The demand for new materials, such as graphene, has been partly filled by mining companies who have opened new sites. One such company is Lomiko Metals. Founded in 2008, Lomiko Metals acquires and develops mining sites that contain minerals for “the new green economy”, including graphite, lithium and gold.
Based in Canada and listed on the TSX Venture Exchange (TSX-V), it currently has a market capitalisation of over $6.2m and operates three primary sites, the La Loutre Graphite Property, the Quatre Milles Graphite Property and the Vine Lakes Gold-Silver-Zinc Property.
The company recently announced they had secured two drilling permits at the La Loutre Crystalline Flake Graphite Properties in Quebec, Canada. The firm said it hopes to use at least some of the highest-purity graphite from this site to manufacture graphene.
This isn’t surprising. It is already invested in the graphene sector, holding a 10.43 per cent stake in Graphene 3D Lab, which develops and retails graphene-based technology for 3D printing, and a 40 per cent stake in Graphene Energy Storage Devices, which develops graphene-based supercapacitors.
Following the news, we spoke exclusively to A. Paul Gill, CEO of Lomiko Metals, about how his company aims to become a low-cost producer of graphite, recent price fluctuations, and what effect demand for graphene might have.
How confident is Lomiko that the La Loutre property in Canada will deliver enough graphite of sufficient purity?
Very confident. The surface of the rock was tested for graphite characterization, flake size and purity before we optioned the property. Also, samples of graphite material taken from the host rock indicated significant grades of graphite.
The flake size is particularly important as the greater the size of the flake and the greater the purity, the more a producer receives for the material.
Prices are negotiated in secret and at the moment there is no commodity market for graphite. A large resource that supplies 94 per cent Flake graphite to an end-user for over 10 years may be able to demand a premium on the market.
Furthermore, during a 25-drill hole program in the autumn of 2014, we discovered significant graphite intercepts and highlighted several drill holes which we felt could offer outstanding results of near surface, high grade graphite. We feel the graphite is amenable to an open pit and would offer sufficient tonnage to support a minimum mine life of 15 years with a significant internal rate of return.
Has Lomiko applied for any other drilling permits elsewhere?
Not this year.
You’ve said you want to become a low-cost producer of graphite. How has Lomiko been able to keep costs down?
Viable near surface mineralization reduces the amount of waste rock that needs to be moved, reducing the overall cost of projects and reducing environmental impact.
Recent PEA publications in the graphite industry indicate that to develop a project, capital expenditures of $100m or more are required. There is an oversupply of graphite projects that require sustained prices of over $2500 per tonne. These prices stress the need to deliver projects with low capital expenditure and sustainable costs in this small and volatile market.
Graphite prices are continuing to fall. How has this affected Lomiko’s project?
The range of graphite prices for flake graphite is between $1200 and $2800 per tonne of 94 per cent (or more) large flake. Thus an operation’s costs must be below $600 per tonne to remain profitable and so that it is possible to repay capital expenditures in a reasonable amount of time, i.e., under 5 years.
As borrowing costs are low and near surface mineralization allows for revenues to come soon after the mine starts producing, the biggest unknown is the cost of the facility to process the material.
This is somewhat mitigated by the happy circumstance of the property location. It is only 25 km away from the only fully operational graphite mining and processing location in North America. There is, if not a buyout potential, an example of all of the infrastructure and facilities needed for a profitable enterprise.
Quebec is also one of the top-rated locations to mine in the world with very clear guidelines on environmental, water and mining permitting.
Do you think graphite prices will increase in the short-, medium-, long-term?
In the upcoming year, I would expect a sharp rise in graphite prices to $2000 per tonne as suppliers from China stop operations or cannot continue to operate profitably because the mines have extracted and exhausted the ore with the highest grades. This will also be exacerbated by the impending shortage “perception” of battery grade flake graphite that will drive that market.
In the medium term, i.e., over the next five years, a new base should be established and due to the small market and supply shortages, we will see further spikes in the price of graphite to $2500 per tonne or more.
In the long term, ten to twenty years out, the price will settle to $1200 per tonne as new mines start up.
What effect will demand for graphene have on the graphite mining industry?
A very minimal effect in the short term as the reduction in the price of oil will allow better margins for the use of petroleum in the creation of graphene.
Another non-mining source to make battery-grade graphite for lithium-ion batteries is the use of carbon black that’s derived from burning manure or compost.
Carbon black is a pollution-intensive source but unless there is an outcry about it, graphene producers will have found a cheaper input instead of using mined graphite.