iTech Minerals Drill Campaign in Review: On the Path to Production
iTech MD Mike Schwarz walks me through a 3D model of their 2023 drill campaign and explains why they remain on track to publish a very strong resource and economic study on the back of it.
Managing Director of iTech Michael Schwarz joins me today to provide an update on iTech's Lacroma Graphite Project. The project hit a rough spot a few months back with some questionable drill results as graphite sentiment bottomed out. However, as Mike demonstrates, iTech has found success enough to overcome those weaker results, and that their initial plans and goals remain on target.
After a brief recap of iTech as a company, Mike uses a 3D Leapfrog model to walk us through his Lacroma drill results and points us to the fact that they will likely hit-or-come-close to their 40Mt goal from this drill campaign. Mike then takes us further, walking us through their confidence in becoming a lowest-quartile cost producer, as well as the potential for future discoveries, ending with a discussion on how iTech plans to become a producer itself and the costs associated to get its own modular plant.
2 Parts: 1. The Companion Article; 2. The Written Summary and Transcripts
ITM.AX
1. Companion Article
(Note: The first 10 minutes or so of the interview is Mike using it as an opportunity to do a sort of “year in review” for iTech. So if you’re looking purely for the drill campaign updates, make sure to use the time stamps I have provided.)
I am going to keep this one brief, as I think the focus for this update should be on Mike Schwarz’s description of events - past, present, and future - rather than my interpretation of those events. Mike covers a lot of important ground that I don’t want to distract from.
I will emphasise here a point I often make about iTech - my trust in Mike. It isn’t just that I think Mike is A Good Guy (which he is), because that alone isn’t enough. This industry is awash in Good Guys who will happily carve their investing edge out of your flesh and blood and smile and ask how your wife is by name while doing it.
More importantly, I believe Mike has demonstrated clearly that he can be trusted. He does what he says and he says what he does. He has demonstrated an ability to progress and develop multiple projects in multiple ways. He shows creativity and ingenuity (gotta love receiving $1m in non-dilutive financing). And he isn’t afraid to have tough conversations on difficult topics.
Trust in management is my #1 investing criteria. I might still be wrong in my investment choices, but at least I know I won’t have been fooled. Which is to say, my decisions based on my knowledge produce the outcomes of my investments - not bad actors spoiling the soup along the way on me.
Anyway, onto the interview.
The Basics:
Despite some disappointing results in Q4 of last year, iTech still remains very much on track to hit or closely approach its tonnage target for its Lacroma target from this campaign thanks to some strong results in more recent months.
Drilling at new discovery targets (Lacroma North) are ongoing.
Clear, easy path to battery-grade graphite.
We can expect a JORC-compliant resource out in May.
An economic study will follow later in the year.
iTech has confidence they will be a bottom-quartile cost producer, which will enable them to remain viable regardless of Chinese manipulation.
Lacroma has numerous geographical advantages which will help spur strong economics (at surface, continuous mineralisation, thick intervals, free dig)
iTech has a clear path to production itself with a relatively low barrier to entry of $15-$20m to get a modular production plant up and running.
Anyway, this remains a compelling story in my eyes. iTech continues to execute successfully in numerous pathways. Their overall goal of taking their Campoona/Lacroma graphite project to production remains viable. It won’t be the world’s largest graphite project, but it doesn’t need to be. More importantly, their path to success remains open and navigable.
As for the moribund graphite market? Good. Honestly. I believe strongly that graphite is buried deep in the classic market pendulum overreaction any good contrarian investor needs to gain their edge. Graphite's needs in a green future are inescapable. The west’s geopolitical efforts to onshore safe supplies of critical minerals is only building. Project's like iTech's Lacroma - cheap, strong jurisdiction, and low-carbon output - are exactly what the industry needs.
That iTech wisely raised all the cash they needed to get to this point when they did (in a time of market strength_ speaks to Mike’s responsible approach to managing this company. That decision has had far-reaching impacts, as it means they’ve so far had no real damage done to the company by this historically weak commodity market. Many good companies with good management and good projects cannot say the same.
