Graphite Report: April 2012
The first quarter of the graphite boom in 2012 has been one of the best quarters for a group of stocks since uranium started to take off in 2004. It has been nothing short of extraordinary considering all other materials stocks continue to struggle to attract investment in 2012. It shows how strong this emerging investment story is. The graphite theme has all the elements of the perfect storm. It has strong industrial growth with a large market and it has strong incremental demand coming from multiple fronts. Li-Ion batteries, nuclear pebble bed reactors and eventually fuel cells will all add to the demand curve for graphite over the next decade and beyond.
Graphite is also at the center of a 21st century revolution in technology with graphene, the 2 dimensional wonder material that will change how we view physics.
Graphene is a discovery so revolutionary that is already being used in hundreds of new technological applications on an R and D level with hundreds of new patents already filed involving graphene. Bendable phones, graphene computer chips, coatings for reinforcement and strength, coatings for efficiencies, space elevators and so much more. This is just the beginning of discovery when it comes to graphene. The uses we find for graphene years from now I am sure will be mind blowing to any of us or what is being conceived and thought of today. The first mass produced products with graphene are at least 5 - 8 years away while scientists are still trying to figure out how to produce large quantities of the material and most technology using graphene won’t well into the 2020’s it is a technology that is a wild care to the long term future of the industry. Is graphite a potential 5Mt market, or is it a 20Mt or 30Mt market? Along with increasing adoption rates of electric and hybrid vehicles and the other large demand drivers, the graphene wild card could combine to create the perfect storm in demand by the end of the decade. While the mining super cycle ends for many metals in the next 10 years, the graphite theme could be one of the few going long and strong.
Between graphene, Li-ion polymer batteries, pebble bed reactors and ultimately fuel cells, it creates an environment to brew the perfect investing storm.
Not since the invention of steel has there been a substance that can potentially revolutionize and change the world in a dramatic way.
Am I exaggerating comparing graphene to the invention of steel?
I don’t think so. Not when NASA is talking about space elevators made possible by graphene. The properties that graphene demonstrates open up limitless opportunity. Not when graphene could eventually find its way into almost everything we use.
Since none of us were alive when steel was invented, finding something recent for comparison will do better justice to appreciate the types of gains ahead for the investing community. 2011/2012 graphite activity closely matches what happened 8 years ago in the uranium sector. If this is the case, the next 12 to 18 months are going to see the early entrants’ (SRK, SGH, FGR) and industry leaders’ (NGC, FMS, FDR) share prices go to astronomical levels, just like uranium stocks did for 3 to 4 years.
The perfect storm that is driving graphite has one key element that neither uranium nor rare earths had that is unique to graphite… 1Mt to 1.5Mt of potential incremental demand over the next 10 years and the potential for graphene to be one of the most common materials used in technology by the end of the 21st century.
Incremental graphite demand is 10 times the size of the uranium market!
The future is bright indeed. The impending market for graphite is 10 times the size of the current rare earths’ or uranium markets. What this means is that while in the uranium sector the mines come online at a snail’s pace, if ever. The companies exploring the graphite sector will have 10:1 odds that they will have a mine over their counterparts in the uranium sector. In some mining sectors a supply crunch can be eased by 1 or 2 large mines coming on line. 1 or 2 new mines in the graphite sector would not even put a dent into the potential demand curve, a curve that is set to grow exponentially with the mass production of EV’s starting in earnest by 2015 through to the end of the decade.
You
are witnessing the birth of a new industry to meet new demand growth
for the next 20 to 30 years. Li-Ion batteries are expected to demand up
to 300,000 tonne of graphite by 2020 on assumed adoption rates of less
than 10%. If EV saturation by 2040 is 70% to 90% and graphite is still
the main component in the EV batteries, demand could exceed a 5Mt market
when the industry matures. To get an idea where this market could be at
100% saturation, just multiply by a factor of 10. Just to satisfy an
auto market at 100% saturation, the industry will need to produce 3Mt to
5Mt of high purity graphite per year. Canaccord estimates that with
only a 20% EV saturation and 25% HEV saturation that would require
2.75Mt of graphite per year at a total saturation of 45%.The growth in demand and subsequent mines needed to supply an extra 1Mt to 1.5Mt of graphite per year by 2020 is jaw dropping. 1Mt per year by 2020 is the equivalent of 20 new graphite mines with an average production of 50,000 tonnes per year. More than double what Northern Graphite currently plans to produce.
The proof is in the pudding. While almost all other materials companies are suffering to raise any type of money in conditions that are downright predatory for financing from gold to rare earths, the investment community is tossing money at these early entrant juniors grabbing up all the prospective graphite occurrences in Canada and elsewhere in the world.
One easy clue is to follow the money… Where is it going?
Straight into graphite
The perfect storm is brewing…
- Li-Ion batteries - 300Mt by 2020
- Nuclear Pebble Bed Reactors - 400Mt by 2020
- Fuel Cells - more than the entire current graphite market
Declining production from China plus export restrictions
Magnitude of potential demand 10 times greater than rare earths or uranium
BIG NEWS FOR THE GRAPHITE INDUSTRY!!!
New pricing for high purity jumbo flake graphite!!!
99.9% Jumbo flake gets $6,000 per tonne!!!
Industrial Metals now quotes jumbo flake graphite at 99% to 99.9% purity. Prices start at $4,500 for 99% jumbo flake.
The
highest purity flake 99.9% commands $6,000 per tonne. This is big news
as everyone will adjust cash flow models for Northern Graphite using
double the price, $6,000 per tonne for their highest quality material
instead of $3,000 or $2,500. It also makes high purity jumbo flake the
most sought after material in the industry affirming that both purity
and flake size are important. If you have jumbo flake and a high
purity, you are going to have a winning product no matter how small the
deposit.A 200,000 tonne graphite deposit, if jumbo flake and high purity is worth $1.2B in-situ. For a reference, that would be around 2Mt at 10%Cg. Even defining a deposit as small as 2Mt, if it is the right flake size and purity, the potential spread is double or even triple your costs to mine and process.
The new pricing category for jumbo flake demonstrates where the industry is going giving out premium prices for the jumbo flake and higher purity products suitable for new industries like lithium ion batteries. 99.9% large flake is close to the purity of synthetic graphite at 99.95% which starts at $7,000 per tonne according to Industrial Metals. There is no price for natural graphite at purities of 99.95% or higher purity fine and medium flake which is yet to be negotiated. $7,000 per tonne I would assume to be a floor but might not be if 99.95%C natural graphite is suitable to replace material that consumers are paying $20,000 per tonne for. Obviously battery manufacturers see natural graphite as a way to cut cost in producing the batteries over the long run as Tesla batteries current replacement cost is around $30,000 and they want it down to $7,000 in 3 to 5 years. Most of the cost savings can be achieved by mass production and economies of sales, but manufacturers will try to attain reasonable prices for materials and replacing synthetic graphite with natural graphite if it is cheaper and works as well just makes sense. There is a huge cost differential between synthetic and natural graphite. In the Tesla’s Roadster’s case, it would bring the cost of 100kg of graphite from $2,000 to $3,000 per battery at current synthetic prices to $700 to $1,000 per battery if the magic number for 99.95%C natural graphite is somewhere between $7,000 and $10,000 per tonne. That is a considerable savings in materials for a battery. At minimum a $1,300 spread.
