Kibaran Resources Limited: Robust September Quarter advances Graphite Project
The September 2015 quarter has been the most robust and successful period to date in Australian-based Kibaran Resources Ltd.'s (ASX:KNL) ('Kibaran' or the 'Company') well enunciated growth strategy to establish its wholly owned flagship graphite projects in Tanzania in East Africa, as the emerging and strategic hub for mainstream natural flake graphite exports into the key direct ship routes to Europe.The quarter was particularly marked by major project achievements across a suite of feasibility studies, project financing negotiations, sales offtake agreements and technical improvements to outputs for our flagship and lead development project, the wholly owned Epanko Deposit.
Epanko has a JORC 2012 Indicated Mineral Resource Estimate of 12.8Mt at 10% TGC, for 1.28Mt of contained graphite.
>Paralleling these positive milestones is increasing market recognition that Kibaran's planned conservative and staged build-up of production and processing capability provides realistic and achievable volume, price entry and project affordability (US$77 million) into "existing" market demand.
This is in contrast to many of our peers whose current project economics are based on the well forecast and expected, but as yet, unrealised "new demand" from emerging technologies and customers. We would expect that any materialisation of this "new demand" will simply further enhance Kibaran's Tanzanian growth profile.
A detailed summary of the quarter's activities follows:
EPANKO GRAPHITE PROJECT - TANZANIA (100% KNL)
The Epanko Graphite Project ("Epanko") is located 245km south-west of Morogoro in south-east Tanzania.
During the reporting period, Kibaran made significant progress on advancing the Epanko Graphite Project, achieving a number of key milestones to bring it closer to a decision to mine.
BANKABLE FEASIBILITY STUDY
Following on from the receipt of the Environmental Impact Assessment Certificate in May from the Ministry of Energy and Minerals of Tanzania, Kibaran was notified during the latest quarter that the Mining Licence for Epanko had also been granted.
This coincided with the completion of the Epanko Bankable Feasibility Study (BFS), (refer announcement 5 August 2015). The study was completed on time, within budget and confirmed that Epanko is technically and financially viable with robust project economics.
The receipt of the environmental certificate and mining licence and completion of the BFS has enabled the Company to commence debt funding discussions with potential financiers and advance discussions with strategic partners in the European, Japanese and US graphite markets.
Key results from the BFS include:
- Conventional open cut mine with conventional flotation processing plant
- Annual concentrate production of 40,000tpa
- Annual EBITDA of US$33.6m for 15 years
- NPV (pre-tax) of US$197.4m
- Internal Rate of Return of 41.2%
- OPEX FOB Dar es Salaam US$570/t
- Payback 2.7 years with 25 year mine life
- Project capital US$77.5m
- Exceptional final average carbon concentrates of 96.3%
- Demonstrated metallurgical testwork indicated a very high proportion of large flake graphite with 85.7% of flake distribution greater than +106 microns
Work completed under the scope of the BFS was the confirmation a maiden Ore Reserve Estimate at Epanko sufficient to support a 25 year mine life.
Ore Reserve Statement >5% TGC
| JORC Classification | Tonnage (Mt) | TGC Grade (%) | Contained Graphite (t) |
| Proved | 8.0 | 8.3 | 659,000 |
| Probable | 2.9 | 9.6 | 279,000 |
| TOTAL | 10.9 | 8.6 | 938,000 |
The Ore Reserve Estimate was based on and inclusive of the Measured and Indicated Mineral Resource which was upgraded during the previous quarter. The Measured and Indicated category now includes 62% of the JORC 2012 Resource Estimate.
Mineral Resource Estimate for Epanko Deposit (8% TGC, June 2015
| JORC Classification | Tonnage (Mt) | TGC Grade (%) | Contained Graphite (t) |
| Measured | 6.6 | 9.7 | 635,800 |
| Indicated | 7.9 | 10.0 | 785,300 |
| Inferred | 8.8 | 8.7 | 773,500 |
| TOTAL | 23.3 | 9.4 | 2,194,600 |
Tonnage figures contained within tables have been rounded to nearest 100,000. % TGC grades are rounded to 1 decimal figure. Abbreviations used: Mt = 1,000,000 tonnes. Rounding errors may occur in tables.
