward and well-documented and that the mining code is bankable for international players.

Working to better integrate itself with the local community, SRG has a corporate social responsibility policy and is ensuring that its mining initiatives are deployed in collaboration with local communities.

SRG’s Lola graphite property is focused on producing graphite for several different markets with about 35 percent of its production earmarked for the lithium-ion battery market. In June 2018, the company was able to expand their existing resource by 54 percent, to 676,900 tonnes of graphite measured and indicated, and 125,200 tonnes of graphite inferred. SRG has also released the results of a preliminary economic assessment (PEA) for the project. The PEA highlights include a pre-tax NPV (eight percent) of $204 million at an average sales price of $1,328 per tonne. The report also indicated an annual production rate of 50,200 tonnes of graphite concentrate per annum and a mine life of approximately 16 years.

The demand for graphite has increased due to clean energy initiatives, new building materials and the demand for lithium-ion batteries which are used in hybrid and electric vehicles. Large-flake graphite is mostly used in the steel industry as part of refractories. A growing market for jumbo and large-flake graphite is the expandable graphite market used in electronics, graphite foils and new building materials such as flame-retardant insulation. Small-flake graphite is a major component in the construction of anodes for lithium-ion batteries. As a result, the world consumption of flake graphite is expected to increase by over 300 percent from 710ktpa to  2.4Mtpa by 2025.

The Gogota nickel-cobalt-scandium property is SRG’s second project in Guinea and is host to nickel, cobalt and scandium. In June 2018, the company filed a resource for the property, which included a pit-constrained inferred resource of 44.9 million tonnes with a grade of 1.28 percent nickel, 0.13 percent cobalt and 29.4 g/t scandium.

SRG’s management team has over 50 years of combined experience working in West Africa. Management and insiders notably hold over 50 percent of company shares. Sama Resources Inc. (TSXV:SME) holds 30 percent of the company’s shares, while CORIS Capital SA holds 17 percent of the company’s shares.

“CORIS is a leader in the West African banking, financial and investment sectors and has been actively involved in the mining industry for quite some time,” said Benoit La Salle, Executive Chairman and Director of SRG. “We are privileged to welcome CORIS as a strategic partner and contributor to the development of SRG as the company continues its quest to become a leader in the production and delivery of cost effective, quick-to-market, quality graphite.”

Company Highlights

  • Two battery metal projects in growing mining jurisdiction of Guinea.
  • Updated measured and indicated resource of 676,900 tonnes graphitic carbon, and inferred resource of 125,200 tonnes graphitic carbon at the Lola property.
  • An pre-tax NPV (eight percent) of $204 million at an average sales price of $1,328 per ton at the Lola property.
  • Expected 16 year mine life at the Lola property.
  • An indicated annual production rate of 50,200 tonnes of graphite concentrate per annum at the Lola property.
  • Gogota property has an inferred resource of 44.9 million tonnes with an average grade of 1.28 percent nickel, 0.13 percent cobalt and 29.4 g/t scandium.
  • Significant shareholders Sama Resources and CORIS Capital respectively hold 30 percent and 17 percent of the company shares.
  • Management notably over 50 percent of the company shares.

Lola Graphite Project

The Lola graphite deposit is located 850 kilometers southeast of Conakry, the capital of Guinea, and approximately 3.5 kilometers east of the nearby town of Lola. The Lola property was initially discovered by the Bureau Minier de la France Outremer (BUMIFOM) during the construction of the Conakry-Lola road in 1951. However, in 1959, BUMIFOM abandoned the project following the declaration of Guinean independence. In 2012, SRG rediscovered the deposit.

Geology

The Lola deposit is one of the largest surface graphite mineralization’s in the world with a surface area of 3.22 square-kilometers of continuous graphitic gneiss.

The deposit is 8.7 kilometers long with an average width of 370 meters and presents at the surface. The first 20 to 50 meters of the deposit release large and jumbo graphite flakes that contain up to 20 percent graphitic carbon content. Grinding the graphite returns a high recovery rate on all of the flakes.

Metallurgy

Metallurgical testing of the material on the Lola property has produced significant results. The main elemental impurities found in the samples are silicon, iron and aluminum. Impurities such as sulfur, manganese and heavy metals are found in minute amounts. Testing also indicates that the graphite material contains a high crystallinity, which makes purification processes easier to complete and offers a high resistance to corrosion.

SRG Graphite has also conducted micronization, spheroidization and purification tests on the graphite concentrates. The results from SEM images displayed that the concentrate contains balanced spherical graphite particles, that the graphite is comparable to typical products already on the market and that the purified graphite contains 99.95 percent wet tons of TGC graphite.

Exploration and development

In 2017, SRG Graphite completed a 7,057 meters drill program and additional drilling commenced in 2018. By April 2018, the company has completed 12,086 meters of drilling and has completed a total of 1,326 meters of trenching. The 2018 drill program will focus on increasing the resource value and quality, drilling deeper to confirm the continuation of the deposit and to complete infill drilling for the feasibility study.

