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Graphite Market Set for Growth

Posted by AGORACOM-JC at 4:36 PM on Wednesday, December 12th, 2012

NOTE TO EDITORS: The Following Is a Research Alert Issued by Century Capital Research

NEW YORK, NY–( Dec 12, 2012) – Graphite, commonly known for its use in No 2 pencils, is quietly finding new applications that are poised to greatly expand its demand in the coming years. Its traditional uses in the steel industry are still rising, especially in China, but also in lithium ion batteries, for companies like Apple and Samsung, hybrid electric (HEV) and electric vehicles (EV) for Nissan and GM, as well as in some recently announced new technologies like bendable flat touch screens and graphene computer chips. Demand is rising and people are taking notice, even the European Union (EU) has put graphite on its “Critical Raw Mineral Materials” list.

According to a recent report by Industrial Minerals magazine, the global graphite market is experiencing a “limited availability” of material and that “the days of cheap abundant supply from China is over” as demand and prices continue to surge. As of 2009, a US Geological Survey outlines the US having zero production of graphite, with all sources of the material being imported, over 70% coming from China and Canada.

Recently, USA Graphite (OTCQB: USGT) announced it has acquired a 100% stake in the Blue Wing Mountain Graphite property. Initial prospecting and geological analysis on the claims confirmed the presence of flake graphite at surface.

This report is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. Information, opinions and analysis contained herein are based on sources deemed to be reliable and are subject to change without notice. A third party has hired and paid Century Capital Research one thousand two hundred and ninety five dollars for the publication and circulation of this news release. Accordingly, certain information included herein may be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. However, no representation, expressed or implied, is made as to the accuracy, completeness or correctness. In light of the above, we accept no liability for any losses arising from an investor’s reliance on or use of this report. We do not and have not had any ownership interest in said third party of any kind.

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Graphite still the one to watch – Chris Berry

Posted by AGORACOM-JC at 5:02 PM on Thursday, November 8th, 2012

Chris Berry is not only unconcerned with graphite’s price softness-he’s even more confident in his long-term “super cycle” thesis than he was previously. An interview with The Critical Metals Report.

Author: The Critical Metals Report
Posted: Wednesday , 07 Nov 2012

TORONTO (The Critical Metals Report) –

The Critical Metals Report: Chris, you have been watching the graphite space for a long time. Prices shot up at the end of 2011 to as much as $2,700/tonne, but have come down since. What is behind this volatility and where could prices go from here?

Chris Berry: We need to remember that graphite is an industrial mineral. As such, it is subject to the vagaries of global growth. We’ve seen a softening of GDP growth in many countries throughout the world, notably in China. This, more than anything, has pushed graphite prices down. While graphite prices are high by some historical measures, the recent decrease is a welcome sign and adds validity to our long-term super cycle thesis supporting higher commodity prices-though not indefinitely higher and not in a linear fashion.

I am reading a book called “The $10 Trillion Dollar Prize” that attempts to predict the size of the consumer market in China and India by 2020. The book states that a Chinese citizen born in 2009 will consume 38 times as many goods as his or her grandparents. In India, a child born in 2009 will consume 13 times as many goods as his or her grandparents. Though this is only a prediction, it is evidence of the long-term super cycle in that those people born today are more cognizant of life’s possibilities and will aspire to a higher quality of life-implying steady commodity demand. Graphite is used in roughly 180 different products and its ubiquity is an indication to me that more graphite of all types will be needed on world markets in the future. While graphite prices have fallen, they have not fallen as far or as fast as other commodities such as iron ore or coal.

We believe that the decrease in graphite prices has been overdone somewhat and has bottomed. While the fall in graphite pricing is no doubt due to an uncertain macroeconomic environment, we view this as temporary and still believe that graphite (flake graphite, in particular) is a tight market with room for a small number of new producers in coming years.

TCMR: What role does China play in the graphite market? Is the country’s dominance as pronounced as it is in the rare earth market?

CB: China is not as dominant in graphite as it is in rare earths. The main difference is that a downstream supply chain for graphite end products exists outside of China-this is not the case for rare earths. Nonetheless, governments throughout the world have labeled graphite as a critical material because China controls up to 80% of natural graphite production. China’s role as a global engine of growth, commodity demand and commodity supply can’t be understated. China’s consolidation of amorphous graphite mines (from 230 down to 20, according to Industrial Minerals) in the name of minimizing environmental impact will no doubt curtail amorphous supply, with the goal of ensuring domestic resources serve domestic needs first and international needs second.

TCMR: What if rumors of China’s growth curve taking a dive are correct? What will that mean for graphite prices?

CB: We are acutely aware that the Chinese growth engine is slowing (as measured by declining GDP) and are of the opinion that the looming supply consolidation within China outweighs any softening of demand in the near term.

