Gambling Greenie  June 30 2019


High tech in the land of the reindeer

GG tally 280619

FORGET OIL. The new "black gold" is graphite. 

Talga Resources (TLG on the ASX) certainly thinks so.

Back in 2011 the Perth-based junior gold explorer, then known as Talga Gold, was not finding much of the yellow metal and started casting around for other ways to earn a crust.

In 2012 it exercised an option to take over iron, copper, gold and graphite tenements in northern Sweden, and graphite quickly became the main game.

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It has since sold three of its four gold interests in Australia, and the last is under option.  The Swedish gold, iron ore and cobalt interests are up for sale or being managed with the aim of funding the graphite and graphene business.

Now known as Talga Resources, the company's graphite deposit at Nunasvaara is the highest-grade graphite resource in the world, with 12.3 mln tonnes at 25 per cent graphite (using a 17 per cent cut off).

These tonnages are in the indicated and inferred categories, which are estimates somewhat less reliable than a "measured" estimate, but let's not be picky.  It is pretty impressive – particularly as nearby it also has Jalkunen  (inferred, 31.5 mln tonnes, 14.9 per cent grade using a 10 per cent cut-off) and Raitajärvi (total of 4.3 mln tonnes, indicated and inferred, 7.1 per cent grade with 5 per cent cut-off).

That all adds up to an estimated 8.1-mln tonnes of contained graphite.

But wait!  There's more!  On June 5, Talga announced that assays from the first drilling at its Niska prospect, also in the same area, had returned exceptionally high grades and widths of graphite. On July 3 it unveiled “spectacular” results from eight of the remainder of the Niska drilling. These included one hole yielding 73 metres at 29.7 percent, including 18 metres at 41.4 per cent graphite. Another bored through 106.4 metres of 25.5 per cent graphite, and it was still in graphite at the end of the hole.  (These are downhole widths, from holes drilled at an angle, so don’t reflect the true width of the deposit).


These are world class graphite results of a grade and width rarely seen, if ever, in a global context.

   Talga’s managing director, Mark Thomson

By comparison, Australia's largest deposit, Sivior, centred on Arno Bay on South Australia's Eyre Peninsula, has an estimated 6.6 mln tonnes of contained graphite.  (Renascor (ASX code RNU) expects to release a definitive feasibility study for Sivior in the next two or three months.)

The world's largest deposit, which is already in production, is the Balama mine owned by Syrah Resources (ASX code SYR) in Mozambique with 18 mln tonnes of contained graphite. However, the politics in Mozambique are a lot less stable than Sweden or Australia.

Graphite companies will tell you that size matters.  Not just the size of the deposit, but the size of the graphite flakes.  Graphite prices fluctuate, and tend to be negotiated on a case by case basis, but Extra Large Flake graphite can fetch up to  $US 2,000 a tonne, compared with around $US 850 for small flake.  Talga's graphite is very fine, but it reckons it has the technology to use it for battery anodes, more cheaply than its competitors.

Like crude oil, graphite in its raw form is almost useless – what makes it so valuable is what you can make from it. Its main use is as an essential component of the anode in lithium-ion batteries. The battery in an electrical vehicle can require up to 70kg of the stuff, and demand for EVs is expected to soar over the next three to five years.

Talga believes that graphite demand for li-ion batteries will be more than 2 mln tonnes by 2028 and 13 mln by 2040.  Its mine has an estimated life of 22 years.

China mines about 60 - 70 per cent of the world's graphite, and refines almost all of it.

Little wonder both the US and EU, both almost entirely dependent on imports, have declared graphite to be a mineral of strategic importance.

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Talga hopes to start manufacturing anode powder before the end of next year, and claims to have developed anode material that allows faster charging and copes significantly better in low temperatures.

It owns a pilot test process facility in Germany, close to battery factories being built in Sweden, Poland and Hungary as well as Germany, and has a research and marketing team in Cambridge, in the UK.

The blue sky for graphite companies is to produce graphene, a sheet of graphite one atom thick.  It is flexible, stronger than steel, lighter than aluminium, resists extreme temperature and has a very high electrical conductivity.  Talga's German test facility for graphene and micro graphite is already being scaled up.

Talga believes its graphite and graphene could eventually end up in high strength building materials, carbon fibre, marine anti-fouling systems, engineered plastics and polymers, "wearable" devices and electrically conductive inks and pastes, among other things.

At the moment it is just burning cash – about $3.9 mln a quarter – and it had only $10.9 mln in the bank at the end of March, so the GG reckons it will be passing the hat around before long. Hopefully it will not just tap into the rich and well connected with a private placement, but will give ordinary shareholders a chance to pick up a few shares at a bargain price.

TLG shares have been sliding since they peaked at $0.715 at the end of April. They are back to where they were at the beginning of the year, but the price now seems to be edging higher.  The Gambling Greenie picked up 5,000 TLG at $0.485 on the last day of the financial year.

 This is more than doubling his exposure to the trendy black stuff.  He already has an emerging graphite miner, Blackrock Mining (BKT), which he bought eight years ago when it was still the geothermal hopeful Greenrock. 

Like all the geothermals, Greenrock fell off a cliff and took a bucketful of the Greenie's money with it. Blackrock still has to find the money to build its Tanzanian mine, but it already has offtake agreements covering more than 80 per cent of what it expects to produce in the first three years of operation. It hopes that when it is going full blast, it will produce 250,000 tonnes a year of 98.5 per cent graphite concentrate  for at least 25 years.

According to its definitive feasibility study, it should be able to produce its graphite at an operating cost of $400 and sell it for around $1,300 a tonne, so perhaps it is not surprising that the share price has doubled (to 8.5 cents) in the first six months of this calendar year.

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 Updated July 3, 2019

 

 

 

 

 

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