Graphite One targets resource expansion

The lithium-ion battery, power source of the burgeoning electric and hybrid vehicle market, is one of a number of high-technology applications that need healthy doses of graphite. Yet the United States lacks a domestic mine producing this industrial mineral that has gotten a high-tech makeover.

The Graphite Creek project in western Alaska, however, hosts one of the largest graphite resources on the planet, a repository that Graphite One Resources hopes to develop into a major global supply of this carboniferous material.

Situated roughly 40 miles (65 kilometers) north of Nome, the rocks at Graphite Creek have long been suspected to host between 6 million and 20 million tons of crystalline-flake graphite. This assumption was based on a 100-meter-thick graphite-rich layer that outcrops to the surface for some three miles (five kilometers) along the northern slopes of the Kigluaik Mountains that run east to west for some 42 miles (68 kilometers) on Alaska's Seward Peninsula.

A 4,248-meter drill program carried out by Graphite One in 2012 established a maiden NI 43-101-compliant inferred resource of 107.2 million metric tons averaging 5.78 percent graphitic carbon. This 6.2 million metric tons of contained graphite ranks Graphite Creek as the world's sixth-largest deposit, according to the Technology Metals Research Advanced Graphite Projects Index which tracks the 258 graphite projects around the world with an NI 43-101, or similarly defined, resource.

Though Graphite Creek already measures among the world's largest, a geophysical and geological programs completed in 2012 provides strong evidence that the layers of graphite tapped by drilling extend up to 18 kilometers (11.2 miles), or roughly seven times the area that makes up the current resource, providing substantially more blue sky to the potential size of the deposit.

Ideally, Graphite One envisioned completing 8,000 meters of drilling this year aimed at upgrading the current resource with extensive infill drilling and extending the deposit along strike. Market conditions, however, dictated a more modest program.

Closing a C$2.2-million financing Sept. 18, Graphite One wasted no time. Less than a week later drills were turning at Graphite Creek, and by Oct. 17, the company had completed 10 holes aimed at more than doubling the length of the resource area; developed a quality assurance program plan; and continued to develop and implement bench-scale metallurgical testing - all with the ultimate target of quickly advancing the project to production.

"We are excited about our 2013 field campaign where we'll continue to grow our world-class resource ahead of our PEA (preliminary economic assessment) and BFS (bankable feasibility study) with our current drill program," said Graphite One Resources President Anthony Huston.

Quick expansion

The resource at Graphite Creek was delineated by 17 holes drilled along 2.2 kilometers (1.4 miles) of an 18-kilometer- (11.2 miles) long magnetic-electromagnetic conductor, revealed by 1,505 line-kilometers of geophysical surveys flown in 2012.

"Now that the main trend is over 18 kilometers in strike length we have only drill tested 12 percent of the trend in detail, which further builds to our story as we continue to work towards a resource," explained Huston.

The 18th hole of the 2012 program, drilled some 2,200 meters southeast of the resource, provided tangible evidence that Graphite Creek could be much bigger than the maiden resource indicates. This hole (12GCH008) cut 177 meters averaging 3 percent graphitic carbon, including 52 meters averaging 6.09 percent graphite. Surface mapping and the electromagnetic surveys indicate a continuity to the carbon-rich layers stretching along the 2,200 meters between hole 8 and the resource area established by the other 17 holes.

"The step-out hole shows the high-grade mineralization is continuous for more than 4.4 kilometers (2.8 miles) as confirmed by drilling," Huston said.

SGS Canada Inc., the consultant that calculated the resource, estimates that drilling the gap between hole 8 and the deposit would increase the Graphite Creek resource to at least 9.9 million metric tons and could swell the size of the deposit to as much as 38.9 million metric tons of graphite, depending on the grades and thicknesses encountered by drilling.

Eight holes of Graphite One's 2013 drill program aims to confirm this blue-sky potential. These holes were spaced roughly 250 meters apart, about the same spacing that defines most of the current resource area, and have an average depth of about 100 meters.

Intercepts of roughly 10 percent graphite were in the top 60 meters of drilling completed in 2012, including:

•12GC002 cut 14.3 meters of 10.1 percent graphite starting at a depth of 26.7 meters;

•12GC004 cut 17.6 meters of 9.36 percent graphite starting at a depth of 20.4 meters;

•12GCH003 cut 17.1 meters of 11.07 percent graphite starting at a depth of 3.9 meters;

•12GCH005 cut 54.9 meters of 10 percent graphite starting at a depth of 6.1 meters;

•12GCH006 cut 31.7 meters of 10.1 percent graphite starting at a depth of 12.2 meters; and

•12GC010 cut 21.6 meters of 11 percent graphite starting at a depth of 13.5 meters.

Asked about these intercepts during an interview early in 2013, Huston told Mining News that "most of the high grade is on top and right along the fault-line."

