Northern Graphite Signs Product Offtake Agreement

2018-06-06

Jun. 4, 2018 - Northern Graphite Corporation announces that it has signed a Memorandum of Understanding (“MOU”) with a European commodity trading company to sell 100 per cent of the projected output from the Bissett Creek graphite project in China. The parties intend to enter into a binding agreement when a number of conditions have been met, including the arrangement of project financing. Northern’s partner will be identified at that time as per their request.

Customers of the trading company have tested graphite from a number of different sources outside China and have found that Northern’s graphite is of the highest quality and fits best with market requirements. Chinese production of XL (+50 mesh) and XXL (+32 mesh) flake graphite is declining while demand is growing, particularly in the expandable graphite market. There is an immediate opportunity for new production and Northern is uniquely positioned to meet that need with an advanced stage project that will produce almost entirely large/XL/XXL flake and which has a reasonable capital cost. The project is also located close to infrastructure in a politically stable jurisdiction.

The Bissett Creek project will produce almost no small flake or fines, both of which are in oversupply. Chinese companies continue to add small flake production capacity to meet demand from the rapidly growing lithium ion battery (“LiB”) market which has kept small flake prices from rising. This will continue to be the case until the very positive growth forecasts for electric vehicles are realized. China Minmetals Corporation, China’s largest metals and minerals group, recently estimated that the demand for spherical graphite, the anode material in LiBs, will be one million tonnes by 2020 and most will be consumed in China. This will require annual flake graphite production to more than double from current levels. While Northern is not specifically targeting the LiB market, a rise in small flake prices is expected to drive up prices for all flake sizes. 

Gregory Bowes, CEO commented that: “The fact that we can sell up to 100 per cent of production in China alone is very strong confirmation of current market conditions and provides a base level of sales which will enable the Company to pursue project financing. Demand for XL/XXL flake is also strong outside of China and Northern has the flexibility to pursue other opportunities to diversify sales.”