Origen Resources Inc. press release
Graphite Goes Critical: A Look At Noteworthy Canadian Juniors
CSE - Canadian National Stock Exchange · Lithium · Gold · Silver · Copper · Canada
By Nathan Pearson and Rachel Harrison ResourcexInvestor.com
By now you’ve heard the buzz: graphite is the next hot resource stock. But why should investors care about this mineral that has gone largely ignored by the stock market since the mid 1980s?
The answer lies in a compelling story of supply and demand, and a future that looks to prove heavily reliant on the new industrial applications and green technologies that graphite is an integral part of. From a skyrocketing demand for lithium-ion batteries to the futuristic promises of graphene, the graphite market is one of the most closely watched in the junior exploration industry.
Graphite: Beyond the Pencil Carbon -- the building blocks of life itself -- consists of three distinct types: amorphous (think coal, soot and charcoal), diamonds and graphite. Graphite is then further divided into amorphous, crystalline flake and lump/vein, all occurring in metamorphic as well as igneous rocks, and varying by grade, particle size distribution (mesh) and moisture content. The valuable properties of graphite are numerous: it’s an excellent conductor of heat and electricity, is extremely resistant to strong acids as well as thermal shock, is a phenomenal lubricant, is highly refractive and has the highest natural strength and stiffness of any known material. These properties make graphite the best if not the only choice for industrial applications such as steel manufacturing, brake linings, clutches, lubricants, crucibles, reinforcements in plastics and our favourite elementary school writing tool-pencils.
The historical applications noted above primarily use amorphous and lump graphite, but newly emerging technologies and a rising demand for alternative energy are creating a never-before seen need for flake graphite. Major drivers include lithium-ion batteries, fuel cells, solar panels, pebble bed nuclear reactors and Proton Exchange Membrane technology.
Perhaps the most exciting feature in the graphite market of the future is the development of graphene, produced when one-atom-thick sheets of graphite are separated from one another. It is the thinnest and strongest material ever developed, being two hundred times stronger than steel and several times tougher than a diamond. Property-wise, it conducts both electricity and heat better than copper. This important discovery resulted in Professors Konstantin Novoselov and Andrew Geim the pair to first isolate graphene winning the 2010 Nobel Prize in physics. Potential future uses of the material are numerous, from playing a major role in the evolution of LCD touch-screen technology to usage in transistors, solar cells and data and energy storage units. Some say that graphene could end up replacing silicon altogether with its ability to enable transistors to operate more than twice the speed of its silicon counterpart.
Limited Supply Meets Increasing Demand Because of new industrial applications and increased importance of green technologies demand for graphite is rising sharply, while supply falls behind at a startling rate.
The rapid industrialization of developing nations such as India and China has contributed to a steady increase in graphite demand of five percent per year for the last decade. Between 2000 and 2011 total graphite consumed doubled from 600,000 tonnes to 1.2 million tonnes. Byron Capital Markets expects to see this figure increase to 2.6 million tonnes by 2020.
Another factor in rising demand is the insatiable consumer appetite for gadgets such as laptops, cameras, cell phones, mp3 players and even power tools which all require the lithium-ion battery. Betraying its own name, the lithium-ion battery takes twenty to thirty times more graphite than lithium to produce. The only natural graphite suitable for these batteries is flake, which only makes up forty percent of the Earth’s available stores. A Canaccord research report states that, “Annual flake graphite production will have to increase by a factor of six by 2020 to meet incremental lithium carbonate requirements for batteries”. Additionally, we’re seeing a steady rise in electric vehicles which require up to seventy kilograms of graphite per vehicle depending on whether or not it is a hybrid, while fuel cells, according to the US Geological Survey, have the potential to use as much graphite as all other uses combined.
It is clear to see that our future could rely heavily on an increased supply of graphite, but the question is, where will it come from? Currently, China controls over seventy percent of the world’s graphite market, but increased consumption within their own steel and automotive industries is keeping them holding on to what they’ve got. The country has imposed a twenty percent export duty combined with a seventeen percent VAT and export licensing system resulting in graphite prices to rise considerably, especially when it comes to flake. As Industrial Minerals Magazine says, “The days of cheap, abundant graphite from China are over.”
The world’s remaining thirty percent of graphite production is carried out in India, Brazil, North Korea, Madagascar, Sri Lanka and Canada. Many new graphite sources will be required to meet the burgeoning demand; it is estimated that up to twenty-five more mines worth of new production could be needed. The British Geological Survey has declared graphite a critical material and the European commission included graphite among the fourteen materials it considers high in economic importance and supply risk. It is for these reasons that graphite prices have been swiftly on the rise.
