Energizer Resources Inc. (TSX:EGZ,OTCQX:ENZR,FWB:YE5) is a mineral exploration and mine development company based in Toronto, Canada, that is developing its 100%-owned, flagship Molo Graphite Project in southern Madagascar.
The Molo is an advanced, full feasibility-stage project that contains 100% flake graphite. ‘Flake’ is the most desirable type of natural graphite because it is the only one that can be used in all 180-plus applications that rely upon graphite today.
The Company’s February 2015 full feasibility (FS) study demonstrated the economic viability of the Molo deposit, outlining a very large NI 43-101 compliant resource that is immediately at surface, hosting a 26-year mine life with annual average production of 53,017 tonnes of flake graphite concentrate, a negligible strip ratio and operating costs in the lowest cost percentile. The Molo is expected to deliver a post-tax NPV of USD$389M, an IRR of 31% and payback in less than 5 years.
Energizer anticipates an 18-month construction period, with first production targeted in mid-2017. The Company is currently focused on securing project financing and off take agreements on the strength of the FS study results.
- Energizer has sent to global graphite buyers over 13 tonnes of graphite concentrate for evaluation, which was produced utilizing a full-scale pilot plant
- Results to date from leading graphite buyers and manufacturers globally verifies that Molo meets all quality and performance specifications for the top graphite growth markets; refractories, lithium-ion batteries and expandable graphite applications (foils)
- Very high purity with very favorable flake size distribution:
- 46.4% of Molo deposit contains the premium-priced large and jumbo flake graphite while 78.9% of deposit meets the minimum required size for producing battery grade graphite (medium flake and larger, or +200 to +48 mesh
- Molo can almost achieve battery-grade purities with simple flotation alone (98.1% C)
- The Molo project is ideally located within the hub of the top demand markets for purchasing and value-added processing of flake graphite – China, Japan, South Korea and India
The Molo Graphite Deposit
The Molo deposit is located in the Green Giant Graphite project in southern Madagascar, and is part of the joint venture (JV) property with Malagasy Minerals Limited.
Based on drill and trench data received to date, as well as mapping, prospecting, and geophysical surveying, graphite mineralization is confirmed at surface and over an area of at least 250,000 m2. Drilling has confirmed that the mineralization is open at depth in excess of 300 metres.
The Molo has a potential deposit size between 80-120 million tonnes*, at a grade range between 5 and 8% carbon (C). The Company anticipates the Molo will be the world’s largest known single source deposit of high-grade graphite. Molo’s size and scalability will be a barrier to entry for other producers.
*The potential quantity and grade of the Molo deposit is conceptual in nature and there has been insufficient assay data to adequately define a mineral resource in accordance with NI 43-101 requirements at this time. The potential quantity and grade of the Molo has been determined through the progression of exploration methodology. This included airborne geophysical surveys, ground geophysics, mapping, drilling and trenching. The deposit target range is based on drilling and trenching results obtained to date.
Energizer’s Molo deposit possesses four key attributes that set it apart from other deposits in the world and position it to be a potential low-cost production model for the industry. These include:
- An excellent topographical setting. The Molo deposit rests in a flat and semi-arid environment, with no environmental issues. With the deposit immediately at surface, operations can be optimized through little to no stripping requirements and easy access to site.
- An ideal geographic location. The Molo deposit is uniquely located in the centre of the hub of key graphite demand markets of China, India, South Korea and Japan. Furthermore, the Molo deposit is in close proximity to specialty-finishing battery producers in both Korea and Japan. Currently, China must send almost all of it’s spherical cut graphite (required for batteries) to both Korea and Japan for specialty coating, which is the final, and very complex, process to produce battery-grade graphite.
- At 100 million tonnes and an average grade greater than 6% carbon, the Molo would be the world’s largest known single source deposit of high-grade graphite, , In addition, the Molo deposit possesses a unique metallurgical characteristic that allows simple mechanical separation of the graphite up to 93% without flotation.
- Current in-place and serviceable infrastructure for transportation water and power. Confirmed by the PanaAlpina Group, one of the world’s leading intercontinental air and ocean freight supply chain and logistics companies, the in-place infrastructure at Molo will allow for immediate production. Utilizing a now serviceable road structure from site to port, 160km away, there are existing water sources proximal to the Project. Over-the-fence power will be required initially and will be satisfactory until the nearby Sakoa Coal Field (35km away) will upgrade the now serviceable infrastructure to world-class status. Targeted to produce 5 million tonnes of coal on an annualized basis, the Sakoa Coal Field will require significant upgrades to road infrastructure, port infrastructure, and on-sight power plants that Energizer expects to tap into. It is the Company’s understanding that the Sakoa Coal Field is targeting operation between 2015 and 2016.
