Nicanda Hill

Triton’s Nicanda Hill resource is the largest combined graphite and vanadium resource in the world

DFS

MINERAL RESOURCE

The Company’s most significant achievement to date is the announcement in October 2014 of the maiden Mineral Resource at Nicanda Hill. Triton achieved this milestone in only six months from the commencement of drilling at Nicanda Hill.

The maiden Mineral Resource estimate ranks Triton’s Nicanda Hill deposit as the largest combined graphite and vanadium deposit in the world.

The total Mineral Resource estimate as at 31 December 2014 comprises 1,457 Million Tonnes (Mt) at an average grade of 10.7%TGC and 3.93 Mt at an average grade of 0.27% of Vanadium Pentoxide (V2O5) classified as either Inferred Mineral Resources or Indicated Mineral Resources in accordance with the guidelines of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012 Edition) as reflected in Table 1 below. This Mineral Resource has been reported inside geological wireframes (defined on the basis of mineralised graphite intercepts) and equates to a nominal 8% TGC cut-off grade.

Classification Tonnes (Mt) Grade (TGC%) Contained Graphite (Mt) Grade (V2O5%) Contained V2O5 (Mt)
Indicated 328 11.0 36.1 0.26 0.85
Inferred 1,128 10.6 119.7 0.27 3.05
*Total 1,458 10.7 155.9 0.27 3.93

Table 1. Balama North – Nicanda Hill Global Mineral Resource
*Note that some of the numbers may not equate fully due to the effects of rounding.

Competent Person’s Statement
The information in this report that relates to Mineral Resource estimate at the Nicanda Hill deposit on Balama North project is based on, and fairly represents, information and supporting documentation prepared by Mr Mark Drabble, who is a Member of the Australasian Institute of Mining & Metallurgy. Mr Drabble is not a full-time employee of the Company. Mr Drabble is employed as Managing Principal at Optiro Pty. Ltd. and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code)’. Mr Drabble has reviewed and approved for release this announcement as it relates to Mineral Resources and consents to the inclusion in this report the supporting information in the form and context as it appears.

Annual Review
The Company reported its maiden resource at Nicanda Hill on 21 October 2014. As a result of the annual review of the Company’s Nicanda Hill resources there has been no change to the resources since it was first reported in 21 October 2014.

Governance of Nicanda Hill Resource
The Company engages external consultants and Competent Persons to prepare and calculate estimates of its Nicanda Hill Resource. These estimates and underlying assumptions are reviewed by the Board and Management for reasonableness and accuracy. The results of the Nicanda Hill Resource estimates are then reported in accordance with the JORC codes and other applicable rules. Where material changes occur during the year to a project, including the project’s size, title or exploration results or other technical information, then previous resource estimates and market disclosures are reviewed for completeness. The Company reviews the Nicanda Hill Resource as at 31 December each year. Where a material change has occurred in the assumptions or data used in previously reported Nicanda Hill Resource, a revised resource estimate will be prepared as part of the Annual review process.Click edit button to change this text.

The global resource summary is reflected in Table 2 below.

Indicated Tonnes (Mt) TGC% V2O5% Inferred Tonnes (Mt) TGC% V2O5% Tonnes (Mt) TGC% V2O5%
Global 0.33 11.0 0.26 1.13 10.6 0.27 1.46 10.7 0.27

Table 2. Nicanda Hill global resource summary (no cut-of grade applied)

Triton notes that this Mineral Resource estimate far exceeds the Company’s original expectations. Nicanda Hill has rapidly progressed from concept stage to classified Mineral Resource. The Nicanda Hill drilling program, which commenced in April 2014, was originally designed as exploration but due to the strong and consistent drilling results, rapidly developed into a resource definition drilling program.

The Company found that the drilling data confirmed both the geological continuity and consistency of graphite grades across the mineralised footprint at the Nicanda Hill deposit. These strong results provided Triton with the opportunity to undertake and complete an initial Mineral Resource estimate for Nicanda Hill approximately six months early.

