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74 www.resourceworld.com F E B R U A R Y / M A R C H 2 0 1 8 MINING Northern Graphite poised for development by Dr. Edward Schiller Look at the proliferation of hand held devices, cell phones, iPads, cameras, even power tools. And it seems more car compa- nies are announcing they will build a line of hybrid and electric cars. The commonality between these two statements is the enabler – lithium ion batteries (LiBs). Lithium ion batteries are already a $20 billion market growing at over 20% per year. That is worthy of an investor's attention. LiBs require three main minerals – lith- ium, cobalt and graphite – and prices for the first two have already taken off. The picture is somewhat different with graph- ite. The slowdown in the Chinese economy and resultant decline in demand for graph- ite from the steel industry has, to date, largely masked the phenomenal growth in LiB demand. This has started change as graphite prices rose 30-40% in the second half of 2017. But they are still less than half the highs of 2012 and therein lies the opportunity. Current LiB manufacturing capacity is less than 100gWh. Plants under con- struction will increase that number to over 400gWh by 2020. Assuming all these plants operate at full capacity, an addi- tional 600,000 tonnes of flake graphite is needed per year by 2020. Current annual flake graphite production is 650,000 tpy mainly from China. One cannot believe in the future of electric vehicles (EVs) and grid storage without believing in graphite. Multiple new graphite mines are required to meet even conservative LiB growth fore- casts. It would be nice if they were located in the West. The first junior graphite company to recognize this potential was Northern Graphite Corp. [NGC-TSXV; NGPHF- OTCQX]. Northern was spectacularly successful in the 2010 to 2012 period as its shares increased from $0.15 to over $3.40 when graphite prices ran up to almost US $3,000/tonne. However, prices subsequently crashed with the Chinese slowdown and it has been four or five frustrating years for the company, waiting for LiBs to create a second wave of price increases. It appears that patience is about to be rewarded. Northern is now one of the few "shovel ready" graphite projects at a time when demand and prices appear ready to take off. Northern has already completed a full feasibility study and received its major environmental approval. The company's Bissett Creek Project is located 15 km from the TransCanada Highway between Ottawa and North Bay, Ontario. Infrastructure is about as good as it gets in the mining business. The company does not have to build a camp for workers who can live in nearby towns. North Bay and Sudbury are major mining supply centres and only a few hours away, and it will have access to natural gas to generate power and dry the concentrate. Because graph- ite mines produce a bulk concentrate that must be shipped to customers, access to road, rail and port facilities is important. Bissett Creek is a little over 100 km from the railhead and five hours from the port of Montreal. In addition to infrastructure advantages, Northern has a unique deposit character- ized by a high percentage of large flakes, in fact, the highest in the industry. Unlike base or precious metals with set prices, industrial mineral prices vary by quality. With graphite, that means flake size and purity. The larger the flakes the higher the price and concentrate purity really needs to be over 94% which Northern has achieved. This will lead to the highest average concentrate price in the industry. The Bissett Creek Project consists of an open-pit mine and a 2,900 tpd processing plant with conventional crushing, grind- ing and flotation circuits. Capital cost is estimated at CDN $101.6 million. An aver- age of 20,800 tonnes of graphite concentrate will be produced annually at a cash mine operating cost of US $635/tonne of concen- trate versus a current price of US $1,700/t. While the mine has a 28-year life based on probable reserves, measured and indicated resources are sufficient for 70 years – plenty of potential to expand as the market grows. In short, Northern has an advanced stage project and could begin construction in 2018 pending financing and the com- pletion of operational and species at risk permitting which are well advanced. The project has the highest margin, best flake size distribution and lowest marketing risk of any new graphite project, and has the added advantage of low capital costs relative to its peers. With only 65 million shares outstanding, Northern has a tight capital structure and is well positioned to make the big step from junior developer to producer. n