The following is an extract from the research report:
A Promising Start
TON's principle project is situated immediately along strike from SYR's Balama Deposit, the second project (Ancuabe) is located closer to the port of Pemba and surrounds the Ancuabe graphite mine.
We feel that TON's proximity to the known graphite deposit at Balama and potential to leverage off of the development that is likely to occur as Syrah Resources advance their deposit is a strategic advantage for TON.
We additionally like that TON is focussed on getting into production as soon as possible in a modest scale, rather than spending time and money on proving up a substantial resource.
In 2012 TON made the move into graphite with the acquisition of the Mozambique projects. The projects are in known graphite rich areas with a history of graphite mining.
The other advantage of the projects is that they are situated close to good roads and an expanding port. Grid power runs through the project area.
Another positive is the relatively quick pace at which SYR have obtained various local government permits, showing that the government is willing to assist development.
Mozambique Graphite Projects (60%, earning 80%)
TON first announced the move into Mozambique in mid 2012 and completed the joint venture transaction in late 2012.
The terms of the JV are that TON will meet minimum expenditure commitments and issue stock to earn into the project. Recently TON announced that they now have a 60% interest in the Mozambique graphite projects. The move to 60% has seen TON commit to making staged payments totalling US$550,000 over the next 18 months and issuing 5 million shares to Grafex.
The next earn-in stage is upon completion of a Definitive Feasibility Study (NYSE:DFS) TON will move to 75% ownership and then 80% upon production commencing.
The Balama Project is located in the Cabo Delgado province of northern Mozambique, approximately
230 kilometres west of the port of Pemba and is supported by a good quality bitumen road that runs through numerous towns and villages.
TON will be able to leverage off the infrastructure development that is planned as part of bringing SYR's Balama project on line and also the expansion of the offshore gas projects, being run out of Pemba.
At Balama North TON has identified two main areas of outcropping graphite mineralisation at the Cobra Plains and Nicanda Hill Prospects.
At both prospects TON has identified graphite over 3-4 kilometres in strike length with grades of up to 17.6% Total Graphitic Carbon (NYSEMKT:TGC) reported, from surface sampling.
The Ancuabe Project includes 5 exploration licenses located only about 60 kilometres from the port of Pemba. The tenements completely surround the historic Ancuabe graphite mine.
In early 2013 TON identified in the North West portion of the project ~4kms of strike length of graphite mineralisation, with grades of up to 9.43% Total Graphitic Carbon (TGC) reported, from surface sampling.
TON plans to commence field work at Ancuabe following the wet season in early 2014.
Graphite can be divided into two markets; natural occurring and synthetically produced. The classifications for natural graphite and pricing is generally based on the grain size, with larger grain sizes a higher value.
Synthetic Graphite: is a manufactured product produced by using high temperatures to produce a high carbon content product that is typically less conductive than natural graphite but can be made to suit specific requirements.
The global natural graphite market is 1.2 million tonnes per annum and growing at 3% pa. Currently China supplies about 70% of natural graphite with export restrictions likely to continue to constrain supply.
Graphite is used in a number of industries including; brake linings, lubricants, batteries, fuel cells, with the major use in refractories and the steel industry.
Growth in demand outside of battery growth is estimated at 3%pa, if battery growth continues as expected then graphite demand could increase by 9% pa.
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