It is important to remember that a commodity like graphite has multiple avenues of demand. This is one of the reasons we like it so much. With the forecast growth in next-generation technologies (batteries) underpinned by steady demand from current day uses (steel) and sweeping consolidation among the largest global producer of graphite, we would submit graphite is a sound investment over the long term.

TCMR: It looks like there is a lot of competition in the space. Your junior mining graphite index shows 69 companies managing 150 projects in 13 countries. How many can be profitable?

CB: It is much too early to tell how many can be profitable. Of those 69 companies, only six have NI 43-101- or JORC-compliant resource estimates. Of those six, only two have any sort of advanced study completed, such as a preliminary economic assessment, and only one has a bankable feasibility study completed. We would need to know much more about the size and composition of a company’s deposit and the potential economics before we undertake a valuation exercise and start making estimates of profitability.

A graphite company will only be profitable if it has agreements with end users to sell its product to. It’s important to remember that the graphite business is one that rests on long-term relationships where end users and graphite producers negotiate price based on a specific end product. It could take time for junior companies breaking into the graphite market to establish these relationships. I think this will be a challenging hurdle for any graphite junior exploration company to navigate-though not insurmountable.

With respect to the index, on an equal-weighted basis, its overall returns have increased by 49.8% year to date. Much of these gains have come from the “bubble” in graphite exploration interest earlier this year. The index is actually down by -7.59% over the last six months. The market cap-weighted returns don’t differ that much from the equal-weighted returns, and this tells us that the companies with the largest market capitalizations are responsible for much of the price movement in the index.

TCMR: Any advice for investors looking to get into the graphite market?

CB: Many people ask me if graphite is still the “one to watch,” or if it has had its day in the sun. My response is that graphite, due to its many unique properties, will remain the “one to watch” for some time. It’s true that there was a huge run up in graphite exploration company share prices earlier in the 2012 with a resulting collapse, much the same as we saw with rare earths and lithium shares. I think this clouded graphite’s true importance and significance in the workings of the global economy. Graphite’s strength is in its ubiquity in current-day and future uses. Despite the fact that global steel demand is stagnant, the battery business is exhibiting strong growth. There are also huge sums of money going into materials science research surrounding battery technology and graphene. A breakthrough here could unleash major changes in how we generate and store electricity or fortify infrastructure.

The next 12-18 months will be an exciting time to watch the graphite space. Several graphite junior mining companies will be releasing studies of their deposits or maiden resource estimates soon, which I think will aid in valuation on a relative basis. While the near-term outlook for many industrial minerals is somewhat uncertain, investors can profit over the longer term in graphite by finding those companies with the right blend of pertinent management experience, high-quality deposits (both grade and tonnage) and locations in reliable political jurisdictions.

TCMR: Thank you for sharing your insights, Chris.

CB: You are welcome.

Chris Berry, with a lifelong interest in geopolitics and the financial issues that emerge from these relationships, founded House Mountain Partners in 2010. The firm focuses on the evolving geopolitical relationship between emerging and developed economies, the commodity space and junior mining and resource stocks positioned to benefit from this phenomenon. Berry holds an MBA in finance with an international focus from Fordham University, and a bachelor’s degree in international studies from The Virginia Military Institute.


Beyond Pencils and Green Technology: The Best Graphite Stocks (NGC, SGH, GPH, CHGI, GTI & GRPH)

Posted by AGORACOM-JC at 9:53 AM on Tuesday, November 6th, 2012

Graphite is an increasingly important technology component with graphite mining stocks including Northern Graphite Corp (NGC), Standard Graphite Corp (SGH), Graphite One Resources (GPH), China Carbon Graphite Group (CHGI) and Graphite Corp (GRPH) plus GrafTech International (GTI).

Nov 6, 2012 1:33:42 AM PST

Most investors are probably unfamiliar with graphite, a popular choice for electrodes because of its electric conductivity, in part because most of the publicly traded graphite stocks like Northern Graphite Corp (CVE: NGC), Standard Graphite Corp (CVE: SGH) and Graphite One Resources (CVE: GPH) trade on Canadian exchanges but there are a options for US investors, including China Carbon Graphite Group (PINK: CHGI), GrafTech International Ltd (NYSE: GTI) and Graphite Corp (PINK: GRPH). So why should investors be interested in graphite and hence, graphite stocks?

What is Graphite?

First a bit of history: Back in in 1789, the material known as graphite was named “graphite,” a derivative from an ancient Greek word meaning “to draw/write,” because it was already being used in pencils. In fact, most pencil “lead” is actually ground up graphite. Today, graphite is mostly used for batteries, brake linings, expanded graphite, foundry facings, lubricants, refractories and steelmaking. However, the real and potentially “unlimited” (up to a certain point) growth for graphite comes from potential new uses in the form of green initiatives like electric cars, fuel cells, lithium ion batteries (Note: There is 10 times more graphite than lithium in lithium-ion batteries plus it takes 30-40 times more graphite to make these batteries thanks to losses during processing), nuclear energy, solar energy and semiconductors. Likewise, the rise of China, Brazil, India and other emerging markets is creating strong demand for traditional graphite uses e.g. steel making and the automotive industry.


