Maurice Jackson: Our feature issuer is establishing itself to become one of the world's leading in graphite producers, DNI Metals. Joining us for our conversation is Dan Weir, the executive chairman of DNI Metals.
Dan, DNI shareholders have been awaiting some company updates, let's get everybody up to speed because I know that you've been working laboriously since our last discussion and want to share the fruits of your labor.
All too often when I talk to speculators, they focus on the tangibles. I'd like to remind our readers that the intangibles are equally important, which leads to today's press release entitled "DNI sponsors clean water day in Madagascar."
What can you share with us?
Dan Weir: It's very important. We take fresh water for granted; we can walk over to our taps, we can brush our teeth, we can drink the water. In most places in the world that's not what happens. There are approximately 21 or 22 million people that live in Madagascar and, according to U.S. AID, over 11 million people in Madagascar don't have fresh water.
We started a drilling program in April of last year, and part of that program the government wants you to work with the local community; it's called CSR or community relationship that they want us to help the community. In fact, they make it mandatory that you do certain things for the local community in order to operate a drill program. As part of that because we had a drill rig there, we drilled a water well for the local village. They had a small soccer field that was built on the side of the hill and kind of sloping; because we had the bulldozer there, we leveled out a whole big field and built them a nice soccer field. When I was there a couple of weeks ago, tons of kids were out playing soccer, so it was really great to see that they were actually using that.
When we were developing the project, we had to put some roads in off the main paved highway and as part of that we took and extended the road right back to the village. So now it's about a three-kilometer road that goes round the village right out to the paved highway, which they never had before. They always used to just walk back and forth on a small path through the bush.
These people are very poor, they grow fruit trees and basically live off the fruit and the rice that they grow. When we were putting the roads in, we did knock down some of those fruit trees. We planted two or three times as many fruit trees as we knocked down, all along the side of the road; it helps stop the erosion and it also gives them fruit trees. And also we compensated the people for that too, meaning that any fruit trees that we knocked down we paid them for that as well.
We worked very hard with the local people, and I'm very excited in the future to work with the local people and potentially make their lives better with the development of a mine because we can give them jobs and we can help them with all sorts of other things to improve their lives.
Maurice Jackson: I had the pleasure of going to Madagascar twice last year to visit the DNI projects. What a wonderful group of people there in the community and I know they welcome DNI's initiatives. Just from a personal standpoint because I know you have a very intimate relationship with the community there, how does this event impact you?
Dan Weir: It's pretty amazing that we were able to sponsor the event, number one, and number two, in being able to give people fresh water. I remember back in February of 2017, we were on the property looking and deciding the route for the roads. One of the routes we looked at was going farther to the north and coming in from the north. We ultimately brought the road in from the south to the main zone and to the village, but we looked at bringing a road in from the north.
A group of us split apart when we were deciding on the route. I wanted to go look over here and see if the road could go that way; a couple of the other people went the other way. We got separated and I ended up back at the village. I didn't have any water with me; I'd left my water bottle with one of the other people. I went over to a small hut and asked if they had any water." They had a barrel, they put a cup in the water and handed it to me, and I looked in the cup and it was a reddish color; it almost looked like rust, and I'm thinking, "Oh, my God, these people actually drink this water all the time."
Now that we were able to drill a well and give them fresh, clean water right in the village, that's a pretty good feeling, I can tell you.
Maurice Jackson: Kudos to you. Job well done there. What kind of response was DNI receiving from the community?
Dan Weir: The community is very supportive of us coming in and developing this project, increasing their standard of living. Again, they're looking for jobs. The statistics in Madagascar is somewhere around an 80% unemployment rate. The average person lives off or earns less than 50 cents a day, so if we can provide good jobs for the locals, that is huge, and they welcome us with open arms.
Maurice Jackson: Switching gears, the press release also referenced DNI update, what type of updates do you have for us?
Dan Weir: A couple of things, and let's touch on about three different things that we've been working on. I just spent about a month in Madagascar; I've been back a little over a week. The focus of me going over there was to meet with a number of our contractors, get a lot of quotes for equipment and everything else for the pilot plant that we'll have in operation before the end of the year. 1) I'm going to provide an update about the pilot plant, 2) an update about the bulk sample that we took from the property in November and we shipped it to India and had it tested. 3) And then we'll talk a little bit about the arbitration with Cougar.