New Pricing Lends to Potential Monster Cash Flow Valuations
When you revise Northern Graphite’s numbers to produce 99.9% jumbo flake at $6,000 per tonne or spherical graphite at $7,000 per tonne or greater, numbers at Bisset Creek start to jump off the page with a very juicy conservative ballpark valuation around $500M NPV. If you ramp up the operations at Bisset Creek to 5,000 tonnes per day averaging $5,000 to $6,000 per tonne, the NPV doubles to over $1B on a short 20 year mine life. A project like Energizer’s Green Giant at 8% grade and $80M capital costs for a 2,000tpd mill netting $5,000/t values in excess of $2.5B. It is potential returns like this from a minimal capex expenditure that is driving the industry forward looking for the ultimate high purity massive flake graphite discovery. What also helps is exploration costs are dirt cheap and simple meaning endless amounts of money won't have to be wasted on exploration like the gold sector.
Exploration for graphite consists of reading EM maps and drilling 100 meters maximum depth.
In mining, investments that return billion dollar valuations rarely cost less than $100M to explore, never mind becoming a $100M plus cash flow producer for less than that. Most with billion dollar NPV will cost a billion. A rule of thumb is if you can spend a dollar to get a dollar in valuation you are doing ok, so to get 10 times return on initial investment is a once in a blue moon investing opportunity and is a huge reason these stocks are going crazy. News of pricing changes like this w ill further drive the industry as it is a material change for everyone and could help drive the next leg up in this fledgling industry.
The graphite investment theme is truly extraordinary and unique only to the graphite industry. It is clear that battery grade material will sell for a minimum of $7,000 per tonne. Even high purity jumbo flake will sell for at least $4,500 to $6,000 per tonne with minimal beneficiation process for the best deposits. As news creeps out about the new pricing for high purity jumbo flake, it should excite the market as returns on investment have potentially doubled if you have a high purity massive flake graphite deposit over just a large flake deposit. This pricing mechanism is great news for NGC and other 2% mines like Eagle Graphite and Ontario Graphite as it ensures that these 2% operations will mine handsome profits with a good cushion if prices ever do come down. Since prices are negotiated, there is now even more price stability with a negotiated product priced a lot higher.
Industry Leaders – capable of production within 18 – 24 months (Prices are Monday’s close)
Northern Graphite NGC-V $2.76
Shares Out… 52.4M (includes recent $10.5M PP at $1.70)
Fully Diluted… 55.4M
Market Cap… $144.6M
Northern Graphite continues to be the industry leader, they are near term production ready, have proved they can produce a high purity product, and have at least 50% jumbo flake. NGC’s jumbo flake is already very pure at 97.7% without any upgrading process. Northern Graphite mgmt. announced they have a found a low cost/low temp environmentally friendly process to purify the concentrate to a 99.95%C product. It’s all about the product (99.9% jumbo flake) and Northern Graphite has it and now they have a low cost process to get them to 99.95%C.
In the last quarter Northern Graphite has been the busiest of all companies…
- Released positive pilot plant test results with 80% of Bisset Creeks product being +80 mesh at a 96.7% Cg with a 50% of the pilot plant results achieving Jumbo flake standards +48 at a 97.7% purity.
- Enter into a co-operation agreement to develop intellectual property with Grafen Chemical Industries for graphene research where Northern Graphite retains a 50% interest in the N.A. patent rights to any products or process developed by Grafen.
- Raised $10.5M at $1.70 in a private placement
- Announced the successful test production of spherical graphite for use in Lithium Ion batteries from concentrate produced from Bisset Creek. The key point here is that the process NGC has developed is environmentally friendly as well as using half the amount of graphite than traditional process.
- Traditionally it takes 3 tonnes of graphite to achieve 1 tonne of spherical graphite while NGC can produce one tonne of spherical graphite with about 1.4 tonnes of Bisset Creek graphite.
- Announced a strategic partnership with Panacis Inc., a global leader in intelligent, high performance Lithium Polymer battery based energy storage systems.
50% * 1.81% * $4,500/$6,000 = $40.73/$54.30
30% * 1.81% * $3,000 = $16.29
20% * 1.81% * $2,500 = $9.05
Low case $66.07
High case $79.64
It is clear why Northern Graphite is the industry leader. They not only have a product ready that will command a minimum $6,000 per tonne, but are developing value added processes and markets for their graphite that will add significant value to the company as a whole. They are developing a suitable product for Li Ion batteries from where they will achieve premium pricing and generating significant IP value by creating these value added processes. Northern Graphite will produce about 20,000 tonnes of graphite per year once in full operation or alternatively about 14,000 tonnes of spherical graphite which is a suitable replacement for synthetic graphite which is priced at $7,000 to $20,000 per tonne according to industrial metals.
Focus Metals FMS-V $1.03
Shares Out… 98.0M (includes $1.30 bought deal)
Fully Diluted… 127.1M
Market Cap… $100.1M
Focus Metals despite having twice the Jumbo flake per tonne of ore than Bisset Creek has been largely ignored by investors and traders. One reason the company has lagged is they were arranging a financing during February. There was also little activity on the news front during that time. The hope is that the laggard will outperform when the leader consolidates as both companies will do well and there is a market for both companies’ products.
Some of FMS flaws are about purity when compared to Bisset Creek at 96.1%C vs. 97.7%C. Recent results from metallurgical testing indicate FMs should be able to achieve 99% to 99.9% similar to Northern Graphite. That being said, Focus Metal’s Lac Knife is still ha a high purity when compared to most other graphite deposits and the grade at Lac Knife more than makes up for percentage point in difference in initial carbon purity results. In the end, both companies will mine at a profit at current graphite prices. Focus Metals will not net as a high price overall per tonne of graphite produced, but they will produce 6 times more graphite per tonne than Northern Graphite making it extremely high value inspite of naysayers opinions about Lac Knife Graphite. The big negative I hear is not enough jumbo distribution. I got news for you folks; the Lac knife grade for jumbo flake alone is 2.57%Cg. That is more than the overall grade at Bisset Creek.
At the very least Lac Knife jumbo flake will be 99% which will sell for $4,500/t.
Once FMS closed the financing the SP started to move and the news about Lac Knife has started to flow including…
The closing of the $10M bought deal
The execution of a $500,000 loan arrangement with Grafoid
Focus Metals update on Lac Knife metallurgical testing
| LAC KNIFE - Concentrate Flake size Distribution (%) and Total | |||||
| Carbon Grade (%C) F21 test | |||||
| SIZE | Distribution | Total carbon Grade | Price | Low value per tonne | High value per tonne |
| (%) | (%C) | $/tonne | |||
| +48mesh | 16.6 | 96.1 | $4,500 - $6,000 | $115.78 | $154.38 |
| +65mesh | 14.3 | 95.0 | $2,500 - $3,000 | $55.41 | $66.50 |
| +80mesh | 7.0 | 94.5 | $2,500 - $3,000 | $27.13 | $32.55 |
| +100mesh | 8.2 | 94.1 | $2,200 - $2,500 | $27.96 | $31.78 |
| +150mesh | 28.0 | 92.6 | $2,000 - $2,400 | $86.80 | $104.16 |
| +200mesh | 11.0 | 87.2 | $800 - $1,400 | $13.65 | $23.87 |
| -200mesh | 14.9 | 85.2 | $800 | $0 | $18.48 |
| $326.73 | $431.72 | ||||
The above assumes 100% recoveries… initial testing at Lac Knife indicates ~85%
Focus Metals plans on producing 7,000 to 10,000 tonnes before ramping up production to more than 20,000 tonnes per year once in full production at Lac Knife in 2014.
