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Nimble juniors prepare for potential surge in graphite and vanadium demand

by Virginia Heffernan on July 20, 2012market

Several juniors have jumped on the graphite and vanadium bandwagon, hoping that new sources of demand for these strategic minerals, mostly from battery applications, will make their exploration projects viable. It’s a risky business that depends to a large extent on what China, a major supplier of both minerals, decides to do. If China were to impose export quotas on either mineral to secure supply for internal uses, as it has done with rare earth minerals, there could be an explosion in demand for alternative sources. Most of the current graphite and vanadium production is used in steelmaking, a market that also depends heavily on China and its prospects for growth.

Let’s tackle graphite first. Prices for natural flake graphite have been soaring in recent years because of lack of supply from mines that cut capacity in the lean years and China’s crackdown on exporters that were shirking the 20% export tax on graphite. The junior sector has taken note, with an estimated 40 companies now scouring the globe for the mineral. Most of the investment focus has been on companies closer to production, which are either restarting old mines such as Ontario Graphite’s Kearney mine in Ontario and Flinders Resources’ Kringel mine in Sweden, or taking previously abandoned advanced stage deposits to production, such as Focus Graphite’s Lac Knife deposit in Quebec and Northern Graphite’s Bissett Creek project in Ontario.

We chose instead to highlight the early and mid stage explorers. They carry a higher investment risk but many have geologically intriguing projects with the potential to become producers if the market for lithium-ion batteries and other green energy applications continues to develop.  The most advanced of this group is Energizer Resources, which is currently exploring the Molo graphite deposit on its Green Giant property in Madagascar (which, coincidentally, also contains a major vanadium deposit). Molo is significant because it is a large, shallow deposit with high grades (6-10% carbon) and an abundance of “jumbo” flake graphite that is relatively easy to process. The deposit is underlain by highly metamorphosed and sheared metasedimentary rocks formed during the break up of the Gondwana supercontinent.

Canada is home to the majority of graphite exploration projects, most of them situated in similar intensely metamorphosed sedimentary terrain such as Strike Graphite’s Simon Lake and Deep Bay East projects in Saskatchewan. Historical drilling returned grades up of to 27.3% carbon over widths of 3-35 m at Deep Bay, while recent drilling intersected a 148 m graphitic zone at Simon Lake within a 25-km long EM conductor. The central metasedimentary belt of the Grenville Province of Quebec is also a graphite exploration hotspot where Strike is making progress on its Wagon property near the producing Lac des Iles graphite mine. Also probing the Grenville is Standard Graphite, which found graphite conductors on several properties with historical occurrences using airborne TDEM surveys and is now sampling those occurrences and their extensions. And Galaxy Graphite is set to begin a 3000 m drilling program at its Sun project near Baie-Comeau, where several large-flake graphite targets were first identified by Finland's Outokumpu in the late 1990s. In Ontario, Standard is investigating the Little Bryan property near Ottawa to follow up on the graphite mineralization outlined in trenches as well as a near-surface conductive trend. Further north in the James Bay Lowlands, Zenyatta Ventures recently intersected 170 m grading 6.6% carbon in a breccia pipe, an unusual host rock for graphite and a potential new source of the mineral.

Across the border in Alaska, Graphite One Resources has recently tripled the strike length to 16 km of an EM conductor that is coincident with graphite occurrences and contains a large volume of graphite-bearing rock within a garnet-bearing quartz biotite schist. 

The vanadium space is less crowded with explorers, most likely because there is less certainty about the need for new sources of the metal that can be recycled from steel smelter slag or produced as a byproduct of uranium mining. Nevertheless, vanadium’s potential future demand in rechargeable redox batteries has encouraged enough juniors to see what they can find outside of the traditional source countries of South Africa, China and Russia. While Energizer has shifted its focus from vanadium to graphite in Madagascar, companies such as American Vanadium, Atlantic and Largo Resources continue to advance towards production. In Nevada, American Vanadium is investigating a historic resource hosted by black shales overlying mudstone at the Gibellini project and could become the lowest cost primary vanadium producer in the world because of the deposit’s low strip ratio. Atlantic is trying to beat American Vanadium to the punch by developing the Windimurra mine in Western Australia, one of the world’s largest known vanadium deposits. Other advanced projects in Western Australia include Reed Resources Barrambie project and Speewah Metals iron-titanium-vanadium deposit in the Kimberley region. Largo is ahead of all of them. Construction began on the Maracas project in Brazil in June and the company has a 6-year off take agreement with Glencore for production.

Earlier stage projects include: Crosshair Energy’s CMB uranium-vanadium project in central Labrador, where a $2.2 million drill program of up to 3,500 m just got underway within gneissic, sedimentary, volcanic and granitoid rocks near the junction of three regional faults; Triple Nine Resources’ Four Corners iron-titanium-vanadium property in Newfoundland, where a 2011 VTEM survey discovered several high intensity magnetic anomalies along the Cabot Fault Zone; and PacificOre Mining’s Lac Doré iron-titanium-vanadium deposit in Quebec, a large, layered Archean intrusion with a historical estimate of 102 million tonnes of 35% magnetite, 17.4% ilmenite and 0.50% V2O5.

The challenge for many of these explorers and developers will be to raise enough financing to continue with their projects while market conditions are so dire. Not all of them will make it but, with time, a clearer picture should emerge of just how much graphite and vanadium the world will need to feed a steady demand from not just steelmaking, but new green energy applications. By then, the fieldwork will be done, the resources brought up to 43-101 standard, and the most viable projects will emerge. It’s what the junior mining sector does best, regardless of the commodity.