First of all, let's talk about the pilot plant and getting all of that organized. We're very lucky; 50 kilometers down the road from our property is a Caterpillar dealership. I've been in there getting quotes from them, but there is also Komatsu, there are a number of other companies in Madagascar where we can get all of the equipment that we need. And what I need by equipment, I mean the rolling stock or the excavators, the bulldozers, everything like that. So I've been organizing and getting that all ready. The pilot plant itself, we have engineered and designed it.
Let's start with the big picture. Let's start with where we are in Madagascar, then we're going zoom in to where the pilot plant is possibly going to go. We have an opportunity of a couple of different locations where we can put it, and then I'm going to talk a little bit about the components that we got for the pilot plant.
We have two properties, the L-shaped Vohitsara property and the square-shaped property called the Marofody. You can see that the U.S. Geological Survey put maps together that showed where historically there were graphite mines. You can see that there are numerous north-south lines on both of our properties.
Now, we're 50 kilometers to a port; we always stress this and we make sure that people understand that and also remember that one of the reasons why we were focused in this area that they've been producing graphite for 100 years. There is an operating mine just to the south of here, there is another operating mine right here right now, and historical mines throughout this whole area.
Maurice Jackson: This port that you just referenced here, this is a world-class port, correct?
Dan Weir: That is correct. It sits right up here only 50 kilometers away. There was a billion dollars spent on it within the last 10 year,s and there was an announcement by a Japanese firm that they are going to extend it out even farther out to accommodate the newer ships. Currently, it can take the second largest container ships in the world. The biggest ships in the world can't come in here yet because of depth, but they're expanding that out. Every day there are container ships that come in and out of this port, so shipping graphite is very simple for us with multiple carriers coming in and out.
Let's just talk a little bit about saprolite just to remind people why we're focused on this area because of the saprolitic--type material. It's a weathered rock. Most of Madagascar is very, very dry. Where we are, the wind comes in off the ocean and as the warm moist air comes in there is a ridge that runs along the coast, it goes up 1400 meters and it dumps all the water in this area. Saprolite is just another term for weathered rock in a climate that is hot and gets lots of rainfall.
The main highway is the line that runs north south. We have the entrance to our second property, Marofody, and an entrance that we built into our first area. When we build the pilot plan, we have a couple of different locations where we can put it. And it will be modular so that over time we may move it to a few different places. Let's look at the Marofody property, which is that square property. We have a very good gravel road that runs into the property here. There is a nice big river out here because we're going to need water. When you're processing the graphite through the plant, it's about 50% water and 50% of the ore or the dirt that we feed into the plant to make it move through the plant.
These are a bunch or rice paddies. Right next to the road might be one place where we'll set up the pilot plant. A couple of the other areas where we could set it up out in the Marofody, there are the graphite areas, so this will be a mine, this will be another mine. Again, the road runs up through the middle. We can set up the pilot plants there, put all the tailings down here. We're still close enough to the river to bring up the water to be able to use it.
People always ask about water. There are two reasons for the tailings ponds. One is to get rid of the dirt once we have taken the graphite out of the ore. The second is we collect the water. When we make a tailings pond where the water settles and all the fine material or the dirt or the dust in the water falls down to the bottom, then we can reuse that water. We will reuse about 90% of the water through our processing plant; we'll have to make up with about 10% of the water on a daily basis because out in the tailings ponds you get some evaporation from the water, so we'll have to bring in some clean water in conjunction with that; it's just called the make-up water.
There are a couple of different opportunities on the Marofody property where the pilot plant will be situated. On the Vohitsara property, the property that we have done all the drilling on, we have the main. We built a road that comes into the main zone. The village that I mentioned sits right to the side along with the water well that we built.
There is a smaller river that runs through here but there's lots of flow through that. We'll have plenty of water for the property. We'll put a warehouse in there so the trucks can be loaded and then taken right up to the port; the containers actually on the truck go right up to the port and get shipped out. There is a big area that is currently a rice paddy; it will be a perfect location for a tailings pond.
We've drilled off the southwest zone, so there are lots of ore that we can bring from there, and we can bring the ore over down the road from the main zone to put it here where the processing plant will go. As I said before, we have multiple choices whether we want to put the pilot plant on the Vohitsara property first or over on the Marofody property. Those would be one of the two areas.
We're going switch over here and look at the flow sheet for the processing plant.