Energizer Resources EGZ-T $0.33
Shares out… 159.3M (includes recent financing with DRA)
Fully diluted… 217.7M
Market Cap… $52.6M
Energizer Resources is the pick of the litter as far as a potential mine at Green Giant that could be an industry leader. The company has demonstrated all the qualities that a world class graphite project needs to be a viable mining operation. It’s got the right product with high purity and large flake. It’s got a very high grade (6%Cg to 9%Cg) pointing to a high value/low cost operation. It is absolutely massive with widths in excess of 100 meters demonstrating Green Giant has scalability on a moment’s notice to meet incremental demand. It also has a very simple recovery process. A large portion of the product at Green Giant is amenable to simple crushing. EGZ’ Green giant has everything it takes to make a mine that is an industry leader. EGZ didn’t report flake distribution or purity except to announce that they achieved greater than 90% purities and have jumbo flake.
EGZ has gone through all the hurdles to be considered in this upper echelon of graphite stocks. Energizer estimates that with a simple portable crusher the company will be able to start producing 7,000 tonnes of graphite on an annualized basis within 12 months and have a 2,000 tonne per day mill in operation within 24 - 36 months capable of producing 40,000 to 50,000 tonnes of graphite per year.
Results from recent drilling include…
- 108 meters grading 8.8% C
- 41.5 meters at 7.01% C
- 118.6 meters at 6.24% C
- 61.4 meters at 7.46%C
The company signed an initial commitment with DRA Mineral Projects to build a mine at Green Giant. This is a major milestone with DRA making a key financial commitment to EGZ which inlcudes a mandate to increase its investment in Energizer to 5% from the current 1.6%. DRA is a world leader in process engineering and metallurgy and has been providing engineering, procurement, construction management which has formed a solid partnership between the two to expedite graphite production at Green Giant. With EGZ announcing simple crushing with no floatation process yielded +50 mesh concentrates as well as purities greater than 90%, EGZ has the product and a the commitment from a player to build a mine. These are two major milestone giving early indications about the quality potential of Energizer’s product. Dundee has also got behind Energizer Resources. Dundee is a good firm who invest for the long term in several plays. Their DD doesn’t include flipping or shorting the warrants and is a good financial backer to have.
EGZ has the best of both worlds in the mining industry… a premium product and mining qualities second to none. Green Giant will have one of the highest NPV/IRR of any of these companies.
Flinders Resources FDR-V $2.35
Shares out… 44.5M (includes $15M @ $2.20 PP)
Fully diluted… 63.5M
Market Cap… $104.6M with ~20M Cash
Flinders is the newest old graphite mine to be redressed to come back into production. The Kringel Mine historical deposits with combined resource of 6.9Mt grading 8.8%. They are 4 small deposits with a central mill location. Kringel has a much higher flake distribution than Focus Metals and a grade that ensures low cost production. The mine had a problem with leaky tailings pond in the past, but the company is committed to doing it right and fixing these problems. The project is a fully permitted operation putting Kringel on the fast lane to production with a similar timeline to Northern Graphite.
Historical deposits at Flinders measure...
- Kringel 1.3mt @ 11.3% C
- Gropabo 2.1mt @6.9%C
- Mattsmyra 2.2mt @8.8%C
- Mansberg 1.3mt@ 9.4%
Flinders Kringel has the capacity to produce 13,000 tonnes of graphite per year and will produce a high distribution of large flake at a high purity. Flinders announced an initial drilling program at Kringel to confirm the historic resource and announced a $15M financing 3 weeks ago at a price of $2.20. Flinders and Northern Graphite are two companies that I expect SP’s will match each other dollar for dollar.
Mega Graphite – Pre IPO
Is Mega Graphite ever going to get off its feet? Still waiting and now the CEO resign, never a good sign no matter how you word the press release. The price tag and the fact that the mine has always had problems with metallurgy do not bode well for this project but it will eventually limp along into production at some point. The big problem with Uley is that it is a fine to medium flake deposit which is not ideal for the hunt in massive flake high purity that net premium pricing. Finer flake deposits also tend to be lower purity lending to potential metallurgy problems and expensive processing.
Out of all the projects, this is the one that most people do not have positive feelings about and neither do I. Just b/c I mention it does not mean buy it when it IPO’s. The one positive about Uely is its grade and the fact that it has existing infrastructure similar to Flinders and can be in production fast with a competent mgmt. at the helm. Problem is there is no need for the product that Uley has unless it can be refined to a super high purity.
Now I get why the Mega CEO resigned. That is a lot of money he raised or is raising for that hunk of junk. The plant has been on care and maintenance for the last 20 years but is capable of producing 14,000 tonnes of graphite per year as is. Clearly Northern Graphite’s approach to metallurgy and partnering with industry leaders to create value added processes and a market for their product is paying off while Mega Graphite is still struggling pre-IPO now looking for a leader. Clearly not money well spent on Mega’s part.
| Company | Project | Grade | Production Capacity | Production Date |
| Mega Graphite | Uley | 8.1% | 14,000t | 2013 |
| Flinders Resources FDR | Kringel | 8.8% | 13,000t | 2013 |
| Northern Graphite NGC | Bisset Creek | 2% | 20,000t | 2013 |
| Focus Metals FMS | Lac Knife | 15.5% | 23,000t | 2014 |
| Energizer Resources EGZ | Green Giant | 6% - 8% | 7,000t to 50,000t | 2015 |
Top Tier Exploration & Early Development Category
Graphite One GPH-V $0.285 (formerly Cedar Mountain Resources CED-V)
Shares Out… 85.6M
Fully diluted… 137M
Market Cap… $24.4M with ~$6M in cash
Graphite One is developing the high grade Graphite Creek Project in Alaska. The project covers a formation that averages 100 meters in thickness and extends for a strike length of 5km. Graphite Creek has been confirmed down dip for a 100m to 200m depth indicating this is a very large tonnage project in Alaska. Early metallurgical results from samples confirm the presence of jumbo flake mineralization with grades ranging from 3% to 60%Cg with distribution of jumbo flake ranging +40 mesh ranging from 67% to 78% distribution. The target is a massive 200Mt resource grading 5% to 10% Cg. The size of some of the largest graphite deposits in the world.
Graphite Creek is conveniently located close to tidewater and shipping lanes anywhere to the Pacific Rim. Graphite Creek is a high value, but very early stage project. GPH raised $6M in a recent financing and is set to aggressively develop graphite creek this summer.
Canada Graphite $0.255 (High North Resources HN.p-V – HALTED)
Shares Out… 31.3M (Post Financing)
Fully diluted… ~36M
Market Cap @ $0.60… ~$20M with $5M cash
Canada Graphite announced a qualifying transaction acquiring the Boisedale Hills Graphite Project near Sydney in Nova Scotia. The project is similar in scope and scale to Graphite Creek except the grade may be a bit lower than Graphite Creek. The project is massive in scale with the deposit traced along a 9.5km strike, up to 300 meters deep and multiple bands of mineralization up to 300 meters wide. Boisedale Hills is a monster of a graphite deposit hosted in marble. Boisedale Hills has an extremely high purity although flake size is closer to Uley than Bisset Creek. Generally purity is much more an important factor for graphite and Canada
Graphite will have a market for their product although there is no jumbo flake at Boisedale Hills. When it comes to the battery industry, purity is a much more important factor than flake size.
Grades of the deposit reach up to 15% and mineralization is high
purity with the potential to reach 99%+ purity. Initial metallurgical
results indicate a purity of 99.3% can be achieved. Boisedale Hills is
hosted in marble which has favorable characteristics when it comes to
processing and achieving high purities. Canada Graphite will be fully
cashed up with $5M in the till to drill 15,000 meters, initiate a pilot
plant and start baseline environmental testing and permitting.
Boisedale Hills is close to infrastructure, power and amenities and
has an available workforce making this project a fast track story if the
production decision is made.
