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Peninsula Mines Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Peninsula Mines progresses Korean graphite commercialisation strategy

The company is hoping to mine its graphite flake, see it turned into concentrate, then produce spherical graphite to supply Korean lithium-ion battery-makers.
Peninsula Mines progresses Korean graphite commercialisation strategy
INVESTMENT OVERVIEW: PSM The Big Picture
Gapyeong is a string in Peninsula’s bow as it hopes to take value from flake graphite resources.

Peninsula Mines Ltd (ASX:PSM) is advancing its strategy to become a graphite producer in South Korea by the end of 2020, drilling targets and working to demonstrate concentrate from its fine flake can be converted into high-purity spherical graphite for lithium-ion batteries.

This week the company kicked off a campaign to drill its Gapyeong Flake-Graphite Project northeast of Seoul and high-grade gold-silver targets at Osu.

 

Peninsula’s Gapyeong campaign for its primary project will take in 1,200 metres and 10-12 diamond-drill holes, testing a 400-metre strike it highlighted with a revised exploration target updated last month.

Peninsula managing director Jon Dugdale told Proactive Investors: “Resource drilling at Gapyeong has the objective of generating a key first milestone which is to generate a high-grade graphite resource.

“The second objective, which would be initiated if we have a good share purchase plan, is to complete our spherical graphite test work which is really to get to the point where we can demonstrate the production of a high-purity graphite product at 99.95% graphite and that’s the test work program in Germany.

“The strategy is to produce a graphite business but we want to get it to the point where we’re producing this higher-purity graphite which can go straight into the graphite battery anode.”

“The third objective, which doesn’t cost anything, is to then take those results, we’ve got a resource, we’ve got the spherical graphite test work and convert what are very productive and positive relationships with potential offtake partners into initial agreements.”

A $600,000 sum already raised from sophisticated and professional investors will fund the company’s upcoming drilling efforts at Gapyeong.

The remaining funds raised from investors in the company’s latest share purchase plan of up to $1 million will be used to progress the Korean flake graphite strategy.

Dugdale said: “We’re targeting $600,000 with the share purchase plan and we’ll take up to $1 million.”

West Perth-based Peninsula has been undertaking rock-chip and channel sampling at the project over the past six months, negotiating land access and conducting electromagnetic surveying.

READ: Peninsula Mines completes second tranche of $600,000 placement

The company’s high-grade graphite exploration target is 13 to 17 million tonnes grading 8-11% total graphitic carbon (TGC) and containing 1.1 to 1.7 million tonnes of graphite for its three wholly-owned flake-graphite projects, with most from Gapyeong.

The other two projects are the drilled Eunha North Graphite Project and Peninsula’s secondary project, the Yongwon Graphite Project.

Dugdale said “results were encouraging” from the drilling undertaken at Eunha North and land-access negotiations were ongoing for Yongwon.

Most of the targeted tonnes come from Gapyeong where the collective exploration target for Gapyeong South, Middle and North is 10.5-13.75 million tonnes grading 7-12% TGC for 960,000 tonnes to 1.44 million tonnes.

Dugdale said: “It’s a process very much focused on proving up the resources that you need, as well as proving downstream metallurgical processing capacity of resources to supply the product that the lithium-ion battery industry in Korea needs and doing it right on their doorstep.”

The Gapyeong project

Peninsula’s drilling will initially focus on the area of the most intense electromagnetic anomaly immediately to the north of Gapyeong’s initial target zone where high-grade graphite was returned.

The company already proved it can produce flotation concentrate grading more than 95% total graphitic carbon (TGC) from its fine flake, meeting the required standard for batteries.

Once funds from the share purchase plan have been received, Peninsula will advance stage II and work with a German metallurgical contractor to complete work to prove concentrate from its fine flake can produce spherical graphite of more than 99.95% TGC, the final input to lithium-ion batteries.

READ: Peninsula Mines defines large high-grade flake graphite exploration target in South Korea

Geologist-MD Dugdale said: “The process we’re going through now is to do that metallurgy in Germany, using the latest technology, using sphericalisation machines and purification.”

The Australian Government science arm CSIRO is going to be involved in stage III as the company hopes to successfully use an alternative purification to the “environmental nasty” hydrofluoric (HF) acid which is used in China in spherical graphite production.

Dugdale said: “We’re working with the CSIRO … to produce non-hydrofluoric acid purification and we want to be able to drill the resources at the same time as we’re getting this next step — the spherical graphite work.”

An isometric view of Gapyeong drill targets

An isometric view of graphitic units at Gapyeong, highlighting proposed drilling.

A staged approach

The company has generated more than 5-kilograms of high-purity concentrate of more than 95% TGC at Eunha during stage I of its strategy and is generating a sample for Gapyeong, to use in the spherical graphite testing.

Dugdale said: “Then we can move through the graphite testing through to feasibility.”

During stage II the company will purify the spherical graphite — targeting more than 99.95% TGC purity — then test the purified product in batteries.

Peninsula’s MD said: “The second stage will be to complete the spherical graphite work in Germany, with the contractor, and the third stage will be the final purification to get to the 99.95% purity, which is also to involve the collaboration with the CSIRO.”

The company has set production targets for its feasibility study in its strategy’s Year 2, next year, based on feedback from offtake companies in Korea.

READ: Peninsula Mines confirms resource targets in South Korea following significant graphite hits

Dugdale said the company hoped to be able to “develop mine production up to say 60,000 tonnes per annum of flake graphite concentrate from which we can recover 36,000 tonnes per annum of spherical graphite, which is the demand that the offtakers have indicated they’ll take.”

Peninsula is also looking to fund and potentially list its wholly-owned Korea Graphite Company Limited (KGCL) subsidiary to develop graphite production capacity and partner with end-users for downstream processing.

Year 3 involves developing production that delivers 26-60 kilotonnes a year capacity at more than 95% TGC concentrate.

A processing facility to produce 12-36 kilotonnes a year of spherical graphite for use in Korean lithium-ion batteries would be a next step.

The company also plans to supply Korean end users with high-value spherical graphite and large-flake concentrate from several sources, including from offshore.

Peninsula is targeting the first three parts of the supply chain.

A required demand

Fine-flake graphite pulls in about US$800 a tonne while spherical graphite price has been on an uptrend due to supplies being retained in China.

This means about a $1,000 a tonne premium has been added in the past 12 months to what is now about a US$3,000 price.

Peninsula has already secured a site for a production facility in Korea located next to a steel plant that can take the inputs the company does not use in spherical graphite.

While the company will not be the world’s biggest graphite product producer, it will hold the competitive advantage of being in the country whose battery-makers are the biggest producers of lithium-ion batteries in the world.

Battery-makers will be able to bring down their trucking miles and maintain the integrity of spherical graphite inputs at a key time when suppliers will continue to be on the hunt for alternative supply sources to China.

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