Focusing on Bissett Creek Flake Graphite Deposit
Recently announced significant increase in estimated resources
Message: Graphite Goes Critical: A Look At Noteworthy Canadian Juniors
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 tonneaEUR"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.
Another Ottawa-based junior with a bright-looking future is Northern Graphite CA:NGC +3.27% , 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.
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