Canada Graphite is certainly a story to watch with purities that are better than any other project on the market. High purity means inexpensive processing. If Canada Graphite can make spherical graphite at a similar cost (graphite loss) to NGC, then there is a very good argument to be made for this deposit despite the lack of jumbo flake.
Standard Graphite SGH-V $0.71 (formerly Orocan Resources OR-V)
Shares Out… 27.6M (includes $3M $0.85 PP)
Fully Diluted… 38.1M
Market Cap… $19.6M with $4.5M in cash
Standard Graphite continues to methodically explore their projects. They received the results of the mag surveys flown on their Ontario projects revealing large conducting bodies including a 5km long trend to the north of their Little Bryan Property. The Black Donald survey was also successful identifying several targets and securing more land around the Black Donald claims which SGH identified as prospective after flying the EM survey.
Standard recently announced completion of a TDEM survey on the Carheil Property in Quebec located 10km from the Lac Knife deposit. The survey identified multiple conductors on the 3,885 property including 4 distinct conductors cutting across the entire length of the property up to 6km in length. The survey also outlined 1km extension of the Lac Carheil occurrence which lies 500 meters to the southeast of the property which extend onto the property. The property is littered with numerous massive graphite boulders and has the same geology as the nearby Lac Knife deposit.
I have been hesitant of Standard Graphite until now, this project looks like a carbon copy of the high grade Lac Knife which Standard management consider the Holy Grail of graphite discoveries. With the latest financing Standard Graphite will be fully cashed up for exploration with $4.5M in the till to drill out some of their high value priority targets.
Zenyatta Ventures ZEN-V $0.45
Shares Out… 39.6M
Fully Diluted… 54.6M
Market Cap… $17.8M with ~$5M in cash
Zenyatta Ventures is on to a massive magmatic hydrothermal graphite breccia similar to the Sri Lankan graphite deposits at the Albany Graphite Project in Ontario. The graphite discovery has all ranges of graphite size from large flake to fine, is extremely unique and is related to a large intrusive body hosted in veins across several bands of mineralization. ZEN recently announced they hit wide zones of mineralization in 200 meter stepouts both north and south of the discovery hole extending the length of the zone at least 400 meters. The overall size of the anomaly is 1,400 meters by 800 meters implying a very large graphite deposit. The company hit banded zones of mineralization from 5.5m wide to 67.5m wide to a down-hole depth of 522 meters ranging in grade from 2.1%C to 4.6%C in the discovery hole at Albany.
I cannot stress enough that when looking at different projects, size isn’t everything, especially in the graphite game. Certainly when most of the mineralization occurs well below the scope of a 100 meter open pit, there will be red herrings in the industry and ZEN looks like one of those. A 500 meter open pit graphite mine is well beyond any field of dreams type plan. It is a unique deposit, very large and worthy of a mention, but ZEN is not a favorite of mine although has performed very well lately and will probably still rise in value with the rest of the industry in anticipation and optimism on what will be a very large resource.
Strike Graphite SRK-V $0.31
Shares Out… 49.4M (includes recent $0.175 financings)
Fully Diluted… 74.9M
Market Cap… $15.3M with $1.2M cash
Strike Graphite is focusing on exploration and development of the massive Simon Lake Graphite Project in Saskatchewan. It is similar in size to Uley in Australia, Green Giant in Madagascar, Bisset Creek in Ontario, Boisedale Hills in Nova Scotia, or Graphite Creek in Alaska. It is truly a monster of a project. Simon Lake is a project that should be evaluated on par with some of the larger higher grading graphite deposits in the world. If Strike confirms the right product at Simon Lake, it will be considered an extremely undervalued investment at only $15M market cap.
Strike announced the discovery a very large 25km conductive trend at Simon Lake, staked more land around the property and have expedited exploration with approval to drill at Simon Lake received. Simon Lake could be the company maker that vaults Strike Graphite into the top tier of companies after phase 1 drilling. Strike Graphite is still relatively cheap considering the potential to have a $50M to $100M valuation within a year if exploration defines high grade, high purity massive flake graphite deposit.
Lomiko Metals LMR-V $0.14
Shares Out… 75.5M (includes $900k PP)
Fully diluted… 86M
Market Cap… $10.6M with ~$1M in cash
Lomiko Metals is developing the high grade Quatre Milles project in Quebec. Quatre Milles is flat lying deposit with potentially 3 to 5Mt around 7% within the scope of a shallow open pit mine. Lomiko will be drilling this summer to confirm and expand the historical results in a two phase drill program. A resource estimate and subsequent PEA on the project should be delivered within 12 to 18 months. Quatre Milles is open in all directions and has excellent exploration potential. Lomiko is still undervalued considering the low risk nature of the historic drilling, the excellent exploration potential of the property, and the company’s ability expedite exploration on the project. Drill permits for Lomiko are the next long anticipated milestone which should bring some speculation into the stock.
First Graphite FGR-V (formerly Solace Resources SOV-V) $0.35
Shares Out… 27.1M (includes $525k at $0.105 and $1.4M at $0.40 PP)
Fully Diluted… 45.6M
Market Cap… $9.5M with ~$2M cash
First Graphite has put together a highly prospective suite of graphite projects across Canada. The first acquisition was the Montpellier Project. The project was acquired for a graphitic showing exposed along a cliff side with grades ranging from 1% to 20%. 4 samples taken from the outcrop graded from 0.82%C to 14.4%C. Thickness of the graphite horizons in the area typically range 10 to 50 meters in thickness.
First Graphite’s next move was to acquire the Mt. Heimdahl claims near the Eagle Graphite mine in BC. Eagle Graphite is disseminated large flake mineralization is similar style and grade to Northern Graphite’s Bisset Creek with grades typically ranging from 1.5% to 2.5%. The 1,045 hectare Mt. Heimdahl property is located 8km from Eagle Graphite’s beneficiation plant and is at the heart of this emerging graphite district in BC.
Recently the company moved to acquire the 22,853 hectare Henry Graphite Project in northeast Saskatchewan covering a large area of prospective graphite mineralization near the Deep Bay West Mine and Strike Graphite’s Deep Bay East Project. The project covers conductive trends up to 10 km long and has historic holes hitting graphite mineralization in excess of 30 meters despite best efforts to avoid hitting graphite in previous exploration. This area is known to have extremely high purity graphite upgradeable to a 99% purity in a cost effective process as per the Deep Bay West Graphite Mine.
First Graphite has quietly gone about building a strong portfolio of graphite projects and raised close to $2M in the last 2 months. The company is well financed and has identified three emerging districts in Mt. Heimdahl (Eagle Graphite) in BC, Deep Bay in Saskatchewan and Montpellier in Quebec where numerous companies have staked historic showings. FGR-V is well on its way to being a top tier company aggressively exploring these high value areas. FGR is still in acquisition mode, so do not be surprised if these guys make one or two more acquisitions to complete the portfolio of projects.
New Acquisitions – CHEAP STOCK - Highly Speculative - High Return/Leverage
Soldi Ventures SOV-V $0.10
Shares Out… 34.4M (includes $600k PP)
Graphite Acquisitions… 3.5M
Options… 2.97M
Warrants… 20.4M
Fully diluted… 61.27M
Market Cap… $3.8M
Soldi Ventures acquired two historic projects in the Grenville Province in southwestern Quebec. Lochaber was the first project acquired in the historic region of Montpellier, an emerging high purity large flake graphite camp. Numerous base metals targets in the area were described as containing graphite from exploration dating back to the 1950’s. Several companies have claimed positions in the area looking for high purity massive flake graphite. The Lochaber project was trenched and found graphite at surface over 50 meters identifying a zone between 1 to 4 meters wide. A pit 450 meters to the west of this zone also identified graphite bearing rock. The EM map shows multiple sub parallel horizons making the Lochaber property a highly prospective graphite project in Montpellier near First Graphite, Atocha Resources and others.