OFF-TAKE AGREEMENT SECURED WITH THYSSENKRUPP
The finalisation of the BFS augmented the views of ThyssenKrupp Metallurgical Products GmbH, part of the Materials Services business area of ThyssenKrupp group, a diversified industrial corporation based in Germany, resulting in the execution of an off-take agreement to acquire Kibaran's natural flake graphite products.
The agreement provides sales for 20,000tpa from the Company's Epanko Graphite Project. This will account for 50% of Kibaran's planned 40,000tpa graphite production from Epanko. The exclusive long-term commercial agreement between Kibaran and ThyssenKrupp is for the sale of a minimum of 20,000tpa of refractory grade natural flake graphite and is for the term of 10 years with a 5 year option.
This off-take agreement together with an existing agreement secures 75% of planned graphite production at Epanko in binding off-take and binding sales agreements.
GERMAN GOVERNMENT LOAN GUARANTEE
The terms captured in the offtake agreement with ThyssenKrupp enlarged the volume of sales into Germany, supplementing those from the existing European offtake agreement, enabling the Company to be eligible for a Untied Loan Guarantee - Garantie für Ungebundene Finanzkredite ('UFK').
Kibaran has received "in-principle eligibility cover" for Epanko from the German Government for a UFK Guarantee. The UFK guarantee coverage is in the form of loan guarantees for loans awarded by lenders to the financing of eligible projects. It provides lenders insurance against commercial and political risk.
Kibaran's Epanko Project has satisfied the initial requirements for eligible projects, being those that contribute to the supply of critical natural resources to Germany in the form of a long-term off-take contract between the borrower and a German off-taker, is economically viable and complies with international environmental and social standards (e.g. Equator Principles). The UFK cover is subject to further due diligence and final approval by the German Government.
MANDATE LETTER SIGNED
Kibaran has finalised (refer announcement 7 October 2015) an agreement with German Bank KfW IPEX-Bank ("KfW") to provide advice and structuring support in relation to obtaining the UFK Guarantee. The UFK Guarantee could provide cover, de-risking up to US$40 million of the initial senior debt for the development of Epanko.
The agreement also provides for KfW IPEX Bank contributing to this initial senior debt and assisting Kibaran with further debt financing arrangements in order to progress the development of Epanko.
PRODUCTION TARGET LIFTED
A study undertaken during the quarter confirmed that Kibaran's Epanko and Merelani-Arusha graphite projects have the resource potential to increase production to produce a combined 150,000tpa of concentrate, subject to market demand, this is a 50% increase over initial estimates earlier this year of a headline rate of 100,00tpa and represents a 375% increase on initial planned production at Epanko.
The growth strategy was calculated in two stages over 6-7 years with production occurring from both Epanko and Merelani-Arusha. The following table shows the potential ramp up in output from Epanko and Merelani-Arusha under the updated production growth strategy, compared to initial estimates.
Staged Production Growth
| Concentrate (tpa) | Timeframe | |
| Initial Start-up | 40,000 | |
| Stage 1 | 84,000 | 2-4 years |
| Stage 2 | 150,000 | 5-6 years |
The update on the growth strategy was modelled utilising the anticipated future increases in global demand for premium quality large flake graphite encompassed in the "Roskill Natural & Synthetic Graphite: Market Outlook to 2020" report.
BATTERY MANUFACTURING FACILITY STUDY
The results of a Battery Grade Scoping Study were released during the quarter. The study highlighted robust economics and a compelling case for the development of a Manufacturing Facility to participate in downstream value added processing.
The manufacturing of the first battery grade Spherical Graphite would support expanded production from the Epanko Graphite Project. Current forecasts anticipate exponential growth in graphite demand over the next five years from the Electric Vehicle (EV) and Battery Storage industries.
