Ontario permitting delays irk Northern Graphite

The following article is reprinted with permission from CMJ’s sister publication The Northern Miner.

The following article is reprinted with permission from CMJ’s sister publication The Northern Miner.

Northern Graphite (NGC-V) CEO Gregory Bowes made it clear in a press release today [July 8, 2013] that he's frustrated with permitting delays at the company's Bissett Creek graphite project, in northern Ontario.

In the release, the company pointed out that permits that should be taking the Ministry of Northern Development and Mines (MNDM) 30 to 45 days to process are stretching into seven months and more – including a mine closure plan that was submitted to the ministry at the end of October.

“This '45-day approval process' has been ongoing for over seven months despite Bissett Creek being a relatively benign operation with no major environmental issues,” reads the statement.

The company, which says the project has strong local support and that consultations with First Nations have been positive, had previously expected permitting to be complete by the end of 2012.

The junior says the mine closure plan has been reviewed by the ministry, but that it can't be approved until a mining lease is issued for Bissett Creek.

Northern Graphite applied for a mining lease in October 2011, in relation to that, was asked to redo a government survey of provincial lot and concession lines that make up its property's boundaries last July. It submitted the completed survey in November, but has had to wait much longer than the standard 30-day time for the survey to be approved.

“Northern Graphite is competing with companies in Quebec, Europe, Africa and Australia to build the first new western graphite mine in over 20 years,” the release continues. “Being first to market is very important but the company is at a competitive disadvantage due to the regulatory process in Ontario, which continues to damage the province's reputation as a place to invest and is potentially depriving it of investment, jobs and tax revenues.”

China dominates natural graphite production, and there are several juniors including Ontario-based Zenyatta Ventures (ZEN-V) advancing projects outside of Asia to supply the battery market.

The graphite junior also announced the resignation of Don Baxter, the company's president. A mining engineer and former president of private graphite company Ontario Graphite, Baxter will continue to consult for the company.

Northern Graphite is working on an updated feasibility study for Bissett Creek, located about 100 km east of North Bay, that will include a new resource model and mine plan, updated capital and operating cost assumptions, and lower graphite prices.

Graphite prices have fallen to around US$1,400 to US$1,500 per tonne for large flake, +80 mesh, 94-97% carbon as graphite from highs of around US$2,000 to US$2,500 last year (See Mining Market's primer on graphite for background on the market.)

While Bissett Creek is low grade deposit – probable reserves come to 19 million tonnes grading 1.89% carbon as graphite – large flake graphite fetches a premium. More than 50% of the graphite at Bissett Creek is “jumbo” sized (+48 and +32 mesh).

Northern Graphite said the new feasibility study is about two months behind schedule because the consulting firm it is using is facing a backlog of work with its other clients.

A feasibility study completed last year showed that with a capital investment of US$103 million in an open-pit, 2,300-tonne-per-day operation, Bissett Creek would have a net present value of US$125 million (after taxes) with a 20% internal rate of return. Production would be 18,600 tonnes of graphite concentrate per year at 94.5% carbon. The study used a discount rate of 8% and a graphite concentrate price of US$2,600.

In response to a request for comment on Northern Graphite's permitting delays, an MNDM spokesperson emailed the following statement.

"Ontario continues to be a leading global destination for mining investment and exploration and MNDM remains dedicated to providing a superior level of customer service to all companies who choose to invest in our province. The Ministry of Northern Development and Mines remains committed to working closely with companies, including Northern Graphite, to guide compliance with the province’s regulations required under Ontario’s Mining Act," reads the statement.

"MNDM continues to work closely with Northern Graphite to ensure their closure plan amendment meets regulatory requirements. Ontario’s Mining Act requires a complete and thorough closure plan to ensure that the project is developed, operated, and rehabilitated in a manner that minimizes the impacts of the activities on public health and safety, and the environment. As part of this process a request for additional information was made to Northern Graphite in order to meet the regulatory requirements for their closure plan amendment. This information is presently being reviewed."

Northern Graphite shares traded at 85¢ today in a 52-week range of 58¢ to $1.99. The company has 49 million shares outstanding and at the end of March, had working capital of $7 million.

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