Soldi Ventures also acquired the Cameron graphite project which was drilled historically with 22 of 23 holes hitting mineralization. Metallurgical tests yielded high purity graphite ranging from 91.35% to 97.4% and +48 mesh measured 65.09% and 52.39% distribution in the concentrates. Both of Soldi’s projects are high grading from 10% to 15% and are considered high purity massive flake projects.
Currently graphite is an industry that is all about product seeking out the ‘holy grail’ jumbo flake with high purity. The historical tests on Cameron makes Soldi’s project extremely interesting.
Lochaber Graphite Property
Atocha Resources ATT-V $0.055
Shares Out… 47.9M
Options…. 3.8M
Warrants… 5.9M
Fully Diluted… 57.6M
Market Cap… $2.6M with $500k cash
Atocha Resources is one of the most recent new entrants to the industry recently announcing the acquisition of the Montpellier project located north of Soldi’s Lochaber project in late March. The project was reported to have graphite mineralization in cores dating back to the 1960’s when companies were looking for near surface base metals mineralization. There are no reported grades but the mineralization is similar in style to Lochaber indicating the potential for high purity massive flake graphite. The widths of the zones have been reported as large as 10 to 50 meters according to First Graphite’s assessment of Montpellier.
In doing their due diligence and reading the historic maps in the area, ATT identified several conducting trends extending south off Soldi’s Lochaber project and quickly staked the un-staked anomalies south of the Lochaber claims. The new claims called Saint-Sixte Graphite Property significantly add to Atocha’s land position to a total 3,215 hectares in the Montpellier district. The claims ATT staked for next to nothing online are double the size of Soldi’s claims. From interpretation of the maps, there are at least 5 conducting trends that take up at least double the surface area of the anomaly on Lochaber. Atocha recently announced they are carrying out initial exploration on the property by contracting Dany Boilard who will carry out exploration by GIS compilation, site visits and a mass mailing of private landowners in the area.
Atocha’s April 10th announcement went largely unnoticed, but is a big deal considering the company staked a mineralized graphite trend online that has an equivalent value of $200k cash and 3M shares when compared to Soldi’s acquisition price of Lochaber. Atocha has an extremely interesting land position to the south of Soldi’s Lochaber. The EM maps indicate widespread graphite mineralization including the extension of the deposit on Soldi’s Lochaber.
This is the first staking coup of the 2012 graphite rush.
Montpellier Graphite Project
Galaxy Capital Corp GXY-V $0.19
Shares Out… 25.1M (post 12M unit financing)
Graphite Acquisitions… 2.6M
Warrants… 17.1M
Fully Diluted… 44.8M
Market Cap… $5.26M with $2.5M cash
Galaxy Capital has an aggressive plan for their flagship Sun Graphite Project which they acquired through Zimtu Capital. Galaxy plans 3,000 meters this summer in phase 1 followed by another 7,500 meter resource definition program this winter in advance of a PEA within a 12 to 18 month timeline. The project is wider than most, grades up to 10% and is shallow. It is very large covering multiple anomalies within a 15km trend with the longest anomaly measuring close to 3km in length. With an aggressive plan in place and the financing to do it, Galaxy is positioned well among the inexpensive new entrants developing a quality project.
Sun Graphite Project
Big North Graphite NRT-V $0.20
Shares Out… 19.8 M
Graphite acquisitions… 5M
Options… 1.66M
Milestones… 2M
Fully Diluted… 28.46M
Market Cap… $5M (pre-financing)
Big North Graphite acquired two projects in S. Ontario near Standard Graphite’s Little Bryan Project which is in the area of Northern Graphite’s Bisset Creek and Ontario Graphite’s Kearney mine. What has really made this company interesting is the recent acquisition of a Lac Knife style deposit in eastern Quebec 140 km north of Sept Iles. The project has an anomaly that is 8km long and up to 2km wide representing a significant target to go after in an area where graphite deposits tend to be very high grade. The company hasn’t announced a financing yet, but I expect $1M to $1.5M financing around $0.20 to $0.25 cents and then these guys are good to go with an exploration program that includes a small drill program on both targets this summer.
Griffith and Brougham Graphite Properties
Canada Rare Earths CJC-V $0.17
Shares Out… 26.9M (including recent $700k PP)
Graphite acquisitions… 3M
Options… 2.98M
Warrants… 11.1M
Fully diluted… ~44M
Market Cap… $5.61M ($700k cash)
Canada Rare Earths was exploring the Geoland Rare Earth Project with the hope they had something similar to Geomega’s bulk tonnage Montviel Rare Earth Project and came up with some disappointing results. CJC was quick to mitigate the disaster and losses by acquiring projects near and around Timcal’s Lac des Iles. CJC acquired the Lac des Iles West project that borders the western boundary of the Lac des Iles mine as an area play as well as properties 50 to 60km east of Lac des Iles. Historic work in 1989 on La Loutre identified several conductors in a 5km trend with the largest anomaly extending over 2km. Grades ranged between 1% and 10%. The Labelle property has historic work dating back to the 1950’s which identified near surface graphite mineralization in trenches within 5km trend.
Lac Des Iles West Property
When looking at these really cheap new entrants, it is hard to judge what project is better than the other without some up-to-date exploration. From early indications, GXY’s Sun project looks very interesting, NRT’s Lac du Nord looks like an early Lac Knife, ATT’s projects in Montpellier could be an emerging graphite camp, and Soldi Venture’s Cameron project has historic met results that indicate they have the right product for $6,000 per tonne pricing.
What is for certain is that the quality, high purity flake projects are getting eaten up and aside for a few projects tied up in negotiations, the pick of the litter is somewhere within this watch-list.
… In graphite, currently emphasis is on finding the right product with the right purity.
Some simple factors one might consider for graphite…
MATERIAL – ITS ALL ABOUT MATERIAL...
Grade - low cost production per tonne of graphite produced potentially less than $1000 per tonne for a plus 5% operation. High grade also means a much smaller mill and a smaller capex project. Grade increases payback of a project and mines.
Purity – THIS IS THE MOST IMPORTANT FACTOR - high purity of 99.9% is imperative for Li-Ion batteries and the industry is racing to find a suitable replacement for synthetic graphite which currently sells for $7,000 to $20,000 per tonne.
Flake size – the larger flake is easier to work with and you can always crush it down to a smaller flake. Northern Graphite’s product and process together combine to use less than 50% of the smaller -100 mesh product to produce spherical graphite. What we do not know is how much of this efficient beneficiation is due to jumbo flake size and how much is credited to NGC’s technology and processes upgrading the material.
Recovery - this is much more important for a lower grading operation NGC needs higher recoveries while a 7% and above mine could get by on 80% recoveries
Ease of processing - some deposits like Bisset Creek and Green Giant are every easy to process and have a high purity meaning the need less intensive processes and less capital cost. EGZ claims all they need is $10M portable crusher to start producing a basic raw material to generate quick cash flow. This translates into low cost mining process which reduces costs at all points of the cash flow statement from capex investment to daily opex costs.
Open Pit Mining Qualities
Proximity to surface - greatly affects the strip ratio which is a major cost of mining simply b/c the closer to surface the deposit lies, less rock you have to move to mine it. Proximity to surface is one of the single biggest factors in determining the cost of a mine including an open pit mine’s strip ratio. Simply put, the further away from surface the deposit is, the more costly it is to mine it.
