Mazarin’s Lac Knife poised to become New Economy mine

If Jacques Bonneau has his way, Mazarin Mining (MAZ-T) will join the highly touted New Economy without leaving the mining business. The Quebec-based company recently unveiled plans to provide graphite for eventual use in a pollution-free fuel cell being designed by Ballard Power Systems as a replacement for the internal combustion engine.

As a first step toward this goal, the company signed a preliminary agreement with Ucar Graph-Tech, a unit of Ucar International (UCR-N), to participate in the joint development of the Lac Knife graphite deposit, 30 km south of Fermont, Que. The final agreement, which has yet to be negotiated, is subject to due diligence by both parties.

Ucar International is the world’s largest manufacturer of high-quality graphite and carbon electrodes and cathodes, as well as flexible graphite. Its products are sold in more than 80 countries. The company also has an exclusive product development collaboration agreement and an exclusive long-term supply agreement with Ballard, a world leader in proton exchange membrane fuel cell technology for automotive, stationary power and portable applications.

Marzin President Bonneau says his company is pleased that Ucar has selected Lac Knife for development and commercialization as a source of raw material for the production process. “This deposit, together with the potential to develop additional reserves in the surrounding area where we have mining rights, should provide Ucar Graph-Tech with a supply of natural graphite beyond 2020, and eventually supply other users of flake graphite.”

As part of the deal, Ucar agreed to buy 2 million Mazarin shares at $1.09 per share by way of private placement, including warrants to buy a further 1 million shares at $1.50 per share.

The memorandum-of-understanding calls for Ucar to fund a feasibility study, which is expected to cost $3 million and take almost two years to complete. Ucar can then decide to develop the deposit with Mazarin, or exercise an option to extend development for up to an additional five years (or terminate the option).

Lac Knife is expected to be a long-term source of high-quality, low-cost natural flake graphite for the manufacture of advanced flexible graphite materials for flow-field plates (a key component for proton exchange membrane fuel cells), as well as other natural graphite product applications.

The deposit hosts geological reserves of 5.5 million tonnes grading an average 17.1% carbon. It is capable of producing an estimated 50,000 tonnes of flake graphite annually, which would make it one of the largest graphite producers in the world.

Ucar Graph-Tech has the option of buying the entire production of graphite flake from the deposit once commercial production begins, which could be as early as 2004, under a long-term contract.

The project would be owned by a new company held 60% by Graph-Tech and 40% by Mazarin. Capital costs are estimated at $60 million.

Mazarin is an industrial minerals company. Through subsidiary AlumiCa, it manufactures calcium aluminate, a product used to refine steel in the last phase of production. Another subsidiary, Dolomex, extracts, processes and markets dolomite products.