Resource estimate

In December 2017, SRG Graphite filed a maiden resource estimate for Lola. The resource was based off of 4,936 meters of drilling completed prior to November 2017.

In June 2018, SRG Graphite updated and increased its resource by 54 percent. The mineral resource was based off of 12,086 meters drilling completed prior to April 2018 and accounts for approximately 33 percent of the deposit. The 2018 base case mineral resource estimate includes a pit-constrained measured and indicated resource of 12.2 million tonnes with a grade of 5.6 percent graphitic carbon (676,900 tonnes) and an inferred resource of 2.06 million tonnes that graded 6.07 percent graphitic carbon (125,200 tonnes). The values were calculated using a cut-off grade of three percent.

Since that time, an additional 5,686 meters have been drilled for a total of 17,954 meters. Drilling onsite is ongoing and will cover an additional 3,000 meters.

PEA

In July 2018, SRG Graphite published the results of a PEA for their Lola project that outlined a pit-constrained model. The prices below were calculated using a 1.64 percent graphitic carbon cut-off rate. The highlights of the PEA include:

  • A production rate of 50,200 tonnes of graphite concentrate per annum.
  • $105 million in capital costs with a contingency of $15 million.
  • After-tax NPV (eight percent) of $121 million at an average sales price of $1,328 per tonne.
  • An operational cost of $372 per tonne of concentrate and $130 per tonne in transportation.
  • Grade between 94 percent and 98 percent graphite in all size fractions.
  • Expected mine life of approximately 16 years.

“These results highlight the value of the Lola graphite asset for the company,” said Ugo Landry-Tolszczuk, President and Chief Operating Officer of SRG. “That said, the team will continue to work on improving the design and economics of the project. During our trade-off assessment work, we have found several key points of improvement to incorporate in the feasibility study. Early works which will contribute to the next stage in the development of the project is underway.”

Gogota Base Metals Project

SRG’s Gogota base metals project is located in eastern Guinea close to the borders of Cote d’Ivoire and Liberia. The project is 1,050 kilometers east of Conakry and covers 1.96 square-kilometers. The property is accessible by road and the neighbouring towns of Lola and N’Zerekore provide various amenities.

Exploration

Since 2010, stream sediment sampling and surface mapping have highlighted numerous occurrences of laterites that are rich in nickel and copper. A total of 830 meters were drilled to test the potential of these occurrences.

In 2013, Sama Resources Inc. drilled 51 holes for a total of 1,360 meters at the Gogota deposit and 14 holes for a total of 308 meters at the Gamakonikoni plateau. Thirty-one of the holes drilled at the Gogota deposit were later excavated and produced 800 samples. The samples results indicated that there was a significant presence of cobalt, nickel and scandium on the property.

The remaining 20 holes were drilled on a 200 meter by 200 meter grid that produced 425 samples. These assay results were used as the foundation for the maiden resource at Gogota. There have been several satellite deposits identified on the property that have not been drilled yet and provide the company an opportunity to expand the deposit.

Mineral Resource

In June 2018, SRG Graphite completed a maiden resource for the Gogota nickel-cobalt deposit which includes a pit-constrained inferred resource of 44.9 million tonnes of weathered material with an indicated grade of 1.28 percent nickel, 0.13 percent cobalt and 29.4 g/t scandium.

“While our focus remains on bringing our Lola graphite deposit into production,” said Ugo Landry-Tolszczuk, President and Chief Operating Officer of SRG Graphite. “We are investigating the best way to pursue the development of the Gogota deposit given its significant potential for value creation.”

Management

Benoit La Salle, FCPA, FCA, MBA —Executive Chairman of the Board

Benoit La Salle has 20 years of experience in the development and operation of mining projects in West Africa. In 1995, he founded SEMAFO Inc. (TSX,OMX:SMF), a successful Canadian gold producer in western Africa. In October 2012, he was named Chair of the Board of Directors of the Canadian Council for Africa. In 1980, Mr. La Salle founded Grou Consulting Group, La Salle Inc., Chartered Accountants. He has served on the boards of several public companies and was Chairman of the Board of Plan International Canada, one of the largest non-governmental organizations in the world. Mr. La Salle is a Fellow of the Order of Chartered Accountants, a member of the Quebec Order of Chartered Accountants and the Canadian Institute of Chartered Accountants.

Ugo Landry-Tolszczuk P.Eng, CFA — President & COO

Ugo Landry-Tolszczuk is appointed President and Chief Operating Officer at SRG in January 2018. Since joining the team in 2017, Mr. Landry-Tolszczuk has assumed more and more responsibilities, especially as head of the technical committee. Previously, he served as Director of Operations at Windiga Energy, an independent energy producer based in Canada, where his responsibilities included corporate operations, financing and project development. Mr. Landry-Tolszczuk holds an honors degree in Computer Engineering from the University of Waterloo and holds the CFA® designation.