Thickness of zone – this can affect the strip ratio as well including how deep an open pit can go and be economically viable. A vertical zone that is at surface and is 100 meters wide will have a low strip ratio vs. a vertical zone that is 10 meters wide and be able to pit much deeper.
Shape of zone - how it lies in a conceptual open pit like flat lying vs dipping vertically. A shallow flat lying zone is preferable because you can scope it all in a pit while a steeply dipping zone will be a hard to pit.
Product First, Mining Qualities Second
When you are just starting out in an industry and looking for a niche product that caters to a certain industry and specifications such as flake size and purity; what is most important is finding a suitable product. This fundamental quality has been even more ingrained after the change in pricing adding high purity jumbo flake as a product at prices ranging from $4,500 to $6,000 per tonne. In an industry that is searching for the perfect product, thinner mining widths of 1 meter to 10 meters will not matter. In an industry where the top product used to sell for $2500 to $3,000, the new pricing category for jumbo flake at $6,000 per tonne is very material. It makes the mining variable much less a factor as long as you have the right stuff.... 99%-99.9% jumbo flake.
Having the right product makes a small 5Mt deposit as valuable as a 100Mt deposit. The last thing that people will emphasize is mining qualities. It is why a project like Bisset Creek, despite an apparent lack of grade will do very well compared to others with grade that don't have the product. In reality Bisset Creek is like a 4% deposit b/c of the pricing differences and FMS is like a 10% deposit. At this stage in the game, it’s all about finding the product and NGC has done that. If anyone else can do it like NGC, they are going to have a bright future and a high value mine on hand. They can do it all without proving up a 100Mt resource and apparent lack of size.
The graphite story has emerged as a top materials growth theme and the race is on to find the ideal deposits that lends to purity, flake size and grade. At $6,000 per tonne for the finest natural flake graphite the industry can find... graphite is now a very lucrative business. If you can find a company with all three qualities of grade, flake, and purity; you will have a company on a trajectory similar to Northern Graphite.
Companies that round out my graphite watchlist not mentioned in the above article are…
Christopher Skidmore
Beat the Market Stock Picks
Disclosure: I own significant positions in ATT, FGR, and LMR and I reserve the right buy or sell my position at any time.
Canada Graphite is certainly a story to watch with purities that are better than any other project on the market. High purity means inexpensive processing. If Canada Graphite can make spherical graphite at a similar cost (graphite loss) to NGC, then there is a very good argument to be made for this deposit despite the lack of jumbo flake.
Standard Graphite SGH-V $0.71 (formerly Orocan Resources OR-V)
Shares Out… 27.6M (includes $3M $0.85 PP)
Fully Diluted… 38.1M
Market Cap… $19.6M with $4.5M in cash
Standard Graphite continues to methodically explore their projects. They received the results of the mag surveys flown on their Ontario projects revealing large conducting bodies including a 5km long trend to the north of their Little Bryan Property. The Black Donald survey was also successful identifying several targets and securing more land around the Black Donald claims which SGH identified as prospective after flying the EM survey.
Standard recently announced completion of a TDEM survey on the Carheil Property in Quebec located 10km from the Lac Knife deposit. The survey identified multiple conductors on the 3,885 property including 4 distinct conductors cutting across the entire length of the property up to 6km in length. The survey also outlined 1km extension of the Lac Carheil occurrence which lies 500 meters to the southeast of the property which extend onto the property. The property is littered with numerous massive graphite boulders and has the same geology as the nearby Lac Knife deposit.
I have been hesitant of Standard Graphite until now, this project looks like a carbon copy of the high grade Lac Knife which Standard management consider the Holy Grail of graphite discoveries. With the latest financing Standard Graphite will be fully cashed up for exploration with $4.5M in the till to drill out some of their high value priority targets.
Zenyatta Ventures ZEN-V $0.45
Shares Out… 39.6M
Fully Diluted… 54.6M
Market Cap… $17.8M with ~$5M in cash
Zenyatta Ventures is on to a massive magmatic hydrothermal graphite breccia similar to the Sri Lankan graphite deposits at the Albany Graphite Project in Ontario. The graphite discovery has all ranges of graphite size from large flake to fine, is extremely unique and is related to a large intrusive body hosted in veins across several bands of mineralization. ZEN recently announced they hit wide zones of mineralization in 200 meter stepouts both north and south of the discovery hole extending the length of the zone at least 400 meters. The overall size of the anomaly is 1,400 meters by 800 meters implying a very large graphite deposit. The company hit banded zones of mineralization from 5.5m wide to 67.5m wide to a down-hole depth of 522 meters ranging in grade from 2.1%C to 4.6%C in the discovery hole at Albany.
I cannot stress enough that when looking at different projects, size isn’t everything, especially in the graphite game. Certainly when most of the mineralization occurs well below the scope of a 100 meter open pit, there will be red herrings in the industry and ZEN looks like one of those. A 500 meter open pit graphite mine is well beyond any field of dreams type plan. It is a unique deposit, very large and worthy of a mention, but ZEN is not a favorite of mine although has performed very well lately and will probably still rise in value with the rest of the industry in anticipation and optimism on what will be a very large resource.
Strike Graphite SRK-V $0.31
Shares Out… 49.4M (includes recent $0.175 financings)
Fully Diluted… 74.9M
Market Cap… $15.3M with $1.2M cash
Strike Graphite is focusing on exploration and development of the massive Simon Lake Graphite Project in Saskatchewan. It is similar in size to Uley in Australia, Green Giant in Madagascar, Bisset Creek in Ontario, Boisedale Hills in Nova Scotia, or Graphite Creek in Alaska. It is truly a monster of a project. Simon Lake is a project that should be evaluated on par with some of the larger higher grading graphite deposits in the world. If Strike confirms the right product at Simon Lake, it will be considered an extremely undervalued investment at only $15M market cap.
Strike announced the discovery a very large 25km conductive trend at Simon Lake, staked more land around the property and have expedited exploration with approval to drill at Simon Lake received. Simon Lake could be the company maker that vaults Strike Graphite into the top tier of companies after phase 1 drilling. Strike Graphite is still relatively cheap considering the potential to have a $50M to $100M valuation within a year if exploration defines high grade, high purity massive flake graphite deposit.
Lomiko Metals LMR-V $0.14
Shares Out… 75.5M (includes $900k PP)
Fully diluted… 86M
Market Cap… $10.6M with ~$1M in cash
Lomiko Metals is developing the high grade Quatre Milles project in Quebec. Quatre Milles is flat lying deposit with potentially 3 to 5Mt around 7% within the scope of a shallow open pit mine. Lomiko will be drilling this summer to confirm and expand the historical results in a two phase drill program. A resource estimate and subsequent PEA on the project should be delivered within 12 to 18 months. Quatre Milles is open in all directions and has excellent exploration potential. Lomiko is still undervalued considering the low risk nature of the historic drilling, the excellent exploration potential of the property, and the company’s ability expedite exploration on the project. Drill permits for Lomiko are the next long anticipated milestone which should bring some speculation into the stock.
First Graphite FGR-V (formerly Solace Resources SOV-V) $0.35
Shares Out… 27.1M (includes $525k at $0.105 and $1.4M at $0.40 PP)
Fully Diluted… 45.6M
Market Cap… $9.5M with ~$2M cash
First Graphite has put together a highly prospective suite of graphite projects across Canada. The first acquisition was the Montpellier Project. The project was acquired for a graphitic showing exposed along a cliff side with grades ranging from 1% to 20%. 4 samples taken from the outcrop graded from 0.82%C to 14.4%C. Thickness of the graphite horizons in the area typically range 10 to 50 meters in thickness.
