Groundhog Day Seems a little like groundhog day on this BB. I seem to have read the same quotes from our friends over and over again, citing a particular comment from the NI43-101. 53% non-commercial. Let’s have a look in a little more detail. Firstly the comments only reflect upon the preliminary metallurgical results (with some added relevant data), as below.
| FMS | 15.67% | Preliminary Metallurgy - 11th April 2012 |
| | | | | |
| | Distribution | KG in Every Tonne of Ore | Ore Processed (t) for Finished Concentrate (t) | Purity |
| +48 Mesh | 16.6% | 26.0 | 38.4 | 96.1% |
| +65 Mesh | 14.3% | 22.4 | 44.6 | 95.0% |
| +80 Mesh | 7.0% | 11.0 | 91.2 | 94.5% |
| +100 Mesh | 8.2% | 12.8 | 77.8 | 94.1% |
| +150 Mesh | 28.0% | 43.9 | 22.8 | 92.6% |
| +200 Mesh | 11.0% | 17.2 | 58.0 | 87.2% |
| -200 Mesh | 14.9% | 23.3 | 42.8 | 85.2% |
| | | 156.7 | | |
So we can see the +150 mesh came in at 92.6%, not the required 94%. Therefore the +150 to -200 mesh has been deemed out of spec. Firstly, I would note that even in the prelim result form, this product does have a commercial value. IM quote a price for it eg; 90% -100 mesh $850 to $1,050/t. It could correctly be stated it is not a premium product, but regardless it is definitely saleable.
The FMS test which forms the basis of the NI43 was a laboratory floatation. This is only the initial test without locked cycle testing and flowsheet/process optimisation. Prelim tests such as these do not seek to provide final recoveries, that is not the objective. The objectives are to: to provide a broad understanding of metallurgy, to confirm that the material can be recovered, to give a basic indication of concentrate quality, to provide indications for future test work and optimised flowsheet parameters. It is essentially the beginning of a process and certainly not the end result. Final testing will inevitably increase recoveries, that is what we are paying SGS for.
The 28% +150 mesh is therefore the main outstanding issue from the preliminary testing. 92.6%, means we require a 1.4% process improvement to get that fraction over the 94%. I believe SGS will achieve this and we will see the medium flake in spec from SGS process improvements. The other fractions +200 to -200 mesh will almost certainly not get over the 94% barrier, So, I believe we will ultimately have 25% that is not a premium product and will attract a lower price, likely somewhere around $850/t, with the remaining 75% of finished production in the premium spec category.
But, there is another more important aspect to consider here. In the same April NR, Focus stated clearly the implications of not getting the medium flake into spec and the intended use for the small flake that almost certainly will be under the 94% grade:
"The balance of available graphite flake (+150 mesh to -200 mesh) can be used for the production of anodes for the high-growth lithium battery manufacturing sector".
Therefore, it actually doesn’t really matter if it gets into spec or not, as we intend to upgrade those fractions to 99.9% for high value anode production anyway. FMS have clearly defined plans in place to optimise revenue and ensure all recovered material is converted to a commercial product. In this case to a premium product, much higher up the value chain from base +94% concentrate.
So, I suppose the next obvious line of enquiry is to how (assuming we get the 28% medium flake in spec, not that it matters as we will upgrade it anyway) Lac Knife ore and concentrate recovery compares to a competitor. In this case I will use NGC, it is important to compare these tables for FMS and NGC, there are stark contrasts when grade is factored in:
| NGC | 2.00% | Variability Testing - 23rd April 2012 |
| | | | | |
| | Distribution | KG in Every Tonne of Ore | Ore Processed (t) for Finished Concentrate (t) | Purity |
| +32 Mesh | 19.1% | 3.8 | 261.8 | 98.1% |
| +50 Mesh | 33.0% | 6.6 | 151.5 | 97.0% |
| +80 Mesh | 23.3% | 4.7 | 214.6 | 95.1% |
| +100 Mesh | 5.2% | 1.0 | 961.5 | 94.0% |
| +200 Mesh | 10.5% | 2.1 | 476.2 | 92.7% |
| -200 Mesh | 8.9% | 1.8 | 561.8 | 83.0% |
| | | 20.0 | | |
The first thing you will notice is that 19.4% of final concentrate (from optimised locked cycles) is under 94%. NGC therefore have 80% in spec, I expect we will have 75% in spec. The Industry average is 72%. Sounds great for NGC, indeed it is an advantage. But, in reality how much finished concentrate do each of these companies have in 1 tonne of unprocessed ore and therefore how many tonnes of ore do they need to process to liberate a tonne of finished concentrate at each fraction. This is a function of grade and flake distribution.
Example - jumbo/large flake up to +80 mesh:
FMS have 59.4kg of jumbo/large flake graphite contained in every tonne of ore vs NGC who have 15.1kg of jumbo/large flake graphite contained in every tonne of ore. FMS comes out with 75% more jumbo/large flake end product, for every tonne of ore put through the process.
Example - total concentrate:
FMS has 157.6kg of graphite in 1 tonne of ore vs NGC with 20kg for every tonne of ore processed, FMS come out with an 87% advantage on total recoveries for every processed ore tonne.
In conclusion:
- From preliminary testing 46.1% jumbo/large flake is in spec for FMS.
- Final recoveries will be provided as part of the PEA. There should be an expectation that the 28% medium flake will get into spec, from the optimised processing methods.
- If this is achieved 75% of final concentrate will be in spec, compared to a 72% industry average and 80% for our nearest competitor.
- FMS has stated in NR that the med/small flake will be upgraded to create a higher value product anyway, so final recoveries are ultimately not that important for the lower fractions.
- FMS has a signed graphite purification/anode agreement with HQ (IREQ), so this is not just show-boating commentary by Management. Indeed, at the time HQ commented, “We believe that the high grade graphite of the Lac Knife property associated with our graphite purification and shaping technologies would yield a quality product for Li-ion battery application.” Positive, 3rd party confirmation, from an organisation who’s integrity is beyond reproach.
- It can be shown that when comparing FMS to its nearest competitor, the pre-eminence so often cited regarding favourable flake distribution and metallurgy, is far outweighed by the advantages of high grade ore (in this specific comparison). This is true whether considering total recoveries per tonne of ore or indeed recoveries of the much loved jumbo/large flake fractions per tonne of ore processed. This advantage directly equates to the low expected cost of finished production for FMS.
- Customers with vast experience in Graphite, will also be fully aware of the considerable advantage FMS will have over the competition. Whilst a positive PEA may not have an immediate impact on the price, it will confirm publically, what has been known privately for a long time and I hope will pave the way for a supply agreement.
DYOR/ My calculations and opinions are my own and are not NI43 compliant.