Graphite explorer Graphex Mining is working on a $112 million loan to take its “Chilao” project in Tanzania through to production.

Though before the loan can go through Graphex (ASX:GPX) still needs to complete final feasibility studies and contracts with buyers and mining contractors. Some issues regarding Tanzania’s mining legislation would also need to be resolved.

“We take great confidence from the commitment of a global private investment firm, which follows a period of extensive due diligence,” said Graphex boss Phil Hoskins.

“We believe this transaction affirms the quality of the Chilalo project, the premium product it will produce, the graphite market opportunity identified by the Company and confidence in the company’s ability to reach a satisfactory resolution in Tanzania.”

The Graphex Mining (ASX:GPX) share price over the past year.
The Graphex Mining (ASX:GPX) share price over the past year.

Shortfall in supply

Global production of graphite is a long way from meeting demand.

Total global production of flake graphite in 2016 was about 860,000 tonnes — and not all of this material is able to generate expandable graphite.

Expandable graphite requires coarse flake, and historically China has accounted for about 70 per cent of supply.

However, China’s coarse flake graphite reserves have largely diminished and supply is also under threat by environmental restrictions forcing mine closures.