From Stockholm, Sweden, 22 September 2014
Flinders Resources (TSX.V: FDR) has become the first pure play, publicly listed graphite producer after successfully restarting the Woxna mine in central Sweden.
Benchmark Mineral Intelligence was invited to the official opening of the flake graphite operation on 17 September and witnessed the ribbon cutting on the plant which is expected to produce 11,000 tonnes at maximum capacity.
With the opening of the mine and plant, which are adjacent to one another, Flinders has become the first of the new wave of graphite exploration companies to make it into production.
The company, led by CEO Blair Way, has managed to get Woxna back up and running for the first time in 13 years by spending less than $3.5m on the plant and mine.
It will take the company some time, however, to tweak and improve its refining process and is only expected to produce up to 4,000 tonnes in the next 12 months. A gradual step up to Woxna’s permitted capacity of 11,000 tpa is expected in the next 3 years.
Blair Way explained that the company first wanted to prove it can get product into the market and then focus on building a business.
The plan now is to build on the first sales contract that is already in place and make inroads into the European market through deals with traders and end users.
Woxna used to produce a graphite concentrate with an average of 92% C, but the company is expected to produce the industry standard of 94% C to enable it to sell into major refractory and foundry markets and compete with supply from China, the leading producer.
To firstly produce a consistent product and then build a network of buyers are now the major challenges facing the company.
Flinders’ position on the global scene
With a total flake graphite output of 375,000 tpa in 2013, the Woxna operation will account for around 3% of total world output at capacity.
While that number at first may seem insignificant, in context of the European market, the importance of the new operation becomes clear.
Europe only has one flake graphite mine it can rely on (not including Russia). The underground operation at Skaland in Norway produces on average 9,000 tpa. Smaller volumes are produced from a mine in Germany but it is a captive source for AMG Mining, while Ukraine’s future remains unstable due to the conflict in the country.
Flinders’ start up has in essence doubled Europe’s capabilities to produce flake graphite in a world which is eager to reduce reliance on the dominant supply from China, which accounts for 60% of output.
While operations are higher cost in Europe, the significant savings on shipping could give European based producers a way into the competitive market, certainly when considering the supply security benefits of such operations.
With most major buyers in Europe relying on China and to a lesser extent Canada and Africa, they will welcome any new supply options.
In fact, the need for new supply is indeed intensifying with consolidation activities in China, long term production doubts over Canada’s only major mine, and Brazil’s lack of activity on the global scene.
What Flinders will now try and show is that new suppliers can survive and thrive in what has been the toughest fundraising environment for new projects many can remember, ever.
The only question remains is whether buyers are now willing to accept that with supply security comes a price premium and the days of cheap graphite are all but over?