Energizer secured a partnership in 2012 with DRA Mineral Projects (DRA), Africa’s leading mine engineering, construction and operations company. With over 30 years of operating experience in Africa, DRA has built over 200 mines and currently operates 23, with clients such as Xstrata, Rio Tinto, Anglo American and Vale. This is a significant advantage for Energizer as it advances to production as it gives the Company a complete ‘turn key’ solution for mine development. Another coup for Energizer is the appointment of two senior directors of DRA – one to Energizer’s Board of Directors and the other to its Mine Development Committee.
Feasibility Study Highlights:
|1.||Post-tax: NPV (10% Discount Cash Flow)(1)(2)||US$389,797,113|
|4.||Capital cost (“CapEx”)||US$149.9 million|
|5.||Design Development Allowance||US$13.8 million|
|7.||On-site Operating Costs (“OpEx”) per tonne of concentrate, Year 3 onward)||US$353|
|8.||Transportation per tonne of concentrate (from Mine site to Madagascar Port Year 3 onward)||US$182|
|9.||Transportation per tonne of concentrate (from Madagascar Port to European Customer Port from Year 3 onward)||US$155|
|10.||Average annual production of concentrate||53,017 tonnes|
|11.||Life of Mine (“LOM”)||26 years|
|12.||Graphite concentrate sale price (US$/tonne at Start Up – 2017)||US$1,689 per tonne|
|13.||Average Head Grade||7.04%|
|14.||Average ore mined per annum||856,701 tonnes|
|15.||Average stripping ratio||0.81:1|
|16.||Average plant recovery||87.80%|
|(1) Assumes project is financed with 50% debt and 50% equity.|
|(2) Values shown based on nominal cash flows, which include the effect of inflation. Costs are increased on an annual basis by the relevant inflation index.|
23.62 Mt at 6.32% carbon (“C”) (measured)
76.75 Mt at 6.25% C (indicated)
100.37 Mt at 6.27% C (measured & indicated)
40.91 Mt at 5.78% C (inferred)
14.17 Mt at 7.00% carbon (C) (proven)
8.37 Mt at 7.04% C (probable)
22.44 Mt at 7.02% C (proven and probable)
Summary of the PEA Study Results (Economic parameters refer to real numbers with the exception of the post-tax NPV and post-tax IRR; $USD)
|Pre-tax NPV (10% Discounted, real)||$421,464,000|
|Pre-tax IRR (Real)||48%|
|Post-tax NPV (10$ Discounted, real)||$341,803,000|
|Post-tax IRR (Real)||41%|
|Mine life||20 years|
|Graphite sale price||$1564 per tonne|
|Average Head Grade||8.50%|
|Average annual ore mined||1,169,749 tonnes per annum|
|Average stripping ratio||1.65|
|Average mill recovery||89%|
|Average annual production||84,000 tonnes per annum|
|Mining cost||$4.76 per tonne mined (Initial LOM)|
|Processing cost||$22.29 per tonne milled|
|Transportation cost (FOB port)||$105.00 per tonne concentrate|
Note: DRA is working towards meeting the requirements of a Preliminary Economic Assessment as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101″). The economic analysis relevant to the optimal pit model contained in the technical report is based on Indicated Resources (as defined in NI 43-101), and is preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves (as defined in NI 43-101). Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the reserves development, production, and economic forecasts on which the PEA is based will be realized. The capital expenditure estimate is based on a +/- 25% cost accuracy and does not include any ancillary costs outside of actual production of possible investment in infrastructure related assets. According to the Ontario Securities Commission, a PEA is held to be accurate to +/- 50% accuracy.
Mineral Resource Estimate
The mineral resource estimate for Molo is summarized below. The mineral resources are classified in the Indicated and Inferred categories according to the Canadian Institute of Mining Definition Standards. Resources within the “low grade” domain are stated at a 2% C cut-off, and resources within the “high grade” domains are stated at a 4% C cut-off. The total Indicated Resource is estimated at 83.99 Mt, grading at 6.36% C, with an additional Inferred Resource of 40.32 Mt, grading at 6.3% C.
|Classification||Material Type||Tonnes (Mt)||Grade (C%)|
|Indicated – Total||83.99||6.36|
|Inferred – Total||40.32||6.3|
In January 2014, the Company announced results from the pilot scale plant, confirming robustness of the proposed metallurgical flowsheet that was first developed on a laboratory scale under continuous pilot scale conditions. The results also developed process design criteria for the ongoing Molo Full Feasibility Study, and generated large samples of concentrate for evaluation by potential off take partners. The average total carbon content of twelve pilot plant surveys was 93.7% Ct at an average carbon recovery of 90.3%.
