Australian explorer Lincoln Minerals plans to capitalise on growing graphite demand with a high-grade project ideally located in South Australia’s Eyre Peninsula.
When mine profitability comes down to commodity prices, it pays for a mining company to have options for development. This has certainly been the case for South Australia-based explorer Lincoln Minerals Limited (ASX: LML), who held onto its graphite tenements for years before a significant price rise catapulted them to the top of the company’s priorities.
Many of Lincoln Minerals’ projects were assembled between 2001 and 2002, when there was a lull in the mining and exploration industry, says Managing Director John Parker.
He was one of the few entrepreneurs to see opportunity in iron ore at that time, and so put together a report focusing on forgotten iron ore deposits in South Australia.
Guided by this report, a private company applied for several exploration tenements on the Eyre Peninsula in 2003 and, after several years of deals and exchanges, these were among the number of tenements acquired by Lincoln Minerals before it listed in March 2007. Today, the company holds 4,215 square kilometres of exploration licences on the peninsula.
“When Lincoln Minerals listed in early 2007, we had only a few iron ore tenements and uranium was a hot topic,” says Parker.
“We had good base metal projects, and base metals are always a good investment opportunity. So we focused on uranium and base metals. Graphite at that time was not highly valued; we noted it in our prospectus, but focused on other projects.
“We reviewed graphite projects in 2009, but it wasn’t until 2011, when graphite prices went through the roof, that we started looking more seriously at our extensive graphite projects.”
The growth of graphite
Graphite, a form of carbon, is an excellent conductor of heat and electricity and boasts the highest natural strength and stiffness of any material, up to temperatures of 3,600C. These qualities make it a unique industrial mineral with numerous applications, many of them in growing markets such as steelmaking, electronics and lithium-ion batteries. Technology developers around the world are particularly excited about the innovative potential of graphene, the name for a layer of graphite that’s just one carbon atom thick. These factors have driven demand, causing the price of graphite to climb over recent years.
“Ignoring the huge spike in prices from late 2010 to mid-2012, graphite prices have seen a steady 15% growth year by year since 2009 and recent global developments, particularly in China, indicate that these price rises and opportunities for Lincoln Minerals are likely to continue,” says Parker.
China has dominated graphite production for the last 20 years, producing approximately 70% of the world’s graphite supply (65% flake graphite, 89% global amorphous graphite) at peak. However, due to various mine closures and trade agreements, China’s graphite exports have reduced significantly since 2007 – “perhaps by as much as 50%,” says Parker – opening up opportunities for new producers in other regions.
Lincoln Minerals’ main project, Kookaburra Gully, is a world-class flake graphite deposit, with a JORC-compliant Mineral Resource of 2.2 million tonnes at 15.1% graphitic carbon (TGC).
“It is among the world’s top 10 graphite deposits based on grade, and when exploration targets are taken into consideration it could become a top 10 deposit in size as well,” Parker remarks.
“It is easy to upgrade the ore to a concentrate with up to 97% total graphitic carbon and it is also a coarse-grained flake graphite deposit, with about 25% of the final concentrate being greater than 150 microns in flake size. Coarse flake graphite attracts some of the best prices.”
The Kookaburra Gully deposit was discovered in the 1980s by Pancontinental Mining Limited, but was not drilled or developed back then due to low graphite prices, resulting from China’s increasing domination of the market. With today’s higher prices, the deposit’s high grade, easy upgradeability and large flake size make it very valuable. Its close proximity to transport links and existing infrastructure make the project more cost-effective still.
“Kookaburra Gully is ideally located with respect to critical infrastructure,” says Parker.
“It is within a few kilometres of roads registered as ‘double road train’ routes, very close [35km] to the major shipping port of Port Lincoln, 10km from a disused reservoir that is suitable for process water, and a major high-voltage power connector is within 2km.”
The nearby city of Port Lincoln (population 14,000) provides a pool of skilled workers with mining experience, which should save Lincoln Minerals the effort and expense of operating a remote-area fly-in, fly-out operation. The city also has an airport, major regional hospital and a large number of engineering and other service companies.
Lincoln Minerals is currently working with Parsons Brinckerhoff to prepare a Mining Lease application for Kookaburra Gully, and plans to lodge it in March or April this year. The company expects the lease to be granted by the end of the year, enabling the commencement of trial mining and a pilot plant operation in either late 2014 or early 2015.
“In the meantime, Lincoln Minerals is forging ahead with detailed metallurgical test work on bulk drilling and trench samples, preparing a mine plan and planning additional drilling programmes for the next six months,” says Parker.
While Kookaburra Gully is certainly Lincoln Minerals’ main focus, the company does have a number of other projects in graphite and other minerals. With the Kookaburra Gully Extended project, Lincoln Minerals hopes to grow its existing Kookaburra Gully resource by an exploration target of 23-44 million tonnes at 10-15% TGC. It has completed an electromagnetic survey of the tenement, secured approval to drill there and intends to identify a JORC resource for it this year, through a major drilling programme.
Another graphite project, at the historic Koppio Graphite Mine, has an existing Inferred Mineral Resource of 57,000 tonnes at 13.1 TGC and exploration target of 1-5 million tonnes at 11-15% TGC. This project should also have a JORC Resource by the end of 2014. Further exploration work is planned for Lincoln Minerals’ remaining, longer-term graphite targets: including modelling and exploration target generation at Campoona Syncline, and a low-level Tempest airborne electromagnetic survey at Gum Flat-Sleaford Mere (also a target for iron ore).
As all this suggests, Lincoln Minerals has a very busy year ahead. Parker says the company has “heaps” to achieve in 2014.
“We want to get a mining lease for Kookaburra Gully, and maybe also for the Gum Flat iron ore project; commence trial mining and pilot plant processing at Kookaburra Gully; establish off-take agreements for proposed graphite production; drill out Kookaburra Gully Extended and Koppio Graphite Mine and establish a large, high-grade resource; and to add significant value to our shareholders,” he says.
“It’s full steam ahead!”