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Big North Goes South to Secure Graphite Production

Big North Graphite (TSXV:NRT) has set its sights on quickly restarting three recently acquired past-producing graphite mines in Mexico.

The junior company just inked a definitive deal to acquire 100 percent interest in two past-producing amorphous graphite mines, Caraples and La Fortuna, in Sonora Mexico. In addition, the deal allows the company to acquire a 50 percent interest in another past-producing graphite mine known as Nuevo San Pedro.

Big North intends to initially focus its efforts on the Nuevo San Pedro mine, which is located on a 1.1 sq km mining concession with the same name, situated about 45 km southwest of the City of Hermosillo.

The Caraples and La Fortuna mines are situated within the 14.5 sq km Aki Wiki mining concession in the same region as the Nuevo San Pedro mine.

According to Big North Graphite, all three underground mines were small, family-owned, operations that sold run-of-mine ore to a nearby processing plant. “The mines were shut down as a result of low graphite prices in 2002,” commented Spiro Kletas, Big North Graphite’s President. “We intend to inject capital to get the mine back up and running. In addition, we hope to build a small plant to process raw graphite with the goal of arranging our own off-take agreement.”

Both the Aki Wiki and Nuevo San Pedro concessions are located in the prolific San Jose de Moradillas graphite region in the mining friendly state of Sonora. The projects have good infrastructure and access. This area has a long history of graphite production that spans more than 145 years. At its peak, the region produced and shipped as much as 58,000 tons of amorphous graphite.

To earn its interest in these mines Big North Graphite must make staged cash payments totaling US$200,000 and issue a total of 2.2 million shares over the course of a year from the closing date. The company currently has 22.8 million shares outstanding and recently closed a financing that put $850,000 in its till.

Amorphous graphite primer: (data sourced from Asbury Carbons – the world’s largest independent processor and merchandiser of graphite in all forms):

Amorphous graphite is a carbon mineral which is composed of crystals so small that they cannot be seen with either the naked eye or through standard microscopy techniques.

Amorphous graphite deposits are usually formed via contact metamorphism of coal seams. Put another way, when hot magma cuts through, or next to, a coal seam it “cooks” the coal closest to the intrusion into graphite – a process referred to as graphitization.

A good example of this type of graphite formation is the amorphous graphite deposits of Sonora, Mexico. In these deposits swarms of volcanic dykes intruded the area and created seams of amorphous graphite.

*Diagram sourced from Asbury Carbons

Coal beds are not pure carbon, since the proto-carbon is deposited at the same time with other mineral matter that flows into swamps, bogs, deltas, and other coal producing environments. As a result, amorphous graphite is the least graphitic of the natural graphite types and often contains higher ash content then other naturally formed graphite. Amorphous graphite typically has a graphite content of 20%-to-40% as compared with +90% for other natural graphite types.

Due to its close association with coal seams it is typically extracted using conventional simple coal-type mining techniques. Most of the current supply of amorphous graphite in the United States is imported from Mexico and China.

Amorphous graphite is mainly used as a component in lubricants, refractories, steel production, brake linings, clutch materials, gaskets and water-based paints.

In 2011, the graphite market was an estimated 1.2 million tons and more than 55% of that was amorphous graphite. Amorphous graphite currently sells for about $500-$700 per ton depending on the carbon content. The USA, European Union and China have all included graphite on their shortlist of critical materials.

Bottom Line

Big North Graphite has purchased the rights to three past producing underground graphite mines. The Company believes it can capitalize on the upswing in graphite market and quickly re-start these mines and reap the rewards of near term production.

There is little public information about the production history of these operations to facilitate investor due diligence. We know that these mines were small, private, family run operations and most likely have limited production records and little or no resource definition. However, we do know that these projects are situated in the heart of a prolific amorphous graphite producing region in Sonora Mexico.

Big North must now prove to the market and potential off-take buyers that these mines still have sufficient mineable resources which can be accessed and processed at reasonable costs.

The Company has set itself the goal of becoming one of the first TSX Venture Exchange companies to produce graphite.  “We believe that the acquisition of these three past producing Mexican graphite mines puts us in line to accomplish this goal,” stated Kletas.

Thomas Schuster – Analyst Bio

With a degree in Geological Sciences from the University of Toronto, Thomas started his career in the 1990s as an exploration geologist in the famous Timmins mining camp in Northern Ontario. He then moved to Vancouver and took a position as staff Journalist at the well-known mining publication, The Northern Miner, reporting the merits and shortcomings of Canadian exploration and mining projects worldwide. This built a foundation for his later work as a Mining Analyst for the Toronto-based institutional investment firm, Fraser Mackenzie. Thomas is currently based in Vancouver working as an independent mining analyst.

Disclosure: No positions at time of writing.

Big North Graphite is a client of Dig Media. Dig Media was paid a fee for the creation and dissemination of this commentary.

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