First Graphite’s next move was to acquire the Mt. Heimdahl claims near the Eagle Graphite mine in BC. Eagle Graphite is disseminated large flake mineralization is similar style and grade to Northern Graphite’s Bisset Creek with grades typically ranging from 1.5% to 2.5%. The 1,045 hectare Mt. Heimdahl property is located 8km from Eagle Graphite’s beneficiation plant and is at the heart of this emerging graphite district in BC.
Recently the company moved to acquire the 22,853 hectare Henry Graphite Project in northeast Saskatchewan covering a large area of prospective graphite mineralization near the Deep Bay West Mine and Strike Graphite’s Deep Bay East Project. The project covers conductive trends up to 10 km long and has historic holes hitting graphite mineralization in excess of 30 meters despite best efforts to avoid hitting graphite in previous exploration. This area is known to have extremely high purity graphite upgradeable to a 99% purity in a cost effective process as per the Deep Bay West Graphite Mine.
First Graphite has quietly gone about building a strong portfolio of graphite projects and raised close to $2M in the last 2 months. The company is well financed and has identified three emerging districts in Mt. Heimdahl (Eagle Graphite) in BC, Deep Bay in Saskatchewan and Montpellier in Quebec where numerous companies have staked historic showings. FGR-V is well on its way to being a top tier company aggressively exploring these high value areas. FGR is still in acquisition mode, so do not be surprised if these guys make one or two more acquisitions to complete the portfolio of projects.
New Acquisitions – CHEAP STOCK - Highly Speculative - High Return/Leverage
Soldi Ventures SOV-V $0.10
Shares Out… 34.4M (includes $600k PP)
Graphite Acquisitions… 3.5M
Options… 2.97M
Warrants… 20.4M
Fully diluted… 61.27M
Market Cap… $3.8M
Soldi Ventures acquired two historic projects in the Grenville Province in southwestern Quebec. Lochaber was the first project acquired in the historic region of Montpellier, an emerging high purity large flake graphite camp. Numerous base metals targets in the area were described as containing graphite from exploration dating back to the 1950’s. Several companies have claimed positions in the area looking for high purity massive flake graphite. The Lochaber project was trenched and found graphite at surface over 50 meters identifying a zone between 1 to 4 meters wide. A pit 450 meters to the west of this zone also identified graphite bearing rock. The EM map shows multiple sub parallel horizons making the Lochaber property a highly prospective graphite project in Montpellier near First Graphite, Atocha Resources and others.
Soldi Ventures also acquired the Cameron graphite project which was drilled historically with 22 of 23 holes hitting mineralization. Metallurgical tests yielded high purity graphite ranging from 91.35% to 97.4% and +48 mesh measured 65.09% and 52.39% distribution in the concentrates. Both of Soldi’s projects are high grading from 10% to 15% and are considered high purity massive flake projects.
Currently graphite is an industry that is all about product seeking out the ‘holy grail’ jumbo flake with high purity. The historical tests on Cameron makes Soldi’s project extremely interesting.
Lochaber Graphite Property
- 929 hectare
- 30km east of Ottawa –Gatineau
- Subject to exploration in the 1950’s and 1980’s
- Massive flake graphite
- 1 meter to 7 meter wide zone
- 10% to 15% grades
- Mineralization confirmed over 650 meter strike length
- Govt. EM shows multiple parallel zones
- Acquisition cost - $100,000 and 1.5M shares
- 1,180 hectare
- 115km north of Ottawa
- 6.5 meters thick
- Large flake
- 15% visually estimated
- 5 ton bulk sample in 1965
- 22 of 23 drill holes hit mineralization
- High purity 91.35% and 95.06% under simple crusher
- Jumbo Flake… 65.09% and 52.39% distribution Jumbo Flake +48 mesh
- Final test run gave 97.4% Carbon and 90.15% recovery
- Acquisition cost - $150,000 and 2.2M shares
Atocha Resources ATT-V $0.055
Shares Out… 47.9M
Options…. 3.8M
Warrants… 5.9M
Fully Diluted… 57.6M
Market Cap… $2.6M with $500k cash
Atocha Resources is one of the most recent new entrants to the industry recently announcing the acquisition of the Montpellier project located north of Soldi’s Lochaber project in late March. The project was reported to have graphite mineralization in cores dating back to the 1960’s when companies were looking for near surface base metals mineralization. There are no reported grades but the mineralization is similar in style to Lochaber indicating the potential for high purity massive flake graphite. The widths of the zones have been reported as large as 10 to 50 meters according to First Graphite’s assessment of Montpellier.
In doing their due diligence and reading the historic maps in the area, ATT identified several conducting trends extending south off Soldi’s Lochaber project and quickly staked the un-staked anomalies south of the Lochaber claims. The new claims called Saint-Sixte Graphite Property significantly add to Atocha’s land position to a total 3,215 hectares in the Montpellier district. The claims ATT staked for next to nothing online are double the size of Soldi’s claims. From interpretation of the maps, there are at least 5 conducting trends that take up at least double the surface area of the anomaly on Lochaber. Atocha recently announced they are carrying out initial exploration on the property by contracting Dany Boilard who will carry out exploration by GIS compilation, site visits and a mass mailing of private landowners in the area.
Atocha’s April 10th announcement went largely unnoticed, but is a big deal considering the company staked a mineralized graphite trend online that has an equivalent value of $200k cash and 3M shares when compared to Soldi’s acquisition price of Lochaber. Atocha has an extremely interesting land position to the south of Soldi’s Lochaber. The EM maps indicate widespread graphite mineralization including the extension of the deposit on Soldi’s Lochaber.
This is the first staking coup of the 2012 graphite rush.
Montpellier Graphite Project
- 30km east of Montreal
- 1,475 hectares
- Located north of Soldi’s Lochaber property
- Drill cores from 1960’s intersected graphite
- 10% to 15% graphite visually estimated
- Graphitic beds up to 7 meters
- Acquisition Cost - $15k and 2.85M shares
- 1,740 hectares
- Adjacent south of Soldi’s Lochaber project
- Staked on reviewing 1950’s govt. airborne EM survey showing several conductors extending south off of Soldi’s claims
- Largest anomaly 2km long and 400m wide
Galaxy Capital Corp GXY-V $0.19
Shares Out… 25.1M (post 12M unit financing)
Graphite Acquisitions… 2.6M
Warrants… 17.1M
Fully Diluted… 44.8M
Market Cap… $5.26M with $2.5M cash
Galaxy Capital has an aggressive plan for their flagship Sun Graphite Project which they acquired through Zimtu Capital. Galaxy plans 3,000 meters this summer in phase 1 followed by another 7,500 meter resource definition program this winter in advance of a PEA within a 12 to 18 month timeline. The project is wider than most, grades up to 10% and is shallow. It is very large covering multiple anomalies within a 15km trend with the longest anomaly measuring close to 3km in length. With an aggressive plan in place and the financing to do it, Galaxy is positioned well among the inexpensive new entrants developing a quality project.