In fact, going even further, iTech might come out of this downswing with uncanny timing - a healthy resource, a feasibility study demonstrating strong economics, further exploration targets coming good, potential breakthroughs with Sugarloaf’s met work, and more are all due over the next 12 months. If the graphite and commodities market in general can continue its nascent swing northward over that time period, then iTech might emerge unscathed from the downswing just in time for positive generalist sentiment to return in search of strong companies with strong and economic resources. Of which iTech most undoubtedly is one.
2. Written Summary and Transcript
Click here for link to transcript.
00:06 Intro to Interview
Primary purpose of today is to discuss final results from a recently completed drill campaign at their Lacroma graphite target. Better than maybe the market is giving iTech credit for.
Goal was 40Mt of graphite. In the fall some disappointing results punished ITM pretty badly as maybe people feared the project was suddenly in question.
However, more recent results have managed to sort of save the day and get iTech back on track to achieve that target.
We will use a PowerPoint to back this conversation.
After, some more “company update”-style questions will be asked.
2:00 Brief Recap of Drill Campaign
Mike provides a general recap of the campaign – started at the center of the target and released strong results. Moving north saw the graphite thin unexpectedly, which sparked a drop in the market about 6 months ago. After, they went back and drilled out the south and ended up finding strong results that rescued the campaign. There was some discrepancy/off-set between where the graphite was found compared to the EM anomaly which contributed to the surprises (good and bad).
Background and Recap
Operating in South Australia
Took over a small graphite resource from Archer Materials (~8.5Mt at 9% TGC)
Compares to Renascor’s nearby Siviour graphite project that SA is a good place for graphite. Same geology and geography. Good infrastructure. Cheap, clean energy.
main focus was on Lacroma Central.
completed about 6 ,500 meters of exploration RC drilling over about 3 .7 kilometres.
Lead to focus on a central zone where that graphite mineralisation was the thickest.
Since then drilled nearly 20 ,000 metres of resource drilling over about 1 .7 kilometres in that central zone.
06:00 What did iTech Accomplish Last Year?
Accomplished what they set out to do.
Archer’s deposit: 8.5Mt of 9% gets you a ~10 year deposit
Goal is to get to 40Mt which gets you a ~40 year deposit
Nice consistent product
They’ve got a permitted mining lease.
They have a concentrator plan that they have developed and engineered.
Produce 94% concentrate that can be spheronised
Can be purified above benchmark of 99.95%
Proven flowsheet
Goal is 80% recovery to 94% conc. through standard flow sheet parameters – rough, then clean flotation in a caustic bath
At 30+ million tonnes plus the existing resource at Campoona (which offers same/similar metallurgy)
Now exploring a new Lacroma North target a few km away that looks to be along strike with the current Lacroma deposit.
Nearly ready to send data package in for resource assessment. Will likely drill a few more infill holes yet.
9:20 Sugarloaf
The sleeping unknown is sugarloaf.
Very large exploration target – 154-268 million tonnes at 7 to 12 % for sugarloaf.
Complexities is in metallurgy is the secret.
There is work underway in 2 different organiations to try to (economically) crack the Sugarloaf code.
9:45 Mike Begins the 3D leapfrog presentation of what they accomplished
Lacroma Central 1 .7 kilometre strike length.
Goes over disappointing results from the north – still had some width, but not the thickness they were hoping for
Thickest in the center. Goes from 20-30 to meters at the ends to 100 metres of 5-7% TGC with 20-40m thicknesses of 8-9% TGC in center.
Central Lacroma is solid mineralisation – no waste material. Important detail.
There is mineralisation from surface and it's dipping at about 30 degrees to the east. So mining ad revenue will happen from surface.
Going to get very close to that 30 plus million ton target for Lacroma Central
10:30 Going Over Lacroma Drill Results
14:00 3D Leapfrog Drill Results Presentation
17:25 Cutoff grade, Met work, and General economics
No stripping
Can be producing from day one.
The central part of the potential resource is 100m true thickness, allowing for very wide benches. 75m wide bench from day 1.
Graphite looks like it is weathered all the way down, meaning it is fine and without need for a lot of grinding and Will likely be free dig the whole way.