Prices for graphite are determined by flake size and purity, with premium product being large flake (+80 mesh), high carbon (>94%) graphite. This grade currently commands up to $3000 per tonne—twice the price from 2010 and nearly tripling since 2008.
Exploration Companies to Watch While scoping out potential exploration companies to invest in, investors will want to take note of properties that have shown near-surface, high-grade, large-flake deposits and are in politically and economically safe areas with a sound infrastructure. Canadian companies are a natural choice and there are several contenders that may offer investors some great value.
Northern Graphite Another Ottawa-based junior with a bright-looking future is Northern Graphite (TSX-V: NGC), who recently closed their $4 million initial public offering with shares going for $0.50. Their current market cap tops off at $65.24 million and shares have already risen to $2.22 as of March 13, 2012.
Northern Graphite’s Bissett Creek property is located between Ottawa and North Bay, Ontario just 15 km from the Trans Canada highway. The property contains a whopping resource of 25,983,000 tonnes grading 1.81% Cg (470,300 tonnes of contained graphite) and inferred resources of 55,038,000 tonnes grading 1.57% Cg (864,100 tonnes of contained graphite). This high purity deposit of large flake graphite is comprised of fifty percent +48 mesh jumbo flake 98% C, thirty percent +80 mesh large flake 94% C, seven percent +100 mesh medium flake 94%C and thirteen percent +200 mesh small flake 94%C. The size of the deposit paired with the high percentage of large flake within makes this property one of the leading undeveloped graphite deposits in the world. Because output will consist almost entirely of the large flake graphite that our future will rely on, Northern Graphite’s product will have no problems commanding a premium pricing of $3000 per tonne. According to a NI 43-101 compliant assessment on this property, forecasted annual production at the mine will top 20,000 tonnes per year of 94% graphite. And because the project is scalable, the mine has the ability to expand as demand increases in the years to come.
Timeline-wise, Northern Graphite has a bankable feasibility study currently underway as well as the environmental and mine permitting process. Once feasibility study results are in, construction on the mine is planned to commence in Q2 of this year and will take approximately one year to complete. Production is slated to commence in Q3 2013.
Northern Graphite is backed by a solid management team headed-up by CEO and Director Gregory Bowes B.Sc. (geology) MBA. Mr. Bowes has gained over twenty-five years of experience in resources and engineering, and past titles include Senior Vice President, Orezone Gold Corporation; Vice President, Corporate Development and CFO, Orezone Resources Inc.; and President and CEO, San Anton Resource Corporation. His team-members include Iain Scarr B.Sc. (geology) MBA, Director; Ron Little P.Eng, Director; Jay Chmelauskas B.A. Sc. MBA, Director; Donald H. Christie, Director; K. Sethu Raman Ph.D, Director; and Donald K.D. Baxter P.Eng, President.
Strike Graphite Strike Graphite (TSX-V:SRK), is also based in Vancouver and is a three property operation with a market cap of $10.36 million and shares offered at $0.285.
Two of Strike’s properties are located in a world renowned region for mineral and exploration development, Saskatchewan. The Deep Bay East project is situated 25 km east of the community of Southend and less than 15 km east of the Deep Bay West Graphite Mine. It has a proven history having been explored by Sherritt Gordon Mines Ltd. in the 1960s and again in the 1970s by Superior Graphite Company. The geology of Deep Bay East appears to be similar to that of the Deep Bay West Mine, indicating a potential for 95% carbon content for all flake sizes. The Simon Lake project, 280 km northeast of La Ronge, Saskatchewan and close to Highway 905 displays flake graphite in historic drill holes created during a previous exploration for base metals. Noteworthy to these two properties is the fact that Saskatchewan was ranked the third best jurisdiction in the world to conduct mineral exploration and development in 2011 and has a history of permitting and developing mines for numerous commodities.
In Quebec sits the Wagon property, 150 km northwest of Montreal and 15km east of Timcal’s Lac des Iles Graphite Mine, a mine in production for the past two decades. This property has a proven history, having been originally explored by Graphicor Resources Inc. in the late 1980s. Out of approximately one hundred outcrops that were located on the property, 15 were sampled and returned assays of up to 18.13% Cg. The geology of the region has also shown flake size up to 3 mm in diameter, a noteworthy figure as large flake graphite is considered 0.2 mm and above.
Strike’s proposed timeline sees the company engaged in a four-phase exploration program throughout 2012 and 2013. Phase 1 will consist of an Airborne EM Survey, ground follow-up and prioritization of targets; Phase 2 will include drilling, metallurgy and mineralogy; definition drilling and resource estimation will occur in Phase 3; and the Preliminary Economic Assessment will take place in Phase 4.
