Syrah Resources (ASX: SYR) is acquiring a second graphite project in southeast Africa, expanding the company's footprint and potential graphite resource base in the region.
The Nachingwea Graphite Project in south Tanzania is hosted within two granted prospecting licences covering a total area of about 30 square kilometres and lies around 325 kilometres north of Syrah's highly prospective Balama graphite-vanadium project in Mozambique.
Indicating the highly prolific nature of Nachingwea is the geological similarities to Balama, a project that is showing early potential to become one of the largest graphite deposits in the world.
Balama has already differentiated itself from graphite deposits in Canada, Europe and Australia through its large tonnage potential, high grade and coarse flake size, which is being revealed through exploration and metallurgical work.
Now it looks as if Syrah could have a lookalike on its hands with Nachingwea, with a desktop study conducted by Jacana Resources, a company recently acquired by Syrah, identifying similar characteristics to Balama
The project, which has seen minimal exploration for the past 18 years, has a reported strike length of 2.8 kilometres with a width of 1 kilometre.
High visual grades have been reported from the project of up to 60% graphite with coarse flake graphite observed.
A historical report indicates that graphite can be concentrated to above 98% content from a single flotation circuit.
High Graphite Demand
In the current market, graphite prices have been increasing solidly and demand is outstripping supply.
Prices of coarse flake graphite have risen from around US$600 per tonne to US$3,000 per tonne between 2004 and 2011.
Most analysts believe there is little chance of graphite returning to its lows and that the price of graphite has the potential to rise further.
Demand is being driven by the need for products such as batteries and fuel cells, as well as a new technology called graphene - a one atom thick sheet of carbon that has a number of potential uses in electronics.
Automotive and iron and steel industries are the key end-users of the material.
China produces about 70% of the world's graphite but is experiencing slowing growth and reserve depletion.
Graphite has recently had quite substantial return to interest from the investment community due to its near-term prospects and long-term growth potential.
The Nachingwea Graphite Project is located about 7 kilometres northeast of the Nachingwea township in southern Tanzania.
The project lies 120 kilometres west of Lindi, which has basic port facilities, and 180 kilometres west of Mtwara, which has a reportedly underutilised deep water port.
Forward Plan for Nachingwea
A field program is expected to begin in the next few months at Nachingwea, weather permitting. The program will involve mapping of the licence areas and collection of samples for metallurgical testing.
Following the field work, Syrah may be in a position to begin drilling in the second half of the calendar year.
Syrah has already made an initial payment of US$100,000 and will make a series of milestone payments over the next 18 months.
Kehoe said Syrah is due to make a $400,000 in six months. "At any stage if we wish to pull out because it doesn't really stack up we can, but we forfeit payments up to that date," he said.
Prior to making the next payment Syrah hopes to have completed mapping and metallurgical testing of the graphite.
The company will then make two additional payments of $500,000 within 12 months and 18 months.