Elias J. Elias, LL.L, LL.B. — Vice President Corporate, Legal Affairs and Corporate Secretary

Elias J. Elias joined SRG in January 2018 as Vice President, Corporate and Legal Affairs. He has extensive experience in West frica in the mining and energy sectors. Prior to joining the Company, he was Chief Legal Officer and Corporate Secretary of Windiga Energy, an independent energy producer based in Canada. Previously, Mr. Elias was legal counsel at SEMAFO, a TSX-listed gold producer with a significant presence in West Africa, as well as at Gildan Activewear, one of the largest vertically integrated apparel manufacturers in the world. Mr. Elias holds a degree in civil law (with great distinction) and a Common Law degree (with distinction) from the University of Ottawa, and is a recipient of the SSHRC Canada Graduate Scholarship. He articled with the Honorable Justice Otis of the Quebec Court of Appeal and has been a member of the Quebec Bar since 2007.

Bakayoko Bouake — Director of Geological Exploration in West Africa

Bakayoko Bouaké obtained his geological degree from Institut National Polytechnique F.H.B. of Yamoussoukro in Côte d’Ivoire. He joined Falconbridge International Investments Limited in Côte d’Ivoire in 1994 as a field geologist for the Touba-Biankouma nickel laterite project where he gained expertise in project management. From 1998 to 2000, he made several visits to the Koniambo nickel laterite project in New Caledonia to assist the local team with setting up their exploration program. Subsequently, he was involved with Falconbridge’s nickel sulphide exploration program in the Cape Smith belt and spent time at the Raglan nickel mine in Quebec, Canada. He made several working visits to the Falcondo nickel laterite mining operation in the Dominican Republic and, from 2004 to 2008, was a geological consultant at the newly discovered Serra do Tapas nickel laterite project in Brazil.

Raphael Beaudoin, P.Eng. — VP Operations, Metallurgy and Process Design

Raphaël Beaudoin graduated with a degree in Materials Engineering from McGill University in 2010. He worked as a metallurgist at the Minto mine in the Yukon before joining the Nunavik Nickel Project for Canadian Royalties Inc. in 2012, where he participated in the implementation of the concentrator. He took up the position of metallurgist, then chief metallurgist, which will allow him to supervise many strategic projects of the concentrator. Prior to joining SRG, he served as Superintendent of Concentrators for Canadian Royalties Inc., where he oversaw the concentrator’s operations, metallurgy, maintenance and power generation. Thanks to his strong experience in the treatment of minerals, he brings valuable expertise for the continuous and efficient development of SRG’s projects.

Mathieu Charette, CPA, CMA – VP Finance & Corporate Controller

Mathieu Charette completed bachelor’s degree in business administration and further continued his studies in taxation at the HEC Montreal in 2004. Mr. Charette and has been a member of the Ordre des Comptables Agréés du Québec since 2006. He has worked in a financial role with mining companies in West Africa since 2008, first as corporate controller with GoviEx Uranimum Inc. (TSX.V: GXU) and then for five years as CFO and secretary for WAI Capital Investments Corp. (TSX.V: WAI). He has over thirteen years of experience in financial management, financial reporting, taxation, budgeting, forecasting and regulatory compliance for private and public companies within multiple jurisdictions.

Marc-Antoine Audet, B.Sc., M.Sc., Ph.D. — Lead Geologist, QP & Director

Marc-Antoine Audet has more than 27 years of experience in geology in the exploration and development of nickel laterite with major mining companies such as Xstrata Nickel and Falconbridge. His experience includes Falcondo lateritic nickel mining, the new Serra do Tapas and Vale dos Sonhos deposits in Brazil, and the Koniambo nickel cobalt laterite project in New Caledonia. Mr. Audet was Manager of Resource Estimation and Mineral Development, and Chief of Exploration and Chief Geologist for Falconbridge in New Caledonia. He was also Senior Project Geologist and Operations Manager for Falconbridge International Investments Limited in Côte d’Ivoire.

Yves Grou, CPA, CA — Director

Holder of a Bachelor of Commerce degree from McGill University, Yves Grou is a Chartered Professional Accountant and Chartered Accountant. He is a member of the Order of Chartered Professional Accountants of Quebec. He co-founded Grou Consulting Group, La Salle, Inc. in 1980 and remained a partner until 2004. He has developed an expertise in business valuation with several prestigious clients. Within the firm, Mr. Grou coordinated and led the reverse takeover process of several public companies, having successfully completed a number of transactions with mining, oil and gas, telecommunications and medical device companies located in France. in Cuba, Thailand, West Africa and China. In 2004, Groupe Conseils Grou, La Salle, Inc. was sold to a major international accounting firm. Prior to 1980, Mr. Grou worked for Ernst & Young (Montreal) for three years. He is a board member of several public companies in the areas of natural resources, renewable energy and materials.


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