Blair Way became President and Chief Executive Officer of Vancouver-based Flinders Resources Ltd in the Fall of 2013 and the Board of Directors gave him a clear and simple mandate.
His job was to put the company’s mothballed Woxna graphite mine in central Sweden into production and he had to do it with a budget of $5 million.
“I took a look at this asset in June 2013 and said you’ve got to get this thing started,” recalls the Nova Scotia native who has worked as an engineering consultant on mining projects around the world.
“I told the Board that if I can’t do it for under $5 million, I’m not doing my job. They said if you think you can, go ahead. So I did.”
Way got the job done for just under $4 million, as it happened. Production resumed in July of this year and the company held the official opening of the Woxna mine on Sept. 22.
Then, on October 14, Flinders announced that it had signed a Letter of Intent with ThyssenKrupp Metallurgical Products, a huge German multinational company that has operations in 80 countries and employs more than 160,000 people. ThyssenKrupp uses graphite in its own operations and also markets the commodity to other users. It has agreed to purchase 20,000 to 50,000 tonnes of Woxna graphite over a 10-year period.
“That’s a huge step for us,” says Way. “We’ve been working on it in the background for some time. It gets us into the market with a very reputable multinational. We’re happy to have the documents signed.”
Graphite is an industrial mineral used mainly in the refractory bricks that line the steel walls of crucibles and other equipment used in smelting metals. It is an excellent conductor of heat, as well as electricity, and enhances the capacity of the bricks to absorb the heat of the molten metal. But the brick liners must be replaced periodically, which ensures that there is steady demand for the graphite used in them.
The Woxna mine operated from 1996 until 2001 when China used its dominance to the disadvantage of competitors. China has traditionally produced about 85 per cent of the world’s graphite and it flooded the market. Prices dropped abruptly and the previous owners of the Woxna mine were forced to suspend operations. Since then, however, Chinese production has decreased while demand has grown and prices have recovered.
Flinders acquired the Woxna mine in 2011 and spent the next two years working with Swedish regulators to acquire the approvals and permits necessary to resume production. Way then joined the company and became responsible for refurbishing the processing plant and re-starting the mine.
“We purchased used equipment which in most cases was new and slated for other projects but had never been used,” he says. “We were buying at $.20 to $.25 on the dollar.”
The Woxna mine is, for the moment at least, a small-scale, open pit operation. The pit covers an area several hundred metres square and is only 100 to 150 metres deep. Reserves are currently estimated at 2.81 million tonnes, with an average grade of 11 per cent graphite, which is enough to keep the mine in operation for 20 years. However, the company is convinced it is sitting on much larger reserves, but it has to yet to do the exploration required to determine the size of the deposit.
Currently, the plant operates three or four days a week and the workforce ranges from 10 to 15 employees, depending on the level of production. “We’re not running the plant 24/7 because our sales don’t warrant it,” says Way. “We run production to match sales, which is unlike most precious metal or base metal mines. Once they have a plant, they run it full out to get production.”
Having put the mine into production, Flinders can now begin to market Woxna graphite and as the company signs new customers it will be able to increase output and add to the workforce. In fact, Way points out that most consumers of graphite will not enter purchase agreements with producers until they have their mine up and running.
Meantime, Flinders is in the process of acquiring another mothballed graphite mine from Big North Graphite Corp., a Vancouver-based junior exploration company. The El Tijon Flake Graphite Mine is located in the Mexican state of Oaxaca and was built by the federal government of Mexico in 1980. Private investors acquired the mine and its mill in 1989 and operated it until 2002 when falling prices forced them to shutter the operation.
Way says Flinders expects to complete the transaction early in the new year and will spend six to 12 months refurbishing the plant and putting the mine into operation. Then it will begin to market the product. “We’ve talked to customers and they’re ready to make a deal as soon as get it up and running,” he adds. “We’ll do the same as we did at Woxna.”
Graphite has long been an obscure industrial mineral, but new markets are emerging that could have a significant impact on demand. The large-scale batteries used to store electricity generated by solar farms and windmill installations require graphite and the emergence of electric cars will also boost demand since every such vehicle will contain between $100 and $150 worth of the material.
For the foreseeable future, however, most of the world’s graphite will be used in refractory bricks. China will also remain the largest producer, but Flinders’ entry into the market with its Woxna mine is a significant development, regardless of the size of the operation.
Currently, there are only three other graphite mines in Europe. One is in Norway and privately owned and there are two small operations in Germany, but all three deliver to a small group of consumers and do not trade into the broader market. That has left big European consumers of graphite overly reliant on China.
“As a European company, ThyssenKrupp is very happy to have a European source so they don’t have to get it all from China,” says Way.
Furthermore, Flinders can move its product to European customers quickly and cost effectively. It can deliver to Western Europe in containers hauled by trucks and, should it develop markets in eastern Europe, the company could rely on marine transport.