These results demonstrate the high quality of the Nicanda Hill deposit. With the successful definition of the Mineral Resource estimate and the identification of multiple high grade mineralised zones which outcrop at surface, Triton is in a strong position to rapidly advance the Nicanda Hill deposit towards production. The Company will now look in the near future to become a market leader and one of the lowest cost graphite and vanadium producers in the world.

The Mineral Resource estimate has been defined within the original 6.2km long mineralised footprint at Nicanda Hill. Additional exploration prospects to the west, east and south have yet to be assessed.

The Company will seek to undertake pilot plant production testing on large bulk samples. The use of a pilot plant would assist Triton to complete the definitive feasibility study and advance the project towards production.

SCOPING STUDY

Another major achievement for the Company was the release of the Nicanda Hill Scoping Study, which was undertaken and prepared by independent geological and mining consultants Optiro Pty Ltd (Optiro).

The Scoping Study is based on the Nicanda Hill resource. Approximately 328Mt of the Nicanda Hill Mineral Resource estimate has been classified as an Indicated Mineral Resource. The Scoping Study is based entirely within the Indicated Mineral Resource.
The mining inventory on which the Scoping Study is based, comprises 51Mt grading 12.4%TGC. Vanadium-credits were not included in the Scoping Study but form part of the future project upside.

The study envisages a shallow open pit operation, focused initially on the high grade Mutola, Macico and Grande graphite zones and accessed by three separate ramps (as shown in Figure 1 below). The shallow nature of the open pit operation combined with interlode (schist + gneiss zones in between the mineralised domains) material averaging 6%TGC, represents exceptionally low technical risk.

Average grades for the first five years are anticipated to be between 12 and 13%TGC. Locally, grades are expected to exceed 13%TGC. Initial waste to ore strip ratio averages 0.84:1, with the Life of Mine (LOM) strip ratio be approximately 1:1. The majority of the interlode material averages approximately 5%TGC.

The Scoping Study anticipates a straight-forward crushing, milling and flotation process together with screening and drying circuits.

The results are based upon a thirty year conceptual LOM (29 years mining plus 1 year construction) and a processing operation of 1.8Mta resulting in an average annual production rate of 210,000 tonnes of graphite concentrate.

Triton notes that the Scoping Study has assumed a conservative average graphite price of US$985 per tonne, to incorporate price variations between the selling prices of different graphite size and purity fractions. The Scoping Study assumes this selling price will remain constant over the thirty year life cycle of the proposed Nicanda Hill mine and does not take into account any potential price escalation as demand grows.

Other key outcomes from the Optiro Scoping Study report are outlined and summarised below:

  • Estimated initial capital cost US$110 million which includes contingencies;
  • LOM free cash flow of US$624/t;
  • Estimated average mine gate cost of production at US$250/t;
  • Free on Board cost (FOB) Port of Pemba estimated average cost at US$315/
  • Cash operating costs of US$338/t;
  • Positive cash flow within 2 months of commission; and
  • Payback period within approximately 10 months of commission.
Classification Tonnes (Mt) Grade (TGC%)
Mining Inventory 51Mt @ 12.4% TGC
Production Rate Mtpa 1.8
Mine Life (including construction) Years 30
Pre-Production Capex US$M 110
LOM Sustaining Capex US$M 29
Cash Operating Cost US$/t produced 338
LOM Free Cashflow US$/t produced 624
DCF / NVP10 US$M 1,230
IRR % 137

Table 3. Summary of Economic Assessment

Table 4. Capital Intensity of peer graphite companies

Figure 1.Conceptual open pit design by Optiro for a 30 year mine life. The pit is approximately 3kms long and averaging 200m wide and 60m deep

Triton believes that the Nicanda Hill deposit will attract very low, market-leading operating costs, and combined with the large scale of the deposit, gives Triton the ability to selectively mine higher grade zones and to target various graphite flake sizes. This affords the Company a competitive advantage to supply high quality graphite to numerous parts of the global graphite market and the potential substitution of graphite into the general carbon markets.

