The Great Graphite Rush of 2012
Graphite prices have yet to go critical in 2012 remaining stable since late last year, but the same can’t be said for the mining stocks as Graphite Fever has gripped the mining community. New acquisitions are announced on a weekly basis and share prices of almost all the companies in this sector are taking off. If price action is any indication that there is growing interest in this sector, one only has to look as far as the share prices of the companies in the sector doubling, tripling and quadrupling in 6 weeks. The Graphite theme has started the year with a bang and will continue to gain traction and momentum as all the household names in the sector are moving at a torrid pace and will continue to do so for the next 18 months and most likely continue out on a 5 year cycle.
Opportunities like a rebirth of a sector don’t come around every day and to be in on the ground floor of this BOOM is something special and you should consider yourself lucky for you early adopters. The last sector that saw this type of excitement and share price appreciation was uranium. Although even uranium didn’t get off to the bang that graphite has in the last 6 weeks. One reason for this is that developing a graphite mine, no easy task in itself is so much easier than uranium or even lithium where many companies put a lot of it back in the ground because the real market could not support all the companies with plans to produce. Not so in the Graphite industry that is both 10 times larger than lithium and uranium markets with unprecedented growth expected not seen in either. If the graphite market doubles, that is a factor of 10 to the lithium market doubling or the uranium market doubling. Meaning all things constant, 10 times the mines will be needed when compared to either lithium or uranium. This long neglected sector that hasn’t seen any investment since Ballard in the early 2000’s has a long way to come back. You can’t even really call this mining sector with not one Canadian public company actually mining graphite.
Gentlemen start your engines, pick your favorite stocks or a basket of them and outperform all your friends who still haven’t heard of graphite or the BOOM that is happening in this sector. A year ago 1 in 20 had heard about graphite, now maybe 4 in 20 have heard about. There is still a lot of people to tell this story too. If you got graphite in your portfolio, it is going to outperform anything else this year as it is clear there is need for mines in this sector.
Further evidence is the amount of companies in the sector. Last summer there were 2… now there are at least 14 and counting.
Trading summer of 2011
1. Northern Graphite NGC-V
2. Focus Metals FMS-V
Acquired projects and actively exploring
3. Strike Graphite SRK-V
4. Standard Graphite (formerly Orocan) SGH-V
5. Lomiko Metals LMR-V
6. Solace Resources SOR-V
7. Cedar Mountain CED-V
8. Energizer Resources EGZ-T
9. Soldi Ventures SOV-V
10. GeoMega GMA-V
11. Greenlight Resources GR-V
Companies currently not trading or listed…
12. Mega Graphite (IPO March)
13. Tasex Capital (Flinders) TAX.p-V
14. High North (Canada Graphite) HN.p-V (IPO April)
There are companies that I have missed, but you can’t keep track of them all. NGC and FMS will remain the industry leaders while Standard Graphite, Lomiko, Cedar Mountain, Energizer, Solace and Strike are my early favorites in the next group down which is 2/3 of them. At this point in time it is hard to differentiate one from the other as it is early and all the projects now are similar to each other and are the best of the bunch and on par or close to as companies like Focus and Northern Graphite. People keep asking me which graphite stock is better? They are all good and any one of these companies in this list will be at least 100% high by next year, even the companies that are still not trading.
Lomiko Metals LMR-V
Lomiko has finished correcting and is about to close the financing and start the next leg up. The company has the highest value project of any of the juniors and is still one of the cheapest. This company should have a similar valuation to SRK or SGH and has the inside track to have a FMS/NGC type project. It has by far the most historical work on any project. LMR recently announced they will be completing a 43-101 with the historical work which will give investors a good idea of what Quatre Milles is all about. I would not expect a resource in the 43-101, but the historical work will be used in the resource report once the work is confirmed accurate. This will give LMR a good base to work off and a head start putting a resource together on their property in a cost effective manner. Technically Lomiko looks like it is ready to breakout after hitting a
.13 and consolidating for a two weeks.
Lomiko has tons of news drivers including…
•43-101 report
• Drilling announcement
• Closing of the financing
• Expanding the technical team
On top of the news drivers there are two other important fundamentals… our big insider is almost done selling and is getting more insignificant by the day and PDAC is 10 days away! Technically LMR is primed to break out and run right into PDAC and out the other side. All graphite stocks look like they will continue to run at least until the end of March/April period.
Energizer Resources EGZ-T (ENZR: OTC)
Made a very big discovery in Madagascar at Green Giant. Early indications are that they are on to a very large graphite camp. 118.6m @ 6.24% Cgr in drill core and 106m@ 7.11% in trench sampling show a very large high grading deposit. Energizer also signed a deal with DRA Mineral Projects to develop Green Giant. This is one that will be a mine in the next 3 to 5 years.
Graphene is exciting… but it’s the Lithium-Vanadium (Graphite) Ion Battery that Will drive the demand for graphite for the next 3-5 years.
What makes this even more exciting is graphite demand is clearly tied to peak oil and gasoline prices over the next decade. The drive to alternative energy vehicles is the key link to many of these companies and their hopes to mine or be bought out or secure off take deals. Without this incremental demand coming online the next 2- 5 years… this theme is dead. As gasoline prices continue to edge higher in this age of inflation, consumers will be forced to adopt affordable alternative fuel vehicles and much faster rates than anticipated. Adoption rates are the wild card in the demand equation and choke supply because of not enough of the right type of graphite available.
