Mineral Commodities looks to Norway to grow its graphite portfolio

Mineral Commodities (ASX: MRC) is set to acquire the highest-grade flake graphite operation in the world after entering into an agreement with private Norwegian liability company, Leonhard Nilsen & Sønner-Eiendom.

The Perth-based company informed the market today that it had entered into a share purchase agreement with the Norwegian firm to purchase Skaland Graphite, currently the largest flake graphite producer in Europe.

Skaland Graphite, which is is 66% owned by Leonard Nielsen, owns and operates the Trælen graphite mine and Skaland processing facility, Norway’s only graphite operation.

Trælen, located in northern Norway on the Island of Senja, has been operating since 2007. It currently produces around 10,000 tonnes of graphite concentrate per annum at an average grade feed of 28% carbon.

Mineral Commodities executive chairman Mark Caruso said Skaland presented an excellent opportunity for the company to gain near-term graphite production capacity.

“When combined with the upcoming development of the Munglinup graphite project, Mineral Commodities will, in a very short time, become a major global strategic graphite producer with two high-grade graphite producing assets in tier one jurisdictions,” he said.

The company plans to fund the acquisition from existing cash reserves for the total consideration of US$9.2 million which comprises an initial cash payment of US$4.8 million.

Mineral Commodities noted that the acquisition remains subject to regulatory approvals with closing expected to occur in the second quarter of 2019.

The new Norwegian graphite assets will complement the company’s current Munglinup graphite project in Western Australia, which is in the final stages of a definitive feasibility study.

The mine will catapult Mineral Commodities to becoming a low-cost producer of high-quality graphite which is commonly used in the global steel industry.

Historical workings

In 2018, the Trælen mine delivered approximately 37,000t of ore to the processing plant.

While no JORC-compliant reserve exits or the Trælen deposit, a 1998 pre-feasibility study estimated geological resources of 1.25 million tonnes at 22% carbon.

An updated review by consultants in 2002 deemed the deposit to contain just over 500,000t of graphite, while a 2015 updated estimate conducted by geologists from Rana Gruber concluded a 2.2Mt resource.

Significant potential to prove up Trælen remains given no resource model has been developed for the deposit utilising modern cut-off grade analysis and estimation.

Once the transaction is wrapped up, Mineral Commodities plans to conduct a work program which will include remodelling the deposit, additional exploration and resource definition drilling, resource optimisation for various underground mining and studies to define the high value optimum plan for conversion of the resource to ore reserves.

Mineral Commodities shares jumped 9.3% to $0.175 in morning trade.