A cut-off grade of 7 percent demonstrates the high-grade segment of Graphite Creek. At this higher cut-off, the deposit has an inferred resource of 25.44 million metric tons, averaging 9.69 percent graphitic carbon for 2.5 million metric tons of graphite.

The remaining two holes aimed to extend the deposit 400 meters to the northeast, which, in combination with the southwest expansion drilling, could expand the Graphite Creek deposit to a total of 4.8 kilometers (three miles) when the resources is updated.

Though assay results are still pending, Graphite One reports that graphite was observed in all 10 holes.

"We're happy to have completed another successful drill campaign and look forward to growing the already impressive resource as the Graphite Creek deposit is the largest flake graphite deposit in North America, and is the United States' only advanced flake graphite deposit," said Graphite One President Anthony Huston.

An updated resource estimate that includes the results from this year's drill program is expected to be completed in the first quarter of 2014.

Size is everything

The size and shape of graphite determines the usefulness and value of the carbon polymer, and the Graphite Creek deposit is shaping up to be a rich source of the quality of graphite prized for high-technology applications.

The most abundant form of naturally occurring graphite is the fine-grained amorphous variety. This lowest form of the carbon polymer is used traditionally in steelmaking - lending its heat resistance to crucibles and furnace bricks, as well as serving as a carbon-boosting additive in the steel itself.

Lithium-ion batteries and other high-technology applications, however, require a higher order of the carbon polymer known as large flake graphite.

Large flake graphite containing 94-97 percent carbon, the grade needed in electric vehicle batteries, is currently selling for around US$1,400 per metric ton, down about half from the peak of around US$3,000 per metric ton in 2011 but substantially higher than the US$1,000-per-metric-ton levels of 2008.

"Flake graphite supply is delicately balanced with little margin for error. China (dominated) global production with a 73 percent market share in 2012, according to our new statistics. Limited supply elsewhere, together with unpredictable demand had resulted in the volatile prices seen over the last five years," according to Industrial Minerals Data manager Simon Moores.

Moores told Brian Sylvester of The Metals Report that flake graphite prices settled at a level that was higher than expected, and he anticipates they will rise from here.

This is good news for developing the Graphite Creek project, which is considered to be a source of the more desirable large flake graphite.

Laboratory analysis of three 15-kilogram samples collected by Graphite One in 2011 identified the potential for large flake graphite at the project.

To qualify as large flake, graphite particles must be larger than 80 mesh. Mesh size refers to the number of openings per linear inch of mesh, so the larger the mesh size the smaller the material.

More than 75 percent of the graphite content of all three of the Graphite Creek samples analyzed by Hazen Laboratories qualified as large flake. A sample of mixed schist and massive graphite, at 93.6 percent, had the highest large flake graphite distribution.

Additionally, some 65 percent of the large flake graphite is greater than 40 mesh, a premium form known as jumbo flake.

In addition to testing the physical characteristics, Graphite One had one of the 2011 samples tested for recoverability. Using a combination of gravity separation and flotation resulted in recoveries from 86.8 percent to 92 percent graphitic carbon.

A larger 10.5-metric-ton sample tested early in 2013 returned even more encouraging results.

In April, Graphite One reported that a first-pass beneficiation test at Activation Laboratories Ltd. demonstrated a leaching process capable of producing 98.8-99.2 percent graphitic carbon from a rough concentrate obtained from Graphite Creek.

Graphite One is hoping that continued metallurgical work will develop a simple concentration and leaching process that will produce an ultra-high purity graphite product, potentially positioning Graphite Creek to compete in the C$13-billion, or 1.5 million-metric-ton-per-year, synthetic market.

Huston said, "The Graphite Creek property is the largest known flake graphite deposit in North America, and we look forward to continuing to develop marketable graphite products to meet the global graphite demand, which is growing rapidly."

Aggressive timeline

To jump into this expanding market as early as possible, Graphite One has initiated dialogue with Alaska regulators. A memorandum of understanding with the Alaska Department of Natural Resources, Office of Project Management and Permitting, for engagement with the state's large mine permitting team has formalized this effort.

As part of the pre-permitting process for the Graphite Creek project in western Alaska, the large mine permitting team will dialog with Graphite One regarding the development of a quality assurance program plan; review and comment on applications and numerous state permit requirements; and review, analyze, and evaluate complex technical documents for adequacy and soundness.

"As we move towards our PEA (preliminary economic assessment) and BFS (bankable feasibility study) this is an integral part of the process as we strive to keep our aggressive timeline towards development," Huston explained.

JDS Energy and Mining Inc. is working on high-level engineering and logistics studies for the Graphite Creek project. Results of the studies will be part of a PEA for Graphite Creek due to be published by the first quarter of 2015.