The results of the independent Scoping Study demonstrate that Triton is increasingly well positioned to advance the Nicanda Hill resource in order to commence graphite production as soon as possible, and in doing so, Triton’s aim is to become a global market leader and a prominent global source of low cost, high quality graphite material.

VANADIUM/ZINC POTENTIAL

The Nicanda Hill resource contains numerous high grade vanadium mineralisation zones and has been confirmed in the Mineral Resource estimation averaging 0.27% V2O5.

Nicanda Hill contains 3.93Mt V2O5 establishing it, in its own right, as the largest known vanadium resource in the world, being approximately one third larger than the next largest known vanadium resource (2.7Mt V2O5) and approximately three and a half times larger than the Rhovan Vanadium mine in the north West province of South Africa (1.1Mt V2O5).

Metallurgical test work to date shows that vanadium is present at significant levels in the process tailings after the flotation and separation of the graphite concentrate from the ore. Also of note is the presence of zinc and other base metals in the tailings.

Further and more comprehensive test work is still required to understand whether the vanadium and zinc can be further upgraded into saleable concentrate levels. Accordingly, the vanadium and zinc potential of the Nicanda Hill was excluded from the economics of the Nicanda Hill Scoping Study.
Should the vanadium and zinc be found to be upgradable from the tailings, a positive impact on the overall economics and profitability of a potential mine at Nicanda Hill is likely.

Nicanda Hill hosts the largest known vanadium resource in the world

MINERALOGICAL

Mineralogical tests taken from the various in situ samples obtained during the year from across the Nicanda Hill mineralisation footprint, have verified a range of graphite flake sizes from fines through to jumbo flake. Results contained head grades of up to 28%TGC, from the various samples. In addition, these tests also confirmed the persistent presence of Vanadium within the graphitic samples, obtaining grades up to 0.50%V2O5.

These mineralogical test results showed on average the graphite flake size distribution from the samples tested are as follows; 23% of the graphite samples are very large flake which are 212µm or larger, 36% are greater than 106µm (medium to large flake), 17% are greater than 75µm (medium flake), and 24% are less than 75µm (small flake) in size. These results are outlined below in Table 5.

Graphite Flake Sizes Flake Distribution
+400µm 7.3%
+212µm 15.9%
+106µm 36%
+75µm 17.1%
-75µm 23.7%

Table 5. Mineralogical Flake size distribution of the graphite as obtained from samples at Nicanda Hill.

Further, the Company has observed that the graphitic material in the northern prospects of the mineralisation footprint appears to host larger graphite flake and grade within the weathered zone.

Triton feels that if the metallurgical and mineralogical test work confirms these observations then the weathered zone in the northern prospects could possibly become the primary focus for Triton in the first 2-5 years of proposed graphite production.

Finally, the strong vanadium assay results has again increased Triton’s confidence in the Nicanda Hill project, as a very large multi-element project and these results also underscore the potential importance of vanadium with respect to the overall future economics of the project when in production.

METALLURGICAL RESULTS

During the year, Triton received metallurgical test work results that have confirmed that the Nicanda Hill graphite ore, through standard flotation methods, is readily able to produce graphite concentrates which assay from 95.8%TGC to 97.3%TGC.

Triton has also begun a metallurgical program, being undertaken by Mintek (Johannesburg), which will be incorporated into the forthcoming feasibility program. This new program will include variability metallurgical testing to identify and confirm larger areas of near-surface large flake graphite material and to verify the methodology for the optimisation in the recovery of the various graphite flake sizes.

The metallurgical results received during the year confirmed that the graphitic concentrate produced through the standard flotation methods contain low levels of impurities, which confirms that the graphite is liberating cleanly from the graphitic ore.

The tests verified low levels of volatiles and impurities. These flotation tests produced graphite concentrates with a weighted average purity of 97.1%TGC, 2.7% Ash and 0.2% Volatiles, without the need for chemical treatment.

