South Star Battery Metals is at a critical point in its development of the company, but with a construction-ready project and an in-demand commodity, it’s a point that its peers would envy.
The graphite company is getting set to put its Santa Cruz project in Brazil into production in 2023 – the first new graphite production in the Americas in over a decade.
Santa Cruz is in the state of Bahia, Brazil, which is the second-largest flake graphite producing district in the world with over 80 years of continuous production.
READ: South Star Battery Metals announces groundbreaking ceremony for start of Phase 1 construction of the Santa Cruz Graphite Mine
To put it simply, graphite is hot right now. The commodity amounts to approximately 95% of anode material for commercial battery technologies such as in electric vehicles. Over the last couple of months, flake graphite prices have trended higher as new support was announced for the electric vehicle (EV) supply chain and critical metals sector by the US and Canadian governments, against the backdrop of looming EV metals supply shortages.
Vancouver-based South Star is committed to sustainable, safe production of industrials minerals and battery metals for green energy and clean technologies. That commitment runs deep with its CEO, Richard Pearce, who lives in Brazil and plans to be onsite around seven to 10 days every month.
“I moved to Brazil in 2008 and have been involved with dozens of mines over the years,” Pearce told Proactive. “I find it essential to be present and active if you want to deliver on time and on budget.”
Pearce and the South Star management team and board are very experienced mine builders and operators who have developed several mines from discovery through to development and ultimately into production and operations.
Multimillon-dollar financing package
Management’s experience has helped South Star to secure a US$28 million streaming deal from Sprott Private Resource Streaming and Royalty Corp, who gave Santa Cruz its seal of approval when it looked at the numbers: the project has at-surface mineralization in friable materials, and successful large-scale pilot-plant testing of just under 30 tons has been completed. The results of the testing show that approximately 65% of graphite-in-carbon (Cg) concentrate is above 80 mesh with good recoveries and 95-99% Cg.
South Star has earmarked $10 million of Sprott’s funding for Phase 1 construction. Phase 1 outlines a 5,000 tons per year pilot plant operations, with commercial production targeted for the fourth quarter of 2022.
Phase 2 operations will represent a larger-scale concentration plant currently planned to produce between 25,000 to 30,000 tons per year of concentrate. The sizing of the Phase 2 plant could be increased depending on the successes of the Phase 1 operations, according to South Star, as well as ongoing development of commercial relationships, and market conditions. Construction and commissioning are anticipated to cost around $18 million and take 12 months with commercial production scheduled for the second quarter of 2023.
There couldn’t be a better time for South Star to transition from development into a producing company with a strong pipeline of scalable assets, Pearce told Proactive.
“It’s a great time to have a world class, scalable project in construction and gearing up to enter production,” Pearce said. “I don’t know any other projects with similar infrastructure and logistical advantages. The mines are located in strategic, stable jurisdictions looking to diversify and secure the supply chain of critical metals.”
High purity graphite
Santa Cruz looks like a significant graphite project, but not all graphite is created equally. Pearce said that markets understand the quality of the Brazilian graphite and the highly crystalline structure, which performs exceptionally well for a variety of industrial and value add applications including EV batteries. What’s more, Santa Cruz has very clean ore with little contaminates that can achieve 96-97% Cg with froth floatation.
South Star purified the ore with both chemical and thermal technologies and achieved 99.9993% Cg, according to Pearce.
“We are one of a few companies that have material in Oakridge Laboratory in US being tested for pebble bed nuclear reactors because of the low levels of contaminates,” Pearce said.
Brazil, according to Benchmark Minerals, also has the most profitable production currently.
“The material has been tested for a variety of applications including active anode material for LiBs, alkaline batteries, powders, dispersions and expandable graphites,” Pearce said. “Overall, the materials have performed exceptionally well. Santa Cruz will be in the first quartile of costs and has strong financial metrics. We look to generate 35% EBITDA, or earnings before interest, taxes, depreciation, and amortization margins in Phase 1, and the results improve as we scale the operations.”
South Star has already shipped a variety of samples to dozens of clients and is in the process of negotiating hard offtake agreements. In addition, it is also gearing up to work with the local municipality, state and other stakeholders to develop and train local partners, service providers as well as potential employees for its operations. Pearce estimates that the majority of the operations will be built in around nine to 10 months, followed by 60 days to commission the plant.
Navigating the transition
The transition from project development into production can be a tricky one on an operational level, but Pearce is emphatic that South Star’s team is comprised of individuals with over 30 years of experience in the graphite sector both on technical as well as commercial sides of the business.
“South Star is uniquely placed with very good development, operations, and capital markets experience for graphite projects throughout the Americas. We look to put Santa Cruz into production quickly and leverage that experience (at the) Ceylon project in Alabama.”
The Ceylon project is South Star’s kicker. A previous producer, Pearce estimates that development at the Alabama Graphite (CSE:ALP) project is about three years behind Santa Cruz. The firm recently signed a contract with North Carolina State Metallurgy Laboratory to provide a small-scale pilot plant test and produce 15 kilograms of concentrate and plans to test the material for a variety of value-add applications similar to the testing program for Santa Cruz. Drilling and further exploration on both projects is also in the cards, in a bid to “significantly upsize” resources and reserves, according to Pearce.
As the company’s name suggests, South Star is targeting the battery metals market as end users – a market which is growing at a double digit compound annual growth rate and creating a very real supply-demand imbalance. Demand is also high for conductivity enhancement materials, foils and gaskets, fire retardants, powders and dispersions. The company’s commercial plan includes traditional industrial applications such as refractories, high strength steels, and lubricants as well as a variety of value-added applications including many types of batteries, Pearce said. “South Star should be very well positioned with a range of products that can be sold into a variety of applications.”
Santa Cruz will be the first major industrial operations in the region, and the company is seriously involved in the process of dialogue with the main stakeholders. Overall, Pearce stressed that the firm is committed to a corporate culture, project execution plan and safe operations that embrace the highest standards of ESG principles and aims to ensure that reporting is consistent, transparent, and measurable in agreement with industry standards.
“Our business plan is simple – safely deliver high quality products that consistently meet the required technical specifications and generate excellent value for our clients, interesting margins for shareholders and in agreement with the highest standards of environmental stewardship,” the CEO said. “If we can do this, we will be very successful.”
Contact Angela at angela@proactiveinvestors.com
Follow her on Twitter @AHarmantas