Fermont, Que. — Industrial miner
Last year, Mazarin and Graftech’s parent company
“For us, the deposit not only represents a chance for us to grow, but also to become leaders in the graphite industry and, later, even to participate in its transformation,” says Mazarin president Jacques Bonneau. “We’re happy to have found a partner who has a market for all this graphite, and with Graftech, we’re with a ‘Cadillac’ of a company.”
The Lac Knife deposit is situated 30 km south of Fermont and is accessible by gravel road. The town of Fermont can be reached from the south by road or rail.
The deposit was discovered in 1988 by Mazarin geologist Pierre Poisson, who was following up a 1959 provincial geology map that had identified a 1-sq.-metre outcropping of graphite. (Today, Poisson acts as a consultant to Mazarin and has spent the summer overseeing the taking of bulk-samples from Lac Knife.)
The 1988 discovery was the fruit of an innovative joint venture between Mazarin and the city of Fermont, which is always seeking to diversify its economy away from the sometimes harsh cycles of the local iron-ore business.
Geologically, the Lac Knife deposit is situated in the Grenville province, a few tens of kilometres south of the triple junction of the Grenville, Superior and Churchill provinces. The petrology is characterized by quartz-feldspar gneisses enriched in graphite (10-50%) and non-economic sulphides (5-20%), namely pyrrhotite, pyrite, sphalerite and galena, and the grade and grain size of the graphite mineralization is generally constant throughout the deposit.
Graphite is an unusual mineral in that it exhibits the properties of both a metal (ie. high thermal and electrical conductivity) and a nonmetal (ie. chemical inertness, high thermal resistance, and lubricity). Treated graphite conducts heat and electricity as well as copper does, but it has a density of only 1.1 grams per tonne — 1/8 that of copper — making it ideal for automotive and portable-electronic applications.
In 1989, Mazarin carried out trenching at Lac Knife followed by a 99-hole, 7,600-metre drilling campaign that proved up a reserve of 8.1 million tonnes grading 16.7% graphite.
The drilling showed that the deposit extends over 600 metres in length, strikes roughly north-south and dips steeply to the west. Its width averages 20 metres but may reach up to 100 metres in the nose of folds. The deposit is open to the south and at depth.
The resulting pit outline extends to 125 metres depth and the strip ratio is about 1-to-1. Overburden is only about 6 metres in thickness.
Two feasibility studies were completed, the first in 1989 by consultants Roche and Davy, and the second a year later by Kilborn and Roche for Cambior. These studies envisaged capital costs in the neighbourhood of $32 million, in 1991 dollars.
Mazarin had originally hoped to bring the Lac Knife deposit into production in 1991, but the economy went into recession and graphite prices nose-dived and have never substantially recovered.
Mazarin then had to wait a decade for new developments in fuel-cell technology that made the Lac Knife deposit once again appear economic.
Enter Graftech
UCAR, the world leader in developing new graphite products, was created by Union Carbide in 1992 and went public in 1995 on the NYSE.
UCAR then formed Graftech in September 1999 to take care of its graphite-foil and flexible-graphite products. A planned initial public offering of Graftech was aborted in mid-2000 when the IPO market began to dry up. Today, Graftech has revenues of about US$100 million annually, with some 60-70% of sales generated from automotive head gaskets.
Since its inception, UCAR had been looking for new applications for its flexible graphite products, which were already being used in high-temperature fluid sealing applications as well as in gaskets in auto engines.
A breakthough came in the mid 1990s when UCAR started working with Ballard using natural graphite.
Graftech created a product called “Grafcell,” which is an advanced flexible graphite material designed for use in the flow-field plates of Ballard’s benchmark Mark 900 fuel cell.
A fuel cell is a power generator that produces electricity through the chemical reaction of hydrogen and oxygen, without combustion, giving off only heat and water as the primary by-products. The hydrogen can be sourced from methanol, natural gas or petroleum, while the oxygen can be sourced from the atmosphere. In short, the fuel cell is a revolutionary product that, once it can be mass-produced economically, promises to dramatically improve the air quality of cities.
By combining hundreds of single fuel cells, a fuel-cell stack is created, with each stack comprising hundreds of square feet of Grafcell material.
At the same time as it created the Grafcell, Graftech hired Toronto-based consultants Strathcona Mineral Services to carry out a global search for an appropriate graphite deposit for use in these cells. The search eventually led to Lac Knife.
Meanwhile Ballard partnered with automotive giants DaimlerChrysler and Ford (which respectively own 18% and 14% interests in the company) and supplied fuel cells to General Motors, Honda, Mazda, Hyundai, Nissan, Volkswagen and others. A second potentially large market for fuel cells is in stationary power generators.
Currently in a typical car there is about a half pound of graphite, but with a fuel-cell-powered car using a 75-kW stack, some 10-30 lbs. of graphite will be required per automobile.
Thus if only 2% of the new cars that are built each year in North America become powered by fuel cells, that will create new demand for graphite equal to the entire demand for head-gasket graphite.
Graftech-Ballard pact
Crucially, in June 2001, Graftech and Ballard updated a 1999 agreement such that, until 2015, Graftech will be the exclusive manufacturer and supplier of natural graphite-based materials for Ballard’s proton-exchange-membrane (PEM) fuel cells.
Under that deal, Ballard agreed to invest US$5 million in Graftech, thus acquiring a 2.5% interest. Futhermore, Graftech will be able to sell its flexible graphite products to any third parties, after agreed-upon release dates.