As I mentioned, the ore will be brought over to the processing plant; it'll be stockpiled. It will then go through the processing plant. Graphite is hydrophobic; it hates water. So, think of oil and water, they don't mix; they try and get away from each other. Graphite is very similar to that; tries to get away from the water.
This looks very complicated, but I'm going to break it down. Just keep in mind the whole purpose of this is to separate out the graphite, which is what we want to sell, and get rid of the dirt or the tailings that go out to the tailings pond. It's not that complicated, it's fairly simple, but I'll break it down through this.
So, it gets fed in. In most operations if this were a hard rock deposit, this would be a massive big area. You'd have multiple crushers, grinding circuits, and this would cost over a third to a half of your project. The cost of all these different grinding mills and everything else in a hard rock circuit can be very expensive., but we're starting with that saprolitic type material. Think of clay material or sandy type material.
We're dropping it into a hopper; we put it through a roll crusher, a trammel and then a polishing mill. And really all we're doing is breaking up the crumbs. We're adding water to it as we do. There is isn't this hard rock where we got to crush and grind it; this is simply breaking up some of the crumbs before we put it into the flotation tanks.
Once we get it through the polishing mill, then it gets put into the conditioning tank and into what we call the first set of flotation tanks, which is called a rougher. We use terms like rougher and cleaner; I'll explain that as we go along.
The rougher is taking the initial ore, separating out some of the graphite, the graphite flows down to a cleaning circuit, and you'll have multiple different cleaning circuits depending on the purity that the client wants. As we put it through each one of these cleaning circuits, we're purifying it as it goes. We also have built within the cleaning circuit a secondary regrind circuit because in some cases some of the ore or the dirt, we call it dang, gets caught in between the different flakes. So using a small regrind circuit, we can break apart those flakes and get rid of the material in between, which then gets fed back into a cleaning circuit and away you go.
There are two other flotation cells here. As the tailings are fed out of the rougher, we put them into a couple of different scavenger cells. The scavenger cells are trying to get as much material out of there as i can. It captures much of the graphite, which is then fed back into the rougher circuit and here before it goes out to the tailings pond.
The dirt flows out to the tailings pond, the graphite flows back to the rougher over here, and then down through the cleaning circuits, the purification circuits, and then ultimately out of the last cleaning circuit, it goes into what we call a centrifuge. A centrifuge is simply, picture your washing machine at home for your clothes, once it's gone through the washing cycle, it spins around really, really fast and tries to get out as much water as it can before you put into the dryers. And we'll have diesel dryers; it's a big long cylinder that the material gets feed through as it's drying, then it goes out into a screening area, gets sorted to different sizes, put into bags and shipped whether it's to Korea, to India, and United States. Multiple times we've talked about those are our primary area that we're focusing on.
The next chart shows where these all get laid out on the property. So, our pilot plant will be all built in containers. These squares are representing 40-foot containers, so I'm giving you the layout where everything is going be laid out on the property.
The flotation cells that I mentioned, here is the rougher, you have your scavenger circuits here, then you have your different cleaning circuits. Each one of those gets a 40-foot container. Just to let you know, we designed this plant to make sure that it would fit in containers. This is the biggest plant that you could build that would fit into containers.
You basically have seven containers sitting there, the rest of the material including the conveyors and the trammels and some of the polishing mill out the front, they'll come into container but they'll be set up on concrete pads out in this area. Stockpile for all the material will go here, then once it's gone through all the container circuits or the flotation cells, it gets brought out to the centrifuge, the heaters, the dryers, and everything else.
You can see here we need an area that's about 48 meters by about 60 meters across this way. We don't need a big area for this, but I really want to show everybody that we have it all engineered, designed exactly how we want to lay all this out, and how we want to proceed with the pilot plant.
So, in conjunction with the information I gave you from all the different flow sheets there, there's a couple of other points I want to make about the pilot plant. We went out and we've already gotten quotes from three different groups in China, one group here in Canada. One of the Chinese groups has said to us that if we go with them that they can build the pilot plant within 60 days. Remember, it all gets put into containers. And it will take about 30 days for shipping. It probably takes another 60 days by the time we clear customs in Madagascar, get it to the property and set all the plants up.
We believe in the timeframe we have here that by the end of the year and hopefully sometime in the fall that we will be producing graphite from the pilot plant. I'm very excited about what we're doing. As the pilot plant is being built in China or here in North America, we will be preparing the site, everything will be organized and ready. The tailings pond will be built. We'll probably even have a stockpile of material so that when the containers and everything get over there, we can start going right away.