The study was based on initial Stage 1 production of at 15,000tpa, increasing to 50,000tpa over 3 stages, producing spherical, expanded and other purified graphite products. Testwork conducted has confirmed that Epanko graphite is of superior quality and exceptionally well suited for the production of spherical graphite and other purified graphite products.
Key Study Results:
- NPV (pre-tax) of US$115m
- IRR (pre-tax) of 51%
- Capital Expenditure of US$35m
- Annual pre-tax cashflow of US$18mpa based on Stage 1
- Payback period of 1.9 years
Manufacturing Facility Staged Growth
| Stage | Spherical Graphite | Expandable Graphite | Purification | Total |
| 1 | 6,000 | 5,000 | 4,000 | 15,000 |
| 2 | 15,000 | 10,000 | 5,000 | 30,000 |
| 3 | 24,000 | 18,000 | 8,000 | 50,000 |
Note: Table 1 assumes production of natural graphite from the Epanko deposit is increased to meet this demand. Whilst the Feasibility Study for Epanko was based on 40,000tpa, the deposit has been modelled to produce up to 100,000tpa (ASX: announcement 22 January 2015.
During the quarter, the Company presented its spherical graphite manufacturing facility concept to the Tanzanian Ministry of Industry and Trade. Following this presentation the Company has received a letter of support from the Permanent Secretary of the Ministry and stated that encouraging value add initiatives and developing the manufacturing sector is a high priority for the Government.
MERELANI-ARUSHA GRAPHITE PROJECT - TANZANIA (100% KNL)
The Merelani-Arusha Project, located in Tanzania, provides the Company with a potential second source of graphite production to Epanko, from the Merelani East Deposit.
An upgrade of the Mineral Resource Estimate for the Merelani East Deposit was announced during the quarter (refer announcement 8 September 2015). The following table shows the estimate based on recent geological and metallurgical testwork.
Mineral Resource Estimate for Merelani East Deposit, > 5% TGC
| JORC Classification | Tonnage (Mt) | TGC Grade (%) | Contained Graphite (t) |
| Indicated | 7.4 | 6.7 | 500,000 |
| Inferred | 10.3 | 6.3 | 650,000 |
| TOTAL | 17.7 | 6.5 | 1,140,000 |
Notes for Table 1: Tonnage figures contained within Table 1 have been rounded to nearest 100,000. % TGC grades are rounded to 1 decimal figure. Abbreviations used: Mt = 1,000,000 tonnes.
Recent completion of the Epanko Graphite Project Bankable Feasibility Study, coupled with the upgrade of the Merelani East resource and its metallurgical characteristics, will provide the foundation for a Pre-Feasibility Study ('PFS') on Merelani East.
The Company has commenced the Environmental and Social Impact Assessment (ESIA) process for its Merelani-Arusha Graphite Project by registering the Project with the National Environmental Management Council (NEMC), the first step in obtaining an Environmental Certificate and the key pre-requisite for a Mining Licence application. The environmental and social baseline study, receipt of the Environmental Certificate and subsequent Mining Licence, are all long lead time items in the approval and permitting process.
SCHEDULE OF TENEMENTS
Mining Tenements Held, Acquired or Disposed of by Kibaran Resource Limited as at 30 September 2015.
Pursuant to ASX Listing Rule 5.3.3 Kibaran Resources Ltd. (ASX: KNL) (the "Company") reports as follows in relation to mining tenements held at the end of each quarter and acquired or disposed of during the quarter and their location.