“Graftech’s advanced flexible graphite technologies and engineering capabilities will play a significant role in supporting the commercialization of Ballard fuel cells,” says Ballard President Kip Smith in a release.
“Natural graphite is the key — it is at the centre of our whole technology,” says Graftech President John Wetula, noting that natural material is preferred over the more-expensive synthetic graphite, which is created from coal and can take up to half a year to manufacture.
“With Ballard, one of the first questions they asked was, ‘is there enough graphite in the world that we can use?'” says Wetula. “The answer, of course, is yes, but going forward, we will eventually need more than Lac Knife — that’s why we’re looking in the surrounding areas.”
Generally the partners are looking for material that grades 15-20% graphite. Typical usage is of 50-80 mesh flakes or roughly 20-30% of the contained graphite flakes at Lac Knife.
One of Graftech’s major objectives is to further refine its technology so that 100-250 mesh material, or up to 75% of the deposit’s contained graphite, can be used.
UCAR has already finished building a US$9-million manufacturing plant in Cleveland, Ohio, that will produce Grafcell products as well as eGraf electronic thermal management products.
The plant will work closely with Graftech’s product-development centre in Parma, Ohio, whic
h is devoted to cutting-edge research into carbon and graphite applications.
Ongoing work
While the Lac Knife deposit had already been drilled off in 1989, the partners did need to take two 1,600-tonne bulk samples this summer from two different pits.
These samples will soon be trucked to Quebec City for processing at facilities operated by Corem, a research consortium specializing in mineral processing and refining. Corem is funded by Quebec’s Ministry of Natural Resources with participation from university researchers and most of the major mining companies active in the province.
The next step will be to send the processed bulk samples from Corem to Graftech in Cleveland and run them through the manufacturing process for fuel cells, as well as for heat sinks and such specialty products as fire-retardant polymer foams.
Graftech carried out its own due diligence on the Lac Knife material in April 2000, testing 3 tonnes of graphite at their facilities in Cleveland. The resulting flexible graphite sheets have been subjected to 5,000 hours of testing and Wetula says the company “feels comfortable” with the quality of the Lac Knife graphite.
“One of the things that has always excited us is the quality of the deposit,” he says, noting that it is 2-to-3 times the average grade of most deposits being mined today.
The current feasibility study at Lac Knife is costing $3-5 million, with Graftech footing the bill. The partners want to complete the study by the end of 2002, so that mining of the deposit could begin in 2004. At full capacity, production could reach 50,000 tonnes of graphite flake per year, making Lac Knife one of the world’s largest graphite producers.
Processing would likely be based on standard on-site crushing and milling followed by flotation of the graphite and the elimination of gangue material using gravity-separation tables.
“The Lac Knife deposit is one of the richest in the world and it will be easy to mine,” notes Bonneau.
Any future mining activity at Lac Knife can draw on a wealth of mining talent and infrastructure located in the region, which hosts three mining towns (Fermont, Labrador City and Wabush) and serves as a base of operation for three iron-ore miners (Quebec Cartier Mining, the Iron Ore Co. of Canada and Wabush Mines.)
The study will also examine the possibility of exploiting a dolomite deposit situated near Lac Knife to neutralize sulphidic tailings. One option being looked at is storing tailings underwater at one end of Knife Lake, adjacent to the deposit.
In terms of further exploration targets, there is some geological and geophysical evidence of further high-quality graphite mineralization on the other side of Knife Lake.
Here in the most nationalist of provinces, the Quebec government could end up subsidizing up to 20% of the indirect costs of the project through the construction of access roads and connection of the site to the main electrical grid. And just last month, the Quebec government granted $547,000 to the partners to assist in completing the feasibility.
There is also a possibility that Hydro Quebec will build another power dam in the vicinity, so that the two groups might be able to co-ordinate future road building.
As well, like many other jurisdictions in North America, Quebec has already begun lobbying Ballard to build their fuel-cell production facilities in the province.
As part of last year’s deal with Mazarin, UCAR signed on for 2 million Mazarin shares priced at $1.09 per share, and was also issued warrants to buy 1 million Mazarin shares at $1.50 apiece.
If the partners decide to give the project the green light, Graftech and Mazarin will respectively own 60% and 40% of the new company formed to exploit the deposit.
The big question that looms for Mazarin shareholders is what price will be paid for Lac Knife graphite. The answer will only become clearer during the next year or two when Ballard at last makes a decision whether to proceed with full commercial production of its fuel cells and, if so, at what rate of production.
In 2000, prices for crystalline flake graphite concentrates ranged from US$480 to US$550 per tonne and commanded higher prices than microcrystalline graphite which sold at about US$225 per tonne. Synthetic graphite sold for about US$2,000 per tonne.
U.S. consumption of natural graphite totalled 41,800 tonnes in 2000, with crystalline-flake graphite accounting for nearly 45% of that supply.
Currently, the top five producers of natural graphite are, in order of importance: China, India, Brazil, Mexico and the Czech Republic. Together, these five countries contribute 80% of the world’s production, which totals 602,000 tonnes annually.
In Canada and the U.S., the only graphite producer is the Stratmin mine in Lac-des-Iles, Que., north of Ottawa. It is operated by privately owned Mircal Mineral Canada.
Mazarin also holds a half interest in the Niobec niobium mine, has a stake in asbestos producer LAB Chrysotile, and operates a dolomite quarry and calcium aluminate plant. All these operations are situated in Quebec.
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