Metallurgical tests have further confirmed that Triton is able to upgrade the Nicanda Hill graphite concentrate up to 99.9%C using simple chemical wash.

To upgrade graphite flotation concentrate, samples were digested in 20% solution of hydrochloric acid (HCl) at 20% solids (w/w) for 4 hours at 80ºC in a water bath to remove carbonate and iron oxides.

The residue was then thoroughly washed to remove all acid and leached in 8% solution of hydrofluoric acid (HF) at 20% solids (w/w) for 4 hours at 90ºC to remove silicates. The final residue was thoroughly washed, dried and assayed for graphitic carbon.

Leaching is a very effective method to remove gangue minerals from graphite concentrate without flake size reduction. The amount of consumables required for the purification process is very low due to the very high grade of the graphite concentrate and the low levels of the impurities which can be readily removed.

In addition to the above, the metallurgical test work undertaken to date shows that both vanadium and zinc are present in the process tailings after the flotation and separation of the graphite concentrate from the ore. Also of note is the presence of other base metals, including titanium, in the tailings.

In the initial testing, vanadium was readily upgraded through a standard flotation of graphite tailings to produce vanadium concentrate with grades up to 0.74% V2O5.

A zinc concentrate assaying 7% was also produced from the graphite tail through simple flotation process.

Further metallurgical investigations are required in order to optimise flotation conditions and improve both vanadium and zinc recoveries so that they may be further upgraded. Accordingly, the vanadium and zinc potential of the Nicanda Hill resource is still to be fully understood.

Should the vanadium and zinc be found to be upgradable from the tailings as a saleable concentrate, this would have a major positive impact on the overall economics and profitability of a potential mine at Nicanda Hill.

GRAPHITE PRODUCTS

There a multiple uses for flake graphite which include:

  • Expandable Graphite (insulation foam, soft foams, mattresses, carpets, textiles, coatings, plastic foils, rubber products, Pipe closing systems, fire retardants, graphite foil);
  • Micronised Graphite Powder (photovoltaic, high temperature furnaces, lamp carbon, lubricants, carbon brushes);
  • Spherical Graphite (anodes in lithium ion batteries) and
  • Recarburisation (steel making and iron casting).

According to the independent IMO study, which assessed metallurgical and mineralogical test results received by the Company to date, the applications for which the TMG concentrate is suitable, include the following:

  • Dry Cell, Lead Acid and Alkaline Batteries
  • Lithium Ion, Spherical Graphite and Fuel Cells
  • Refractory Crucibles
  • Foundry Core and Mould Wash
  • Gaskets
  • Lubricants and Releasing Agents
  • Brake Linings
  • Carbon Brushes
  • Powder Metallurgy
  • Graphite Powders
  • Polymer Additives
  • Conductive Polymers and Plastics

Triton believes that, with further testing and analysis and the possible integration of the Balama North and Ancuabe projects, the Company will be able to expand the list of suitable graphite applications to encompass all of the graphite sectors and potentially a full range of the graphite sub-sectors. This is an extremely positive achievement for the Company.

DEFINITIVE FEASIBILITY STUDY, TECHNICAL APPOINTMENTS & DEVELOPMENT TIMELINE

Triton has engaged a complete technical team of experts, who possess a high degree of experience in graphite, to assist Triton with the completion of the Definitive Feasibility Study (DFS) and an Environmental Management and Impact Assessment in relation to Triton’s Mozambique graphite project.

The technical team includes:

  • DRA Global
  • Orelogy
  • Golder Associates
  • Jem-Met
  • Legacy Project Solutions; and
  • Engagement of Coastal and Environmental Services (Pty) Ltd

Compiling such an experienced and capable team of experts, gives the Company confidence that it can build on its past successes and continue with the rapid development of the Nicanda Hill resource, towards graphite production. The Definitive Feasibility Study is underway and Triton is expecting to receive the results of the DFS in Q4 2015.

The preliminary concept for the Nicanda Hill site layout is shown in Figure 2 below.

