Mining & Energy
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Courtesy from AMG Advanced Metallurgical Group / Critical materials producers do not need China as much as energy-related firms.
Ilmenite, rutile, zircon. Those titanium-based “critical materials” and gems are not as familiar in our everyday conversations and chatting as the words ‘gas’,’oil’, ‘gold’ or ‘coal’. However, critical metals and gems are some of the most common and important elements of human life, as demand for them by various industries around the world are is to increase. For a very long time.
Mozambique should therefore care for them. And it does, indeed, as we observe a growing number of licences being granted by the Government since 2009 (at least), when it regained control of the Corridor Sands Titanium-ore Project, in Chibuto (Gaza province), after BHP Billiton had abandoned it eventually considering the USD 500 million undertaking as financially unviable.
Energy-related materials such as gas and oil are directly correlated to the Chinese economic boom. As long as China is expected to grow at a rate which is faster than 6-7% per year, the commodity complex will enjoy higher prices stemming from a higher demand. However, everyone saw, between the summer of 2014 and the end of 2016, how commodity prices can be cut in more than half in a short period of time.
Critical materials display a very different pattern in terms of price exposure. Sure, the market for such products has its own volatility, but it is not dependent on a region in particular, but on various industries instead, such as agriculture, aerospace, chemistry and pharmaceuticals, to name a few. Critical materials are also narrowly connected to technological advances.
The result is that a cyclically lower demand from one industry or technological application can be compensated by another. The CEO of Netherland-based AMG Advanced Metallurgical Group (AMG), Dr. Heinz Schimmelbusch, insisted on that point last year during an interview for the Wall Street Journal.
He said, as a company that produces graphite and lithium for batteries and titanium alloys tailored for the aerospace sector, that “you don’t need China” but the aerospace industry, which is global. “When you produce tantalum, you are depending on the smartphone industry, which isn’t regionally defined”, adds Heinz Schimmelbusch.
It is thus no wonder that AMG gives so special an attention to the huge reserves of critical materials which lie beneath the Mozambican sediments. Ten days ago, it announced that its division Graphit Kropfmuhl GmbH (AMG Graphite) had successfully completed the commissioning process at its Ancuabe graphite mine in the province of Cabo Delgado.
The company added that production activities will restart in the current month, with a projected annual production capacity of 9,000 metric tons. AMG Graphite is the first and currently sole graphite producer in the Ancuabe area of Mozambique. Its assets include the mining concession 4C, which encompasses the functional graphite producing plant at Ancuabe, and exploration license 3659L at Nipacue, where an estimated 900,000 metric ton graphite deposit, with a Joint Ore Reserves Committee (JORC) of an estimated, has been developed.
Earlier this year, in March, another Australia-based company, Mustang Resources, announced the discovery of high-grade graphite at its Caula project, also in Cabo Delgado. It underscored the “spectacular grades of up to 26% Total Graphite Carbon” that demonstrate the “potential for Caula to become a low-cost supplier to the lithium battery industry”. It is worth reminding that the listed shares of Mustang Resources jumped almost 10% on the Australian Stock Exchange on the day of the announcement.
Mustang Resources is developing its Montepuez Ruby Project, which consists in “world-class rubies which are expected to generate strong cash-flow for Mustang as sales ramp-up from the middle of 2017”, explains the mining company. Adding in its latest Investor Presentation, published at the beginning of May, that it was “on track” to post first revenues from sale of rough rubies at auction/tender in October 2017.
For its part, Syrah Resources, also based in Australia, is involved in the district of Balama, again in Cabo Delgado. The 110km2 concession (Balam Project) hosts the largest graphite ore reserves in the world. Another Australian group, Triton Minerals, holds eight exploration licenses in Mozambique, including three projects in Cabo Delgado (Balama North, Balama South and Ancuabe).
As a type of carbon which possesses conductive properties, graphite is mainly used in batteries and fuel cells and shows a growing importance in electronics as well. According to a special country report by the Economist – Intelligence Unit (EIU) in 2014, which confirmed that Balama was the largest graphite deposit in the world, its estimated reserves are 1.1 billion tonnes, containing “more natural graphite than all other known global deposits combined”. A third company, Metals of Africa, in June of that year, also obtained three licences for exploration in the same area.
Consensus forecasts indicates that by 2020, “100,000 tonne per-year mines could open each year solely dedicated to electric cars and this market would not be filled”, predict experts from the specialized data platform Investor Intel. This explains why some observers call graphite the “new black gold”.
Titanium is also highly sought-after, its alloys being critical for the aerospace industry. Irish-based Kenmare Resources enjoys the Moma mineral sands mine concession, in Moma, in the province of Nampula, since late 2007. The mine produces 7% of the world’s ilmenite, which is one of the main sources of titanium metal and titanium dioxide for use as a white pigment in paint.
Finally, the success of companies focused on materials such as titanium and graphite will be highly dependent on the long-term development of technology, since materials allow many advanced and future technologies to function properly. “Although much more modest in scale than Mozambique’s booming coal mines, graphite projects are a reminder of the potential and diversity of the country’s mining assets”, explains the EIU. The potential of gems such as zircon lies in its application as an opacifier used in the decorative ceramics industry.
By Levy-Sergio Muthemba
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