Reuters reported that Magnesita is in talks with five companies to jointly develop a graphite mine in Brazil as it seeks to boost exposure to a fast growing and highly lucrative market.
Mr Ronaldo Iabrudi CEO of Magnesita said that the company, which owns the world's highest quality magnesite mine, wants partners to develop the Almenara graphite mine because prices for the mineral have jumped by two thirds this year alone.
Mr Iabrudi said that Magnesita is discussing options with Japanese and Chinese miners. The company expects Almenara which is located in the mineral-rich state of Minas Gerais, to produce 40,000 tonnes of graphite a year by the start of 2013. A venture could help ramp up output to 100,000 tonnes in the medium term.
The talks underscore Magnesita's efforts to make more money from its mining assets as conditions in the refractory business remain tough because of the weak global steel market. Refractory materials, which retain their strength at high temperatures, are used in linings for furnaces, kilns and reactors.
By teaming up to develop Almenara, Magnesita could become self-sufficient in graphite and tap red hot demand for the mineral a key ingredient in mobile phones and electric car batteries.
Mr Iabrudi said that "We have an asset that has a unique mix of high prices and demand, relatively low production costs and great returns. Graphite is a highly differentiated mineral."
Analysts at Santander Investment Securities recently valued Almenara at USD 1.1 billion highlighting its competitive production costs, low required investments and Magnesita's cheap funding sources.
The focus on Almenara is a bet on the growing use of lithium ion batteries, which require 10 times as much graphite as they do lithium as well as on fuel cells and nuclear power. Graphite prices have risen sevenfold since 2007 on rising demand for industrial minerals and so called rare earth elements minerals that are very difficult to mine.
The graphite market is tightly controlled by China, which has imposed export quotas in recent years. Demand could double by the end of the decade as the use of hybrid and electric vehicles expands.
Mr Iabrudi said that for years, investors speculated that Magnesita could first try to sell a stake in Brumado, a mine in northeastern Brazil that has an estimated 185 years worth of the highest quality magnesite reserves in the world.
But there were no immediate plans to do that and the company instead is pushing forward with a two-phase expansion plan. It has recently found evidence of copper and iron ore reserves in Brumado, which also has dolomite and talc deposits.
(Sourced from Reuters)