Graphene will play a more important role in graphite demand from 5 to 15 years from now while getting mines into production to support electric/hybrid vehicle mass production rollout over the next 3 years is the priority. Just from Tesla’s Model X and S they could be selling 30,000 to 40,000 cars per year by 2014 which is a quarter of the total output of Northern Graphite. Hyundai’s hybrids use the li ion battery. Every auto manufacturer is forced with the same choice and is going down the road of electric and hybrid vehicles. If gas prices go to $5 a gallon in the US over the next 18 months, you will see much faster adoption rates than anyone anticipated.
This is just the start of a major bull market in a sector that didn’t exist 18 months ago. At the end of this run 5 years from now some of these stocks will have gone up 1,000% to 10,000%. Some say this is like the beginning of the Uranium boom while others say it is like the Lithium boom. I say it is better than both because this is a sector that needs mines constructed. This is a sector where building a mine isn’t impossible. This is a sector where there is real incremental demand from several angles and is a sector that has no companies and no major mines outside of China. This is a sector where the returns are off the chart for the minimal dollars required and has generated a lot of excitement about chasing pencil lead. The fundamentals in this sector from mine to pencil suggested that the perfect storm is brewing in graphite and the early birds in this sector will get the worms.
Note… early birds and worms are plural.
Out of the 14 companies listed above… half may be mines in ten years. Those are odds that just don’t happen very often in mining. So are these prices rises justified? Every single penny is justified and my gut tells me graphite stocks will be in high demand all year for several years. Themes just don’t come around lie this very often. The last one was Uranium 8 or 9 years ago. There might not be another hot theme like this for another ten years. Don’t hum and haw about graphite and watch these stocks go up. Join the party and make some money!
Christopher Skidmore
Beat the Market Stock Picks
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Added bonuss:
Lomiko Metals LMR-V
Also has the Vine Lake gold-silver property and the Salar de Agus lithium-potash property. So, in addition to its graphite property, it also has lithium, both of which will be used in the batteries to power hybrid and electric cars.
Energizer Resources EGZ-T (ENZR: OTC)
In additon to its graphite, the same property has a massive vanadium deposit, and the new electric car batteries will be Lithium-Vanadium-Graphite batteries. Because DRA Mineral Projects has partnered with them, the company has now gained respectability and the investment community will realize that they will be able to develop and start mining their Green Giant Project.
Greenlight Resources GR-V
Is a multiple resource company and in addition to its graphite project it has Rare Earth properties which include lithium, tantalum and rubidium. Plus it has gold and silver-base metal properties, as well as its Tomahawk manganese property. So in addition to its graphite property, it also has lithium which will be used in the newer Lithium-Vanadium-Graphite car batteries.
Plus, its manganese property could be a real sleeper that could propel the stock higher:
A new and exciting market is opening for manganese that could provide the metal with explosive growth potential, and diversification away from it ties to the steel industry. This market is essential to the future, from high tech consumer goods, to the automotive industry, and energy production. The future for manganese lies in battery technology. With the addition of manganese to the lithium cathode of lithium-ion batteries, energy density and recharge rates are improved dramatically. These factors can lower the cost of production making the economic viability of electric cars and a host of other technologies, a reality.
Chairman William Clay Ford Jr. of Ford Motor Co. predicts 25% of all Ford's future auto production will be electric vehicles by 2020.
One of the first new widespread uses for EMD (electrolytic manganese dioxide) is in the cathodes of lithium-ion batteries for electric vehicles. This technology is already in use by GM's Chevy Volt as well as the Nissan Leaf and is in development by other automotive manufacturers. The Argonne National Laboratory in conjunction with Envia Systems has developed a "high capacity manganese rich cathode" (HCMRC) battery and they claim it holds twice the charge of other lithium-ion type batteries currently in use, can be recharged in a few minutes and is approximately half the weight of other batteries as well as having a lower production cost than other comparable lithium-ion type batteries currently under development. Lithium manganese dioxide batteries (Li-Mn2-O4) (LMD) contain 4% lithium, 61% manganese and 35% oxygen by atomic weight.
Lithiated manganese dioxide (LMD) batteries are already being used by Milwaukee Tools in their electric battery tools sector and this technology application is rapidly growing with many other tool companies.
LMD batteries, besides having a high power output and low production costs, also exhibit high thermal stability and enhanced safety when compared to other lithium-ion batteries. The University of Illinois has recently created an advanced prototype battery using lithiated manganese that can be recharged in as little as two minutes.
On another front, researchers at the College of Science and Engineering at the University of Minnesota have developed an early stage multi-ferroic alloy that converts heat directly into electricity. This consists of a combination of nickel, cobalt, manganese and tin. Professor Richard James, led the research team. He states, "This research is very promising because it represents a new method for energy conversion that has never been done before." They also state in their report that even though this technology is in the early stages of development it could potentially be used to capture waste heat from a vehicles' engine or its exhaust that would produce electricity for charging batteries in hybrid cars. Another possibility includes rejected heat from industrial and power generation plants. This is just one more of the many emerging new scientific discoveries being made concerning manganese.
Another example of constant change and innovation in the manganese sector is the new technology for wind and solar farms grid electrical storage announced this month by researchers at the DOE Pacific Northwest National Laboratory and China's Wuhan University. They have developed a large scale sodium, ion, manganese oxide battery that is more energy efficient and lower cost than lithium due to the size and scale of batteries needed to store large grid scale electricity. This research is still early stage and ongoing.
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Lomiko Metals and Greenlight Resources both closed at .13 Friday, while Energizer Resources closed at .29 which is more than twice the price of LMR or GR, but Energizer is closer to becoming a mine.
Even though Lomiko LMR-V closed at .13, the same price as Greenlight, Lomiko has been spiking upward on increasing volume.