Highlights of the Pilot Plant Study:
- The average mass recovery into the large and extra-large flake category (greater than +80 mesh) was 43.5% based on the results of fifteen size fraction analyses of the combined concentrate;
- The average grade of the extra-large flake (greater than +48 mesh) was 97.7%Ct;
- The average grade of the large flake (greater than +80 mesh) was 97.4%Ct;
- The average grade of the medium flake (greater than +200 mesh) was 96.7% Ct;
- The majority of the impurities reported to the small flake size fractions (-400 mesh)
Production is poised to start-up in 2015, with an output capacity of between 50,000 and 150,000 tonnes per annum (tpa). Energizer’s technical partner DRA is designing the mine with three 50,000-tonne modules, where by the Molo will begin initially at 50 tpa, but can expand quickly to produce additional graphite as the market requires.
The Green Giant Graphite Project
The 100% owned Green Giant Project, located 145 km southeast of Toliara in the Tulear Region of South Central Madagascar. The project has the potential to become a flake graphite camp however the Company’s immediate focus is on the Molo graphite deposit located on the JV property.
Exploration to Date
The identification of graphite as a potential credit to the NI 43-101 compliant vanadium resource led geologists to conduct a reconnaissance exploration program on the property with the goal of delineating new graphitic trends, and comparing them to those associated with the vanadium mineralization.
During the course of the Phase I program, surficial graphitic trends were identified on the Green Giant Property. These graphite trends were visually determined to be of both higher carbon content, and larger flake size than those associated with the NI 43-101 compliant vanadium resource mineralization. Based on the promising results of the Phase I program, the Phase II exploration program was launched in November 2011.
In March 26, 2012, Energizer Resources announced that graphite ore samples from the Fotsy and Molo zones were submitted to the North Carolina State University (NCSU) Minerals Research Laboratory in Asheville, North Carolina for preliminary evaluations to define potential for recovery of commercial products. Simple mechanical crushing with no flotation yielded flake sizes of +50 mesh, which, according to Tom Burkett, Vice President of Graphite Materials & Systems at SGL Carbon Group – the world’s largest carbon company – is regarded by the industry as jumbo flake. Both ores have produced graphite concentrates at purities of +90%.
In the Fondrana Zone, the average aggregate graphite intersection from drilling is 73 metres with a weighted average carbon assay of 6.14 percent C, while the average aggregate trench intersection is 82.5 metres with a weighted average of 6.73 percent C. The Fondrana zone is found at surface and extends to a vertical depth of at least 120 metres. The zone is confirmed to extend for at least 800 metres in strike length with mineralization open along strike and at depth.
In the Fotsy Main Zone, the average aggregate graphite intersection from drilling is 20.8 metres with a weighted average carbon assay of 5.62% C, while the average aggregate trench intersection is 10.9 metres with a weighted average of 6.33 percent C. The Fotsy zone is found at surface, extends to a vertical depth of at least 115 metres, and is open along strike and at depth. The zone is confirmed to extend for at least 800 metres in strike length. Mapping and prospecting have indicated that this zone extends for over 6 kilometres in length.
Energizer has put its exploration activities on hold while it focuses its efforts on developing the Molo graphite deposit.
In January 2012, there were 9 junior exploration companies involved in graphite exploration on the ASX, AIM and TSX Venture exchanges. Today, there are over 82 companies managing 150 graphite projects in 13 countries. Of those 82, 9 have a compliant resource (NI 43-101 or JORC), 3 have a PEA, 1 has a Bankable Feasibility Study, and none have an off-take arrangement.
Energizer’s Molo deposit possesses four key attributes that set it apart from other deposits in the world and position it to be a potential low-cost production model for the industry. These include: an excellent topographical setting, an ideal geographic location, current in-place and serviceable infrastructure for transportation water and power, and at 100 million tonnes and an average grade greater than 6% carbon, the Molo would be the world’s largest known single source deposit of high-grade graphite.
Richard Schler – Chief Executive Officer, Director
Mr. Schler, has served as the Company’s Executive Vice President since September 2012 and has worked for the Company and served as a director since April 2006. Prior to being appointed Executive Vice President, Mr. Schler held numerous positions including Chief Financial Officer and Chief Operating Officer. Before joining Energizer, Mr. Schler held various senior management positions with noted corporations in the manufacturing sector. Mr. Schler holds an MBA (Masters of Business Administration) from Western University and has a background in Mechanical Engineering.
