Kibaran Resources is emerging Tanzanian graphite producer that boasts an existing high-grade JORC-compliant resource base, Scoping Study and most importantly a binding off-take agreement with a European graphite trader.
| Corporate Details |  |
| Status: Emerging Producer | |
| Size: Small Cap | |
| Commodity Exposure: Graphite | |
| Share Price: $0.40 | |
| 12-month Range: $0.05 – $0.425 | |
| Shares: 130m, Options: 17m | |
| Top 20: 38% | |
| Net Cash: $4m | |
| Market Value: $52m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q1 2014 Exploration Spend: $0.217m |
| Financial Security | ✓✓✓✓ | Q1 2014 Admin Spend: $0.205m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 51%, Admin Spend 49% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q2 2014 Forecast Exploration Spend: $0.221m |
| Project Risk | ✓✓✓✓✓ | Q2 2014 Forecast Admin Spend: $0.132m |
We introduced Kibaran Resources to our MineLife Portfolio during April 2014 with a Spec Buy recommendation around $0.20, based on positive initial meetings with key management of the company, who demonstrated a highly commercial attitude. Graphite will remain a hot topic amongst investors as a result of the exciting opportunities that lie ahead, as evidenced by recent developments surrounding US electric vehicle manufacturer Tesla. Kibaran has the potential to generate strong capital gains for investors.
We’ve consistently stated that there are clear guidelines that should be adhered to when assessing credible graphite investment candidates. Firstly, the company should maintain a focused board and management team, with a clear strategy of how to successfully commercialise their project. Secondly, the project itself must contain high-grade, low impurity, flake graphite that can be utilized in the growing range of modern applications. We believe that Kibaran Resources satisfies all of these key investment criteria.
Kibaran has enjoyed a strong share price performance, firming from $0.05 in October 2013 to its highest price level in two years this week of $0.425. Recent high grade drilling results and positive metallurgical test-work results are hugely important because they demonstrate that ultra-high grade/low impurity graphite can be reached easily in a single, one-step process. This means there are no limitations on the applications and uses of Epanko flake graphite, enhancing its overall commerciality.
Recent Activity
Kibaran has this week announced outstanding results from recent RC drilling at its Epanko deposit, situated within its Mahenge Graphite Project in Tanzania. The work has generated the best graphite intersections to date, including 22 metres at 13.4%TGC (total graphitic content), including 7 metres at 20.1% TGC and 39 metres at 11.3%TGC, including 12 metres at 14.5% TGC and 6 metres at 15.5% TGC.
Significantly, all drill-holes intersected high-grade, premium large flake graphite mineralisation, with the majority of holes encountering graphite mineralisation from surface to the end-of-hole. Importantly, the Epanko graphite mineralisation still remains open at depth and in all directions.
What’s also important is that these outstanding high-grade drilling results follow on from the fabulous metallurgical results announced last week from Epanko, which yielded ultra-high purity results exceeding 99.9% carbon from a simple one-step process after flotation. The average carbon head grade was reported to be 13.6% carbon, with large flakes of up to 3mm observed before crushing.
This test-work was undertaken at NGS Naturgraphit GmbH, an independent company that specialises in worldwide graphite sales and carbon-based products, located in Germany. The test-work was overseen by Kibaran’s graphite trader under its partnership and sales arrangement.
Technical Significance
With the graphite market currently focused on graphite of between 94% and 97% carbon purity, Kibaran’s capacity to simply and inexpensively produce ultra-high purity flake graphite of 99.9% from Epanko concentrate means it is superbly positioned to tap into a multitude of markets, along with an opportunity command a premium price. One of Kibaran’s product options is the burgeoning market for lithium-ion batteries, which utilize both expanded and spherical graphite in their composition.
Work is well underway to upgrade the existing JORC Inferred Mineral Resource (14.9Mt @ 10.5% TGC for 1.56Mt of contained graphite) to an Indicated/Measured category, with a substantial increase likely. The resource estimation work is running in parallel to ongoing development studies and Kibaran is now fast tracking this work to a development decision.
Project Background
The Mahenge Project is a historically recognised graphite occurrence in southeast Tanzania. Past exploration work has identified coarse flake, high-grade graphite material within the project area. The Mahenge project hosts the Epanko Deposit – a 100%-owned graphite target comprising a Western Zone of mineralisation and an Eastern Zone of mineralisation. Epanko is now the primary focus for Kibaran, with an aggressive exploration work program well underway.
During December 2013, Kibaran reached a major milestone with the signing of a binding off-take and partnership agreement with a major European graphite trader. Under the terms of the deal, the European graphite trader guarantees the purchase of 10,000 tonnes of graphite concentrate per year from Kibaran, for an initial period of five years with the option to renew for a further five years. This is a non-binding contracted term, not a production target as production may not occur. Production will depend on upgrade of Resources and a positive feasibility study.
Kibaran meanwhile continues to advance discussions with Richland Resources Limited and its joint venture partner, the State Mining Company (STAMICO), regarding the graphite rights associated with the historic Merelani graphite mine. Meralani is significant because it represents the largest historical production of graphite in East Africa, with only a small part of the deposit mined prior to its closure in 1998. The project is likely to be attractive to numerous end-users as they look to lock in supply, given the project’s premium quality and production history.
Summary
We reiterate our view that Kibaran Resources is in the right place at the right time as far as escalating market interest in quality graphite plays with a defined path to production, is concerned. Spectacular drilling and metallurgical results released over the past week reinforce our confidence in Epanko’s commerciality. Accordingly, we don’t believe it’s too late for new investors to get aboard, considering Kibaran’s market value is under $60m, which is quite modest in the context of current ASX-listed graphite plays. Accordingly, we recommend Kibaran Resources as a Speculative Buy for those without current exposure.