Maurice Jackson: This is quite exciting news for shareholders and a great combination of tangibles and intangibles.
Before we close, Dan, give us an update on the litigation with Cougar Metals?
Dan Weir: Cougar metals, I'm going to refer everybody to the press release because the information in the press release was put together by our lawyers, so I think it's better that people just go to our press release and read the wording that we put in there. This will stop me from getting into trouble at all with my lawyers and the whole arbitration process.
One other thing that we didn't mention was the bulk sample. In October, November we went in and took in a 40-ton bulk sample, 20 tons from the south west zone, 20 tons from the main zone; we shipped 20 tons of it to India. The Indian group is one of the largest producers in India; they've been producing graphite for about 80 years. They ran the material through their processing plants and they were very happy with the results. From those results, we have been in negotiations and I'm glad to say that we are in final discussions about them buying material from our pilot plant. That's going very well. Stay tuned, over the next little while we should have some further news out on that.
Maurice Jackson: Looking forward to hearing about another offtake agreement there. Dan, what is the next answered question for DNI Metals, when should we expect the response and what determines success?
Dan Weir: I think the biggest question that all of us have had, and definitely shareholders keep reminding me of this, is getting the environmental license for both the Vohitsara and the Marofody properties. The other reason why I was in Madagascar was I was working on that as well. We're very close to completing all of that. I know it's taken longer than most people expected; it's taken longer than I expected to complete this. Let's put this in perspective, from the day that we put a geologist and the biologist out on the site was about 12 months ago to complete the environmental study. That's taken seven months to do all the field work, create a 500-page report. Remember, we created 500-page reports for each property; they've all been filed, all the filing fees have all been paid for all of these, and we're just waiting for the license to be granted to us.
That whole process has been about seven months. You can see how efficient the Malagasy process is in getting a license. You try and get an environmental license in the United States, you're not talking seven months, you're likely talking seven years. So, it's great and I know all of our shareholders want to see this happen as fast as possible, so do I, trust me. But we are basically at the one yard line here and it is getting done. I assure you that we'll have this very soon.
Maurice Jackson: What is plan B is plan A doesn't work?
Dan Weir: Plan A has always been that we wanted to get this project into production. The pilot plant is part of that, is getting samples because we know, and this is what most don't understand about a graphite project, is that we'll produce hundreds of different products, the key here is getting clients, it's getting people that want to buy our material. Getting this pilot plant up and running as soon as possible so that I can provide samples . . and I'm not talking about one kilogram type samples, I'm talking about 20-ton samples that we need to be able to deliver to potential customers. That is extremely important and that's what we're doing.
A lot of other different graphite projects around the world focused on the traditional way of moving a mining project forward where they went out, they bought a project, they drilled it, did a resource study, did feasibility studies, and tried to then go out and raise some money to put it into production. In a graphite project, we have shown that that does not work, you've got to basically go out and get a pilot plant, get it going, get samples, build a customer base, and then you can build your final plant and start selling to your customers and work with your customers.
That's always been plan A. Plan B, I don't really like plan B. Plan B would be go back, keep drilling, do a resource report, do all sorts of other studies. Plan B really doesn't work for a graphite project, you want to focus on plan A, get a pilot plan up and running, and with that pilot plant we can have some cash flow as well. That's the most important thing when you're building a graphite company.
Maurice Jackson: Last question, what did I forget to ask?
Dan Weir: I think we covered pretty much everything here. I really appreciate the fact that you've been to the properties, and I know how excited you were about seeing this being developed, seeing the pilot plant get going here, so you know what? The local people are happy, I love working with all the local people and get going here on this project is absolutely amazing, and having spent a month in Madagascar, I love being there and we're so excited about getting the pilot plant up and running and ultimately selling to our customers.
Maurice Jackson: Dan, if investors want to get more information regarding DNI Metals, please share the contact details?
Dan Weir: Yes, you can get a hold of me anytime. My email address is Danweir@dnimetals.com or I'll give you my cell phone, it's 416-720-0754.
Maurice Jackson: Last but not the least, please visit our website, www.provenandprobable.com, where we interview the most respected names in the natural resource space. You may reach us at email@example.com. Dan Weir of DNI Metals, thank you for joining us today on Proven and Probable.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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1) Dan Weir: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metlas. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: DNI Metals.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metals. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: DNI Metals is a sponsor of Proven and Probable. Proven and Probable disclosures are listed below.
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