Will have income from day 1 thanks to surface, broad mineralisation.
Free and easy flotation
The goal was to be a bottom quartile cost producer and they look to have achieved that.
24:20 Sugarloaf Chat & Update on Met Work
158 to 264 million tonnes at 7 to 12%.
100 plus year mine life but unsolved metallurgy.
The projects are 4-5 months into their work now. Hope to see results in the next couple months.
Doors have not been closed.
Other companies have cracked the code on similar deposits so Mike is optimistic.
Could be as simple as grinding it very fine.
Optimistic they can get recoveries where they want them, the trick will be the cost of the process.
The plus side of the Sugarloaf efforts is that they can likely apply the technology and processes they’ve developed at Sugarloaf to their other targets to capture currently-lost material, which will boost the economics of both.
28:30 Lacroma North - Meterage, Met Work, etc.
Currently drilling at Lacroma North – can’t comment as results haven’t been released yet but they have intersected graphite. Won’t be in the current resource, though – only Lacroma Central.
After they’ve completed at Lacroma North they will circle back to the southern part of Lacroma Central as it looked like it may be thickening in one region and there are easy pounds to add in resource there if they can confirm it.
30+ holes at 80+ meters each for 3000m or so.
About 2000 meters of exploration drilling at Sugarloaf
Lacroma North met work won’t begin until they’ve confirmed formally there’s a resource there working on.
33:00 Upcoming Catalysts
They will get first-pass met results from Lacroma central in a couple weeks. Required for JORC-compliant resource.
Resource by May
If met work is confirmed strong they will go back and upgrade Lacroma central resource with further infill in the second half of the year.
They anticipate Lacroma Central met work to come good and anticipate Lacroma North to have similar characteristics to Lacroma Central.
Getting Sugarloaf met work back in the first half of the year.
36:00 Pilot Plant Production
for pilot plant concentrate type setups, the capital cost of that you're looking at $15-20 million to be able to get a system set up to produce.
Modular plants bought out of China.
You can toll treat it for $4-5m and get enough material to send it out to all of your potential off-take partners to get it all tested.
Preference however is to invest the capital in a pilot plant so that we know how to process the material. Get the expertise in-house.
46:00 Non-China Graphite Premiums
Benchmark Metals has begun producing a new North American minus 100 mesh graphite index, taking into account the increased costs of competing with China and meeting all of those ESG criteria and supplying into the North American market.
Believes there's going to be a premium that needs to be paid to be able to feed your material into the North American and in European markets. So that index is getting developed now. Shows the cost of material from China versus the cost from the Western markets as well.
But for iTech, the goal is to be the lowest-cost producer and be able to feed both markets.
47:00 New Land Acquisition
Lots of minerals at play – what was the specific opportunity you were looking for?
Was very cheap to get. Too cheap to pass up.
Mike knows people who know the area and the offer came up.
Interesting Lithium potential, but also has some of the most sought-after REEs.
Just adding another project to their company for next to no cost. Important for a junior explorer to have options.
Theoretically they have time to explore other projects in the coming months as they hand off their graphite projects to independent experts so this gives them a new project to develop targets on.
51:00 Concluding Thoughts
Wants it to be very clear to the market that Lacroma remains their main focus.
Adding value at low cost is something every explorer should try to do.
Even as a defence against graphite staying suppressed for a long time – they need an out in that scenario.
But he doesn’t see how graphite doesn’t jump – a 3-7X growth in demand in the coming years.
Market always overreacts in its swings.
China won’t be able to keep up this supply of synthetic graphite forever.
As prices improve interest will return.
Contrarian investing means these are the exact moments to be making moves as a retail investor in the graphite space.
With any luck, iTech will be advancing a well-known project with strong economic studies and near-term production as graphite’s feet get back under it.
Thank you. For your reading, for your support. I encourage you to reach out to Mike. iTech and graphite are unloved now, but things are irrationally negative right now. But as with all investing - if you let the market’s fickle whims dictate your decisions you will always be reactive and on your heels rather than proactive and on your toes. I know which one I prefer to be when it comes to investing.
-Matthew from JRI