Flinders to buy Big North Graphite

Vancouver-based graphite producer Flinders Resources (TSXV: FDR; US-OTC: FLNXF) is moving to acquire Big North Graphite (TSXV: NRT).

Flinders recently became a producer by restarting its Woxna graphite mine in Sweden, which achieved commercial graphite production in July.

With this latest friendly bid, Flinders has its sights set on restarting Big North’s El Tejon historic graphite mine in Mexico’s Oaxaca state.

“Our successful restart of the Woxna project in Sweden demonstrates Flinders’ expertise, which will now be directed towards the restart of the Big North–El Tejon project,” said Flinders president and CEO Blair Way in a release.

Big North only acquired El Tejon in February. The 5 sq. km property includes a historic large-flake graphite mine and mill, which operated from 1980 until 2002, when low graphite prices forced operators to shutter the mine.

“To the best of my knowledge this is the only large-flake graphite mine in Mexico,” Big North CEO Spiro Kletas said in an interview shortly before the Flinders bid was announced.

Large-flake graphite is usually of higher purity and sells for a higher price than the more common amorphous graphite. Twenty percent of El Tejon’s historic production was large flake, with the rest being amorphous, Big North notes.

In August Big North released a technical report that gauged the cost of restarting the old mill at El Tejon under two scenarios. The report, completed by Tetra Tech, pegs the total cost of getting the mill up and running at $2.3 million for one of two processing lines, and $5 million for full capacity of 500 tonnes per day.

Kletas said the mill was built in 1980 by the Mexican government, which added a second processing line in 1989. Shortly thereafter the Mexican government sold the assets and production continued under private owners until 2002.

To acquire El Tejon, Big North agreed to pay $1.7 million and issue 12.5 million shares to the vendors over five years. The sellers also retain a 3% net-profit interest royalty on the project.

Under Flinders’ offer, Big North shareholders will receive one Flinders share for every nine Big North shares.

The deal would result in Flinders issuing 9 million shares, and is expected to close in mid-October.

With the purchase, Flinders would also gain control of Big North’s amorphous graphite properties in Sonora state, where the junior had already sold 1,200 tonnes of graphite to local steelmakers.

Those 1,200 tonnes were derived from two sources: a “test mining” program at Big North’s 50%-owned, past-producing Nuevo San Pedro project, which operated from 1996 to 2002; and local miners who lack the ability to process and bring the material to market.

Big North set up a facility near the town of La Colorada for crushing, grinding and straining material to produce salable graphite of up to 80% purity, Kletas said.

Also in Sonora, Big North holds the Akiwiki graphite concession, a 1.45 sq. km property that includes two more past-producing graphite mines: La Fortuna and Caraples.

Big North also has two early stage graphite exploration projects in Ontario and Quebec.

On the day of the Flinders bid, Big North shares jumped to a 52-week high of 10¢ before closing flat for the day at 7.5¢.

Flinders shares closed down 6% at 97¢ apiece, within a 52-week trading range of 32¢ to $1.18.