With over 30 years of financial management, engineering and business operations experience, Mr. Schler’s unique skill set will allow the Company to continue the advancement of the Molo Graphite Project and help to realize Energizer’s potential capability to be a low cost, vertically integrated producer of value-added graphite products.
Craig Scherba, P.Geol. – President & COO, Director
Mr. Scherba was appointed as our President and Chief Operating Officer during September 2012 and a director during January 2010. Mr. Scherba served as Vice President, Exploration of the Company from January 2010 to September 2012. Mr. Scherba also servers as Vice President, Exploration of MacDonald Mines Exploration Ltd., Red Pine Exploration Inc. and Honey Badger Exploration Inc., all of which are resource exploration companies trading on the TSX – Venture Exchange. In addition, Mr. Scherba was professional geologist with Taiga Consultants Ltd. (“Taiga”), a mining exploration consulting company from March 2003 to December 2009. He was a managing partner of Taiga between January 2006 and December 2009. Mr. Scherba has been a professional geologist (P. Geol.) since 2000, and his expertise includes supervising large Canadian and international exploration. Mr. Scherba was an integral member of the exploration team that developed Nevsun Resources’ high grade gold, copper and zinc Bisha project in Eritrea. Mr. Scherba served as the Company’s Country and Exploration Manager in Madagascar during its initial exploration stage.
Robin Borley, B.Tech, Mining Engineering – Senior Vice President, Mine Development
Mr. Robin Borley is a Graduate mining engineering professional and a certified mine manager with more than 25 years of international mining experience building and operating mining ventures. He has held senior management positions both Internationally and within the South African mining industry. He has most recently served as Mining Director for DRA Mineral Projects and was instrumental as the COO of Red Island Minerals in a developing a Madagascar coal venture.
His diverse career has spanned resource project management, evaluation, exploration and mine development. Robin has completed several mine evaluations including operational and financial evaluations of new and existing operations across a diverse range of resource sectors. He has experience in the management of underground and surface mining operations from both the contractor and owner miner environments.
From 2006 through to 2012, Robin participated in the BEE management buy-out transaction of the Optimum Colliery mining property from BHP, through its independent listing and its ultimate sale to Glencore in December 2012.
Peter Liabotis – Senior Vice President, CFO & Corporate Secretary
Mr. Liabotis was appointed as our Chief Financial Officer on September 19, 2012. From October 2009 through September 18, 2012, Mr. Liabotis served as our company’s Vice President – Finance. Mr. Liabotis also currently serves as Vice President – Finance of MacDonald Mines Exploration Ltd., Red Pine Exploration Inc. and Honey Badger Exploration Inc., all of which are resource exploration companies trading on the TSX – Venture Exchange. From August 2008 to September 2009 Mr. Liabotis worked for EFG Wealth Management (Canada), Ltd assisting with accounting matters and Canadian mutual fund launches. From July 1998 through July 2008, Mr. Liabotis was the Senior Vice-President and Chief Financial Officer of Olympia Capital (Bermuda) Ltd, a Bermuda corporation. Prior to July 1998, Mr. Liabotis worked for two years at PriceWaterhouseCoopers in Bermuda and two years with KPMG in Canada Mr. Liabotis is a member of the Board of Directors of Honey Badger Exploration, Inc. Mr. Liabotis is a Chartered Accountant (through the Institute of Chartered Accountants of Ontario), received his Bachelor of Commerce, Honours from the University of Windsor and received his Bachelor of Arts from the Western University (in Ontario, Canada).
Brent Nykoliation – Senior Vice President of Corporate Development
Mr. Nykoliation holds a Bachelor of Commerce degree with Honours from Queen’s University, and has a career that has spanned 15 years in various senior management roles in marketing and corporate development with notable industry leading companies such as Nestle, Home Depot and Whirlpool.
Quentin Yarie – Senior Vice-President of Exploration, Director
Mr. Yarie’s principal occupation is as a professional geophysicist (P.Geo). He is President & CEO of Red Pine Exploration Inc., Senior Vice-President of Exploration for Honey Badger Exploration Inc. and Senior Vice-President of Exploration for MacDonald Mines Exploration Ltd. since January 1, 2010.
Mr. Yarie was the business development officer of Geotech Limited, an Ontario corporation from October 2007 to January 2010. From September 2004 through October 2007, he was a senior representative of sales and business development for Aeroquest Limited.
Roland Fok Seung – Chartered Accountant and Madagascar Country Manager
Mr. Fok Seung is a Chartered Accountant of the Institute of England and Wales and the Association of Chartered Certified Accountants. Employed as Energizer’s Madagascar Country Manager for the past 5 years, Mr. Fok Seung is based full time in Madagascar and will continue to act in this capacity with a focus on financial related business activity.