| Ministry ID | Area (sq. km) | Project Location |
| TanzGraphite (TZ) Ltd (100% Owned) | ||
| ML 548/2015 | 9.499 | Mahenge |
| PL 7906/2012 | 130.49 | Merelani-Arusha |
| PL 7907/2012 | 53.78 | Merelani-Arusha |
| PL 7915/2012 | 92.28 | Merelani-Arusha |
| PL 7918/2012 | 121.88 | Merelani-Arusha |
| PL 9307/2013 | 2.80 | Mahenge |
| PL 9344/2013 | 1.37 | Mahenge |
| PL 10388/2014 | 2.57 | Mahenge |
| PL 10389/2014 | 103.56 | Mahenge |
| PL 10390/2014 | 2.81 | Mahenge |
| PL 10392/2014 | 133.95 | Mahenge |
| PL 10394/2014 | 9.74 | Mahenge |
| PL 10396/2014 | 152.43 | Mahenge |
| PL 10090/2014 | 44.88 | Merelani-Arusha |
| PL 10091/2014 | 114.22 | Merelani-Arusha |
| PL 10092/2014 | 23.23 | Merelani-Arusha |
| PL 9537/2014 | 84.00 | Tanga |
| Castillian Resources (Tanzania) Ltd (100% Owned) | ||
| PL 4985/2008 | 30.71 | Kagera |
| PL 5192/2008 | 23.93 | Kagera |
| PL 5306/2008 | 44.65 | Kagera |
| PL 8368/2012 | 157.62 | Kagera |
Number disposed during the quarter:
There were no tenements disposed during the quarter.
Number acquired during the quarter:
There were no tenements acquired during the quarter.
ABOUT KIBARAN RESOURCES LIMITED
Kibaran Resources Ltd. (ASX: KNL) ('Kibaran' or the 'Company') is a graphite focused resource company with world class graphite projects located in Tanzania.
The Company's primary focus is to develop its 100%-owned Epanko Graphite Project, located within the Mahenge Graphite Province. A Bankable Feasibility Study has been completed with a Proved & Probable Ore Reserve of 10.9Mt at 8.36%. Both Environmental and Mining Licence approvals are in place for Epanko. This initial estimate only covers 20% of the project area. Metallurgical testwork has found Epanko graphite to be large flake, expandable, ultra-high purity and premium quality from a global perspective.
Kibaran also has rights to the Merelani-Arusha Graphite Project, located in the north-east of Tanzania. Merelani-Arusha is also considered to be highly prospective for commercial graphite.
Graphite is regarded as a critical material for future global industrial growth, destined for industrial and technology applications including nuclear reactors, lithium-ion battery manufacturing and a raw material of graphene.
The Company is positioning itself to participate in the emerging 3D printing market using graphite inks via 3D Graphtech Industries PL, jointly owned with 333D Pty Ltd (formerly 3D Group) which is transacting as OZ Brewing (ASX:OZB).
In addition, Kibaran has the Kagera Nickel Project which remains underexplored and is located along strike of the Kabanga nickel deposit, owned by the Glencore - Barrick Gold Joint Venture, which is considered to be the largest undeveloped, high grade nickel sulphide deposit in the world. Kibaran is currently seeking a partner to progress exploration of its highly prospective nickel properties.
For further information, please contact:
Managing Director CFO/Company Secretary
Andrew Spinks Robert Hodby
Kibaran Resources Ltd. | ABN: 15 117 330 757
338 Hay Street Subiaco WA 6008 | PO Box 2106 Subiaco WA 6904
T: +61 8 6380 1003 | E: info@kibaranresources.com | www.kibaranresources.com
The information in this report that relates to Exploration Results is based on information compiled by Mr Andrew Spinks, a Competent Person, who is a Member of The Australasian Institute of Mining and Metallurgy. Andrew Spinks is employed by Kibaran Resources Ltd.. Mr Spinks has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Andrew Spinks consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to Mineral Resources is based on information compiled by Mr David Williams, a Competent Person, who is a Member of The Australasian Institute of Mining and Metallurgy. David Williams is employed by CSA Global Pty Ltd, an independent consulting company. Mr Williams has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". David Williams consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to the Ore Reserve has been compiled by Mr Steve O'Grady. Mr O'Grady, who is a Member of the Australasian Institute of Mining and Metallurgy, is a full time employee of Intermine Engineering and produced the Mining Reserve estimate based on data and geological information supplied by Mr Williams. Mr O'Grady has sufficient experience that is relevant to the estimation, assessment, evaluation and economic extraction of Ore Reserve that he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr O'Grady consents to the inclusion in this report of the matters based on his information in the form and context that the information appears.