iTech Minerals Q&A: Chinese Graphite Restrictions, Recent Drill Results, and Bright Future Exploration Potential
MD Michael Schwarz of iTech was gracious enough to provide me with a series of strong, thoughtful answers on a whole host of topics.
tl;dr:
I provide the results of a written interview I held with MD Michael Schwarz of iTech Minerals (ITM.AX). Michael goes into great detail on a number of topics related to ITM and graphite in general, including recent drill results, future exploration plans, and the current state of the graphite market in general in light of the news out of China.
Introductory Thoughts
I am going to start this week out by saying I think I owe iTech’s MD Mike Schwarz a pint. The past month or so has been a very busy one news-wise for iTech and graphite in general, as I will explain below. Therefore, I thought this month made a lot of sense to ask him a few written questions, similar to last month. However the list grew from the 5 or 6 questions I asked last time, and, in retrospect, ended up being fairly dense content-wise.
Rather than taking the easy way out and phoning it in on a couple answers, or combining questions, Mike gave thoughtful, detailed responses that covered a whole host of topics, from recent Chinese graphite restrictions, to his thoughts on recent iTech drill results which the market received negatively, to the future of his company.
So yeah. My job here is meant to be for me to produce thoughtful, written content to help readers keep abreast of iTech’s goings ons. But I apparently outsourced it this month back to Mike and iTech (oops). Which, returning to my original point, means I might owe Mike a stubby or some other bevvie if I ever make it down his way.
Sincerely though, Mike’s forthcoming responses to not-so-easy questions is a big part of why, despite its share price struggles (welcome to 90% of juniors these days), I believe iTech to be a strong company and investment choice for people looking for graphite exploration and development exposure. My trust in Mike’s vision and ability to execute remains as strong as it ever was. Other resource executives would do well to learn from Mike’s honest, head-on approach and willingness to freely share his knowledge and expertise on a host of topics.
It is my belief, as Mike demonstrates, that ITM continues to build toward a strong future, with an economic graphite resource being uncovered one assay at a time.
And - maybe critically for some ITM shareholders worried after the results from North Lacroma - Mike presents a very positive future of exploration for iTech. They will soon enough be onto a brand new target north of Lacroma they have identified as having strong graphite potential. That revelation coming out of this interview, mixed with the already-positive results being seen out of South and Central Lacroma, should take some of the sting out of North Lacroma.
Hope you enjoy the interview. (Note - the interview is presented unedited and unabridged, save for my added images.)
Interview: Topics Covered (hyperlinked titles)
Infill Drilling at Lacroma Central Demonstrates Increasing Graphite Mineralisation to South (Nov. 3)
The Interview
1. New Chinese Graphite Restrictions
1a. Care to speak to the news out of China? What are the specific details? How fundamental a disruption does this potentially become?
At this stage it looks more like the Chinese Government is asking exporters to apply for permits to export the higher value, technically difficult synthetic and natural flake graphite products rather than placing export restrictions in place. It will depend on how the government implements the permitting system. Given that the supply to end users outside of China of Gallium and Geranium was significantly impacted, it may have a similar effect, but it is too early to tell.
1b. Can you provide details/context maybe the average retailer won’t “get” or know? Apply your expertise to shed some new understanding for us on what you think is relevant/important.
What I believe it does signal is that the Chinese Government is expecting to use all its internally produced supply within the country and is putting controls in place to make sure the Chinese producers have enough in the medium to long term. This leaves battery producers outside of China scrambling to source alternate supply chains for battery anode material.
1c. Other thoughts?
Combine the rush to secure battery anode material by battery producers outside of China along with the seasonal shutdown of natural flake graphite mines in Northern China over the next 6 months and we could see a coincident increase in demand with decrease in supply and a recovery of the fine flake graphite prices in the near future.
2. Lacroma North Drill Results & Exploration Strategy
2a. The results were not what they were hoped to be by the market. Were you surprised at the results based on your EM/geophys work?
Drilling is always an iterative process to work out what is going on. The graphite wasn’t where were hoping it to be based on the EM surveys. It seems as though the main graphite horizon swings further east and gets deeper to the north. We will try and pick it up in further drilling at a later stage but at this point in time we are concentrating on moving south where it appears to be thickening and getting high grade closer to surface.
2b. Do these results change your interpretation of your EM data?
Yes, we have a better understanding that there is not a good 1:1 correlation with the better graphite mineralisation and the size/intensity of the EM anomaly.
2c. Does it otherwise alter your exploration strategy in any way?
We have designed a new high resolution, ground-based EM survey to gives us more accuracy on the location of near surface conductive zones (graphite). If approved, we aim to undertake this early next year. It will also cover a new target we are generating a few kilometres to the north that looks larger than Lacroma.
3. Lacroma Resource Number
3a. Obviously this takes off some top-side potential of Lacroma as a target/deposit. The market is pricing in essentially total failure, which I think is absurd and more so a result of moribund sector sentiment. Hope to get a sense of what this outcome changes for iTech.
It puts a short-term limit on the quick, easily defined tonnes but we are still hoping for a significant increase over our current resources. The potential is still there, and I think that will be revealed as we start drilling south. The drill spacing we have been doing is planning for better than inferred resource classification so that is why it is taking time.
3b. What is your hope for a final resource number out of original Lacroma target – before and after Lacroma North results?
Our long-term target was always 40 Mt of resources in our inventory. If we could get that all in one go, then that would have been a bonus. I think this first pass could net us 20 Mt and we will build on that in upcoming drill programs. I think it’s important to remember that many other companies take 3-5 years to build up these large-scale resources. We have been trying to do it all at once.
4. Future Plans
4a. What is left to discover/prove up at Lacroma?
Given that we still have $5 million in the bank we have the cash to keep adding resource tonnes. We will drill out another ~1km south of the current resource drilling area and then move on to a new target a few kilometers to the north.
4b. What about other targets? Where will the drill go next after Lacroma drilling is done?
This additional northern target appears to be twice the size of Lacroma based on the EM. It is in the same geological position and possibly and extension of Lacroma so we are hoping for all the same nice geological characteristics and metallurgical properties. It also has graphite confirmed in historical drilling. So why not start at the bigger target? Well, we started at Lacroma as the preliminary metallurgy shows a nice concentrate can be achieved so it is relatively low risk to drill out a resource at that location.
4c. Can you still get the mine life/tonnage you need out of Lacroma alone to be a viable mine?
Absolutely. Our primary goal was to have quick and cheap tonnes, with low mining costs and good metallurgy to our current resource inventory. Lacroma is looking like it will be the best resource by the time we have finished. Hopefully the target to the north comes to the party next year and we can exceed our 40 Mt target within two years.
4d. Anything else you want to let investors know?
iTech is cashed up and actively drilling with a resource and metallurgy due early next year. We plan to keep drilling on new targets, after Lacroma, to keep adding resource tonnes to meet that 40 Mt target within 2 years. If we can add 20 Mt of battery grade graphite resource, each year, in the first two years, it will be pretty good going.
That’s it! Hope you enjoyed your cup of coffee with this interview. More news from JRI coming soon, as always.
Have a good weekend.
-Matthew from JRI