Bass Metals: global market now seeing cross over of rising demand and decreasing supply of large flake graphite concentrates

Australia’s Bass Metals Ltd is progressing well with its optimization and refurbishment of the Graphmada graphite mine in Madagascar. While optimization and refurbishment of the mine has been in progress, significant time has been allocated to the continued training of the workforce in safe working procedures, with additional education in health and hygiene.

Another significant safety initiative has been realized at Graphmada with the arrival of two fire fighting trailers. The trailers are critical equipment required for mine recommissioning and camp safety.

  • Bass Metals continues to progress optimization and refurbishment works at its 100% owned Graphmada mine, remaining on track to deliver Stage 1: the establishment of 6,000 t/y production of premium graphite concentrates
  • The process plant has been de-commissioned, with civil works underway to prepare for arrival and install of new equipment
  • The new dryer is in transit to site, while civil works are underway in preparation for its installation
  • Bass Metals continues to make sales of concentrates to maintain customer relationships.

The company reports that the flake graphite market looks to have stabilized in the wake of the Chinese export duty removal. Some minor pressure was reported on prices out of China as a result of higher shipping costs, however discounted offers from suppliers seeking to reduce inventories kept average prices stable.

Supply pressure across larger flake grades continues to grow, reflected in higher prices for +80 and +50 mesh concentrates. This pressure comes from the prospect of further closures in China, limiting flake graphite concentrate production in Shandong province. Recent environmental restrictions on bauxite and magnesia mining raise the possibility of further restrictions being implemented on the flake graphite mining sector, in turn further pressuring prices for large flake concentrates throughout the remainder of the year.

In addition to tightening supply of large flake out of China, it has been confirmed that a significant large flake producer in Madagascar has ceased production due to under-investment in its production line and resource development. It appears that Bass is now the only producer in Madagascar of large flake graphite to the open market, and one of the few globally outside of Brazil and the diminishing flake supply from China.

These supply-side pressures are being met by some increased demand for larger mesh concentrates from industrial markets. Brazil, Germany and the US all reported strong growth in steel production throughout Q1 2017, compensating the marginal decline in Asian output and prompting market optimism.

The market is now seeing the beginnings of a cross over of rising demand and decreasing supply of large flake graphite concentrates, with signs a divergence in pricing between small and large flake concentrates will continue to develop over the coming months.

With the delivery of Stage 1 at Graphmada in calendar year 2017, Bass will emerge as a low cost (1st quartile) producer of high quality concentrates as these supply and demand fundamentals begin to pressure large flake pricing.

Through positive cash flow from Stage 1 production of 6,000 t/y, the company, over the course of 2018/19, will progress towards its intended Stage 2 expansion of 20,000 t/y with decreasing costs of production and decreasing capital intensity.