Figure 2. Proposed Nicanda Hill Graphite Mine – preliminary site layout

It is also worth noting that Triton is working towards the indicative Nicanda Hill project development timeline outlined in Table 6 below, which demonstrates a targeted commencement of production to be Q1, 2017.

Table 6. Targeted project timeline for development of the Nicanda Hill graphite deposit, subject to obtaining the relevant funding and regulatory approvals

OFFTAKE AGREEMENTS

On 1 April 2015, Triton announced it has secured a 20 year binding off-take agreement with Yichang Xincheng Graphite Co., Ltd (YXGC).

The minimum total contract revenue of US$2,000,000,000 (two billion dollars US) is assured by a floor price of US$1,000/tonne, with the full contract value determined by the future sale price as set by the applicable market price. Further, Triton has exclusive rights to supply graphite to YXGC from Mozambique, Madagascar, Malawi and Tanzania.

YXGC is located in Yichang, China. This region of China is famous for being the hydroelectric capital of the world and is one of the biggest enterprises area from the whole of China for mineral processing and products.

YXGC products are widely used in the fields of petroleum and chemical industry, steel refining, electric power, metallurgy, machinery, automobile, shipping building, pharmacy, aerospace industry, nuclear industry and, most significantly, a number of distinguished global electronic and technology companies.

YXGC products are distributed throughout China and exported to more than 20 countries around the world. (http://www.xc-graphite.com/)

Figure 3. Mr Brad Boyle, CEO & MD Triton and Mr Yue Bin, Chairman YXGC at contract signing ceremony, 30 March 2015, Yichang, China

Key terms of the binding off-take agreement include:

Term 20 years
Amount 100,000 tonnes of graphite concentrate per year, annualised over term, scaling up from initial production
Sale Price Graphite Market Price  
Minimum Sale Price Graphite concentrate will be traded at market price at the time of supply, which shall be no less than US$1,000 per tonne. The market price is not limited in its upside, however, the Contract provides that should the global graphite market price fall below US$650 per tonne, the Parties have agreed that, acting in good faith, they will undertake to negotiate new terms in relation to the graphite sale price
Minimum Contract Revenue US$2,000,000,000 (2 Billion Dollars)
Minimum Flake Size 150µm
Graphite Purity 90% Total Graphitic Carbon
Moisture Content Less than 1%
No Restriction Triton is not restricted in selling TMG to other parties
Exclusivity of Supply YXGC will only source graphite concentrate from Mozambique, Madagascar, Malawi and Tanzania exclusively from Triton
Condition Precedents Within 36 months of signing Agreement the follow conditions apply:

  • Triton receiving all relevant government approvals
  • Triton commissioning a processing plant or plants
  • Triton achieving commercial production of Material to the satisfaction of Triton
  • Triton providing YXGC notice of its intention to commence deliveries of Material
Binding Nature
  • the Contract is titled “Letter agreement”, is executed by representatives of Triton and YXGC and parties agree that the Contract is to be legally binding upon them, gives rise to full legal rights and obligations and contains binding undertakings and representations regarding the full operation of an off-take
  • should no other more formal agreement be negotiated, finalised or executed, the terms of the Contract remain in force and continue to bind the parties
  • the Contract provides that should either party make a written request to do so, Triton will prepare a more comprehensive offtake agreement that sets out in more detail any additional required terms and to the extent required elaborate upon the arrangements and commitments contained in the Contract
Post Production review of terms the Contract provides that within 6-12 months post the commencement of full Production, the Parties have agreed that if a more formal offtake agreement has not already been entered between the parties, the parties will in good faith negotiate a formal off-take agreement which will replace the Contract and incorporate any additional terms required to finalise the strategic relationship

Triton considers the initial binding off-take agreement with YXGC, which is possibly one of the largest and longest materials supply contracts made in the graphite market and is very significant with respect to any mineral commodity, to be an encouraging major milestone in the development of the TMG projects.

The implementation of this agreement demonstrates the strategic importance and growth potential of graphite-based technologies.