Graphite

TSXV:FDR

Flinders Resources (TSXV:FDR) clarified a disclosure regarding its Woxna graphite mine and processing plant in Sweden, noting that the project has not yet achieved commercial production. The company has successfully restarted the mine and established “meaningful graphite production” at the project.

Flinders Resources (TSXV:FDR) clarified a disclosure regarding its Woxna graphite mine and processing plant in Sweden, noting that the project has not yet achieved commercial production. The company has successfully restarted the mine and established “meaningful graphite production” at the project.

As quoted in the press release:

Commercial production is a convention for determining the point in time at which the commissioning of the mine and plant has been completed after which production costs are no longer capitalized and are reported as operating costs. The determination of when commercial production commences is based on several qualitative and quantitative factors.

The Woxna processing facility was refurbished and upgraded with new equipment in the first half of 2014 after which the processing plant commenced operation by feeding stockpiled graphitic material into the plant during July 2014. The plant was operated until the end of 2014 on stockpiled graphitic rock and mining of graphitic rock commenced in Q1 2015. The freshly mined graphitic rock was fed into the Woxna processing facility and operated at normal design capacity producing graphite concentrate inventory. This inventory was stockpiled instead of sold due to declining global flake graphite demand during 2015 that has pushed prices to a four year low. As previously disclosed, given these weakening conditions, the Board of Flinders has chosen to reduce production at Woxna and only supply larger volumes when improved graphite prices return thus conserving working capital.

The Woxna project has never defined a mineral reserve and the previous preliminary economic assessment (“PEA”) on Woxna dated October 29, 2013, has been superseded by the Company’s current technical report dated May 11, 2015 that increased the measured and indicated mineral resource on Woxna to 7.7Mt @ 9.3% Cg so the PEA is no longer valid. The decision to recommence mining at Woxna was not based on a feasibility study of mineral reserves demonstrating economic and technical viability as the Company is of the view that the establishment of mineral reserves is not necessary. There is increased uncertainty and risk of economic and technical failure associated with such production decisions. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing or other relevant issues.

The Board of Flinders is of the view that the costs of undertaking a feasibility study for a brownfield project of this type and scale is cost prohibitive. Therefore, the Company determined it was the most responsible utilization of financial resources to restart the mine and processing plant to establish itself in the graphite market as quickly as possible to develop credible sales and marketing presence. The Company acknowledges that there is increased uncertainty and risk of economic and technical failure associated with such production decisions not supported by pre-feasibility and feasibility studies that are structured for a large greenfield project. With the cost of this brownfield project, Flinders believes its financial decision to restart the Woxna mine was justified without the contribution from an extensive series of studies.

Click here to read the Flinders Resources (TSXV:FDR) press release

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