Mason Graphite Inc. [LLG-TSXV; MGPHF-OTCQX] said Thursday January 4 that it has raised $45 million from a private placement offering of 18.75 million shares priced at $2.40 per share.
Mason is a graphite mining and processing company focused on developing the 100%-owned Lac Gueret Project in northern Quebec, where the graphite grade is believed by management to be among the highest in the world. According to an amended technical report, which was announced on March 1, 2016, Lac Gueret is host to proven and probable reserves of 4.7 million tonnes, grading 27.77% graphitic carbon. That is in addition to a measured and indicated resource of 58.1 million tonnes, grading 16.30% graphitic carbon.
Proceeds of the private placement will be used for development and construction expenses related to the Lac Gueret graphite mine and Baie Comeau concentrator plant project. Development and construction expenses represent a portion of the estimated $200 million capital spending budget.
“We are pleased by the strong ongoing support we’ve received from investors during the offering,’’ said Mason Graphite President and CEO Benoit Gascon. “These investments constitute a further endorsement of the quality and viability of the project,’’ he said.
Gascon went on to say that the offering represents an important milestone for the company and will enable it to continue working towards the successful realization of the project, which is progressing according to a previously disclosed plan.
A 2015 feasibility study for the Lac Gueret Project, which is based on the high-grade portion of the deposit, foresees 51,900 tonnes per year of graphite concentrate production over a 25-year mine life. The construction period is forecast at between 13 and 16 months.
Graphite has traditionally been used as a refractory material in steel furnaces, an industry that still accounts for about 40% of global demand. However, investor interest in the second is driven by the fact that graphite, along with lithium are two of the key raw materials used in the production of lithium-ion batteries that are needed for electric vehicles. China currently accounts for 65% of global production.
It has been estimated that Tesla, Inc. [TSLA-NASDAQ] annual sales target of 500,000 cars would require five or six new graphite mines as it looks to source graphite, lithium and cobalt to meet its needs. That’s because a large electric vehicle battery requires about 25 kilograms of graphite for the lithium-ion anode.
Still, investors should be mindful of the two main differences between graphite and other commodities. First, unlike gold or copper, graphite does not trade transparently and there is no ready market for it. Graphite is sold privately, so actual prices for the material can only be estimated. Mason has said it intends to enter the value-added market, including the production of coated spherical graphite for lithium-ion batteries.
Mason Graphite shares advanced 0.56% or $0.015 to $2.71 in morning trading on Thursday.