Sun Graphite Project
- 4,200 hectare
- North shore of the St. Lawrence River Quebec – discovery in 1998 looking for base metals
- Multiple anomalies up to 3km long within 15km trend
- 20 meters wide up to 10%
- Summer drilling 3,000 meters in 40 holes phase 1
- Winter drilling 7,500 meters phase 2
- Followed by PEA in 12 months total $2.5M cost
- Cost $100k and 2M shares
- 2 former producing mines 1865 (50t) and 1910 to 1919 (916t)
- 1,324 hectares
- Grenville geological province
- Cost $30k and 600,000 shares
Big North Graphite NRT-V $0.20
Shares Out… 19.8 M
Graphite acquisitions… 5M
Options… 1.66M
Milestones… 2M
Fully Diluted… 28.46M
Market Cap… $5M (pre-financing)
Big North Graphite acquired two projects in S. Ontario near Standard Graphite’s Little Bryan Project which is in the area of Northern Graphite’s Bisset Creek and Ontario Graphite’s Kearney mine. What has really made this company interesting is the recent acquisition of a Lac Knife style deposit in eastern Quebec 140 km north of Sept Iles. The project has an anomaly that is 8km long and up to 2km wide representing a significant target to go after in an area where graphite deposits tend to be very high grade. The company hasn’t announced a financing yet, but I expect $1M to $1.5M financing around $0.20 to $0.25 cents and then these guys are good to go with an exploration program that includes a small drill program on both targets this summer.
Griffith and Brougham Graphite Properties
- Southern Ontario
- 6,500 hectares
- Near Standard Graphite’s Little Bryan Property
- Cost - $80k plus 3M shares
- Eastern Quebec
- 140km NW of Sept-Iles
- 2,009 hectares
- Graphitic paragneiss formation 8km long and up to 2km wide
- Cost - $80k and 3M shares plus milestones of $200k and 2M shares (200,000t of Cgr at 5% cut-off)
Canada Rare Earths CJC-V $0.17
Shares Out… 26.9M (including recent $700k PP)
Graphite acquisitions… 3M
Options… 2.98M
Warrants… 11.1M
Fully diluted… ~44M
Market Cap… $5.61M ($700k cash)
Canada Rare Earths was exploring the Geoland Rare Earth Project with the hope they had something similar to Geomega’s bulk tonnage Montviel Rare Earth Project and came up with some disappointing results. CJC was quick to mitigate the disaster and losses by acquiring projects near and around Timcal’s Lac des Iles. CJC acquired the Lac des Iles West project that borders the western boundary of the Lac des Iles mine as an area play as well as properties 50 to 60km east of Lac des Iles. Historic work in 1989 on La Loutre identified several conductors in a 5km trend with the largest anomaly extending over 2km. Grades ranged between 1% and 10%. The Labelle property has historic work dating back to the 1950’s which identified near surface graphite mineralization in trenches within 5km trend.
Lac Des Iles West Property
- 4,700 hectares
- Borders the western boundary of Timcal’s Lac Des Iles graphite mine
- May host possible extension to Lac Des Iles
- Cost - $12.5k and 500,000 shares plus milestone of $1M or 1M shares at company discretion at production decision
- 2,500 hectares
- 53km east of Timcal
- Historical work in 1989 identified several parallel conductors up to 2km in length
- Overall strike length greater than 5km
- Grades 1% to 10% Cg
- Cost - $75k and 2M shares
- 680 hectares
- 67km east of Timcal
- Property covers a 5km long trend
- Exploration in 1950’s
- 80 meter long trench 3 to 5 meters deep and 2 to 3 meters wide
- Grades 8% to 15% and up to 30% locally
- Cost - $45k and 500,000 shares
When looking at these really cheap new entrants, it is hard to judge what project is better than the other without some up-to-date exploration. From early indications, GXY’s Sun project looks very interesting, NRT’s Lac du Nord looks like an early Lac Knife, ATT’s projects in Montpellier could be an emerging graphite camp, and Soldi Venture’s Cameron project has historic met results that indicate they have the right product for $6,000 per tonne pricing.
What is for certain is that the quality, high purity flake projects are getting eaten up and aside for a few projects tied up in negotiations, the pick of the litter is somewhere within this watch-list.
… In graphite, currently emphasis is on finding the right product with the right purity.
Some simple factors one might consider for graphite…
MATERIAL – ITS ALL ABOUT MATERIAL...
$6,000 per tonne for 99.9% jumbo flake!
Grade - low cost production per tonne of graphite produced potentially less than $1000 per tonne for a plus 5% operation. High grade also means a much smaller mill and a smaller capex project. Grade increases payback of a project and mines.
Purity – THIS IS THE MOST IMPORTANT FACTOR - high purity of 99.9% is imperative for Li-Ion batteries and the industry is racing to find a suitable replacement for synthetic graphite which currently sells for $7,000 to $20,000 per tonne.
Flake size – the larger flake is easier to work with and you can always crush it down to a smaller flake. Northern Graphite’s product and process together combine to use less than 50% of the smaller -100 mesh product to produce spherical graphite. What we do not know is how much of this efficient beneficiation is due to jumbo flake size and how much is credited to NGC’s technology and processes upgrading the material.
Recovery - this is much more important for a lower grading operation NGC needs higher recoveries while a 7% and above mine could get by on 80% recoveries
Ease of processing - some deposits like Bisset Creek and Green Giant are every easy to process and have a high purity meaning the need less intensive processes and less capital cost. EGZ claims all they need is $10M portable crusher to start producing a basic raw material to generate quick cash flow. This translates into low cost mining process which reduces costs at all points of the cash flow statement from capex investment to daily opex costs.
Open Pit Mining Qualities
Proximity to surface - greatly affects the strip ratio which is a major cost of mining simply b/c the closer to surface the deposit lies, less rock you have to move to mine it. Proximity to surface is one of the single biggest factors in determining the cost of a mine including an open pit mine’s strip ratio. Simply put, the further away from surface the deposit is, the more costly it is to mine it.
Thickness of zone – this can affect the strip ratio as well including how deep an open pit can go and be economically viable. A vertical zone that is at surface and is 100 meters wide will have a low strip ratio vs. a vertical zone that is 10 meters wide and be able to pit much deeper.
Shape of zone - how it lies in a conceptual open pit like flat lying vs dipping vertically. A shallow flat lying zone is preferable because you can scope it all in a pit while a steeply dipping zone will be a hard to pit.
Product First, Mining Qualities Second
When you are just starting out in an industry and looking for a niche product that caters to a certain industry and specifications such as flake size and purity; what is most important is finding a suitable product. This fundamental quality has been even more ingrained after the change in pricing adding high purity jumbo flake as a product at prices ranging from $4,500 to $6,000 per tonne. In an industry that is searching for the perfect product, thinner mining widths of 1 meter to 10 meters will not matter. In an industry where the top product used to sell for $2500 to $3,000, the new pricing category for jumbo flake at $6,000 per tonne is very material. It makes the mining variable much less a factor as long as you have the right stuff.... 99%-99.9% jumbo flake.
Having the right product makes a small 5Mt deposit as valuable as a 100Mt deposit. The last thing that people will emphasize is mining qualities. It is why a project like Bisset Creek, despite an apparent lack of grade will do very well compared to others with grade that don't have the product. In reality Bisset Creek is like a 4% deposit b/c of the pricing differences and FMS is like a 10% deposit. At this stage in the game, it’s all about finding the product and NGC has done that. If anyone else can do it like NGC, they are going to have a bright future and a high value mine on hand. They can do it all without proving up a 100Mt resource and apparent lack of size.
The graphite story has emerged as a top materials growth theme and the race is on to find the ideal deposits that lends to purity, flake size and grade. At $6,000 per tonne for the finest natural flake graphite the industry can find... graphite is now a very lucrative business. If you can find a company with all three qualities of grade, flake, and purity; you will have a company on a trajectory similar to Northern Graphite.
Companies that round out my graphite watchlist not mentioned in the above article are…
- UBR-V
- GCN-V
- RA-V
- GR-V
- WCU-V
- GMA-V
- CVN-V
- PNS-V
- LRA-V
- VLC-T
- KEX-V
Christopher Skidmore
Beat the Market Stock Picks
Disclosure: I own significant positions in ATT, FGR, and LMR and I reserve the right buy or sell my position at any time.