Strike’s highly experienced President and CEO is Geoff Balderson, also the President of Flow Capital Corp., Vice President of Snowwater Financial Ltd, Director of Argentum Silver Corp. and President, CEO, Secretary and Director of Barranco Resources Corp. He is joined by Robert A. Biagioni, CFO and Director; J. Douglas Blanchflower, Vice President of Exploration; David Toyoda, Director; Bruno Maruzzo, Director; and Robert Findlay, Director.
Focus Metals Focus Metals (TSX-V:FMS) is an Ottawa-based company whose Lac Knife property is situated 35km south of Fermont, Quebec. The property comes with the bragging rights to a NI 43-101 compliant resource of approximately 8 million tonnes of 16% carbon grade medium and large flake crystalline graphite, making it the highest-grade graphite resource in the world.
The Lac Knife property was discovered twenty-five years ago with a follow-up drill program in 1990 confirming the high-grade deposit. However, after two feasibility studies were carried out, commodities crashed and the project subsequently faltered. After a decade of inertia two companies by the names of Graftech and Ballard Power Systems where on the hunt for fuel cell suitable graphite and were led to Lac Knife by Strathcona Mineral Services. A change of hands and several more years later in 2010, IAMGOLD sold the property to Focus Metals.
Currently, Lac Knife is in the pre-development stage with surface mining and primary processing facility construction aimed for completion in 2013. By Q4 of the same year Focus Metals plans to begin annual production in the arena of 25,000 tonnes of 95% purity graphite annually. The company also has plans to construct a secondary enrichment and refining facility in 2014, adding an additional 3,000 tonnes of 99.9% graphite per year. Expected mine life of the Lac Knife property is at least forty years.
Another reason to take note of Focus Metals is their privately held joint venture Grafoid Inc., which plans to become a global supplier of mass produced, economically scalable graphene. A patent currently in the works will allow Focus to produce graphene directly from their Lac Knife ore deposit while side-stepping any further processing steps. Because of the likelihood that graphene will change the way we all live, work and communicate in the not-so-distant future, paying close attention to companies with a hand in its development could prove fruitful in the long run for investors.
The management team at Focus Metals boasts a talented group of experienced business leaders. President and CEO Gary Economo served as CEO for several public and private high-tech companies spanning a period of two decades, and as Director, Corporate Communications and Investor Relations for Everton Resources Inc. His experience also includes a long history of graphite marketing and sales. Also on the team is Jeffrey York, Chairman/Director; Francis Pomerleau, Director; Chester Burtt, Director; Marc-Andre Bernier, Director, Senior Technical Advisor and Qp; and Marco Gagnon, P.Geo/Director.
Current market capitalization for Focus Metals is $74.03 million with share price sitting at $0.94 as of March 13th, 2012. With a solid resource soon to be in production, plans for expansion and a hand in the graphene market, Focus Metals looks to have potential for long-term return on investment.
Standard Graphite Vancouver-based Standard Graphite (TSX-V:SGH) takes the cake when it comes to sheer number of properties. The company holds one hundred percent interest in twelve graphite properties spanning from Quebec and Ontario.
Standard’s two Ontario properties have proven histories, with one of the properties surrounding the former Black Donald Mine. This mine was previously one of the largest and richest graphite mines in North America with an average grade of 25%-30% Cg during its last ten years in operation. The Little Bryan property, previously explored by Harrington Sound Resources in 1989 has shown average historic samples of 10.94% Cg in large flakes.
The company’s nine Quebec properties have not yet been explored by modern methods though assays have displayed grades of up to 30% Cg and high-grade shist/marble lithologies favourable for in-demand large flake graphite. 2012 will see Standard Graphite completing an aggressive exploration strategy on all twelve of its properties. The airborne EM survey, which has already commenced, will be followed by detailed ground geophysics, metallurgical testing and a five to six target drill program ultimately leading to resource development.
Standard’s management team is lead by President, CEO and Director Chris Bogart, whose extensive experience spans resource finance, business development, strategic planning and corporate restructuring. He is also the President of Metals Mgmt Group and was Co-Founder of Magnum Uranium. Also on the team are Antoine Fournier M.Sc., Chief Geologist; Michael Philpot MBA, Director; and Alan Hitchborn P.Geo, Director.
Current market cap for Standard Graphite is $12.86 million and shares can be purchased for $0.58.
A Booming Resource As the graphite boom gains momentum investors will want to pay close attention to the value currently offered by Canadian juniors in the industry. And as more and more companies pop up to claim their slice of graphite pie, it would be wise to get in on the action while the supply and demand situation remains critical.
With developing nations in full-swing industrialization and green technologies becoming a global priority graphite has incredible long-term growth potential and should be a very large blip on every investor’s radar screen.
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