In addition, its worth noting that China produces around 70% of the world’s graphite but production and export growth there is leveling off, costs are rising and quality is falling. Hence, new sources of graphite will need to be developed – meaning there are opportunities for North American based mining stocks.

Price Range for +80 mesh, 94-97%C graphite (US$/tonne)


Canada Listed Graphite Stocks

Among the many small Canadian graphite stocks, the following are worth mentioning briefly as they also trade on the OTC:

Northern Graphite Corp (CVE: NGC). Also trading on the OTCBB under the symbol “NGPHF,” Northern Graphite Corp’s principal asset is the Bissett Creek graphite project that is located 100km east of North Bay, Ontario and 15km from the Trans Canada highway. Northern Graphite Corp believes it will be in a position to begin construction of the mine sometime in early 2013 but those plans will be subject to the availability of financing. On Monday, Northern Graphite Corp rose 1.27% to C$0.80 (NGC has a 52 week trading range of C$0.74 to C$3.47 a share) for a market cap of C$37.50 million plus the stock is down 14.9% since the start of the year and down 30.4% since April 2011 according to Google Finance.


Standard Graphite Corp (CVE: SGH). Positioning itself as North America’s premier pure-play graphite exploration company that also trades on the OTC under the symbol “NGPHF,” Standard Graphite Corp controls a 100% interest in 12 prospective graphite properties within known graphite districts in both Quebec and Ontario. Standard Graphite Corp is currently undertaking an exploration plan and intends to soon commence construction on its Bissett Creek Mine, subject to financing. On Monday, Standard Graphite Corp closed at C$0.180 (SGH has a 52 week trading range of C$0.16 to C$1.07 a share) for a market cap of $3.99 million plus the stock is down 45.45% since last January.


Graphite One Resources (CVE: GPH). Also trading on the OTCQX under the symbol “GPHOF,” Graphite One Resources is a mineral exploration company focused on its Graphite Creek Property located on the Seward Peninsula of Alaska. According to Graphite One Resources, the property offers significant potential for the discovery and development of a large-flake, high-grade graphite mineralization exposed at surface – meaning an open pit mine can be used. Graphite One Resources plans to advance Graphite Creek to a NI 43-101 compliant resource in 2013. On Monday, Graphite One Resources rose 3.03% to C$0.170 (GPH has a trading range of C$0.06 to C$0.40 a share) for a market cap of C$14.59 million plus the stock is up 54.5% since the start of the year and down 62.2% over the past five years.


US Listed Graphite Stocks

The few pure US listed graphite stocks that investors should be aware of include the following:

China Carbon Graphite Group (PINK: CHGI). Founded in 1986 as a state-owned carbon and graphite manufacturer and restructured in 2002 as a private enterprise. China Carbon Graphite Group is one of China’s leading wholesale suppliers of fine grain and high purity graphite and it’s a top overall producer of carbon and graphite products. There is not too much written about China Carbon Graphite Group but for what its worth given it’s a Chinese company, the company does issue regular earnings reports with the last one noting the ramp up of its higher margin business. On Friday (the last day CHGI traded), China Carbon Graphite Group fell 9.8% to $0.460 (CHGI has a 52 week trading range of $0.32 to $1.26 a share) for a market cap of $11.15 million plus the stock is up 2.2% since the start of the year and down 22.5% over the past five years according to Yahoo! Finance.

Chart forChina Carbon Graphite Group, Inc. (CHGI)

GrafTech International (NYSE: GTI). A world leader in graphite material science with more than 125 years of experience in the carbon and graphite industry, GrafTech International products are used in a variety of applications in various industries, including metal production, electronics, chemicals, aerospace and transportation. The last time GrafTech International reported earnings, shares soared because they beat expectations although revenue and net income both fell. Likewise, GrafTech International’s sales for its core industrial-materials business fell 14% but the smaller engineered-solutions segment (e.g. consumer products) rose 41%. In addition, GrafTech International’s bottom line had surged 46% in the second quarter thanks to higher prices for its graphite electrodes and needle coke. On Monday, GrafTech International rose 0.38% to $10.63 (GTI has a 52 week trading range of $8.45 to $17.69 a share) for a market cap of $1.43 billion plus the stock is down 22.1% since the start of the year and down 39.7% over the past five years.

Graphite Corp (PINK: GRPH). An exploration stage company focused on the evaluation, acquisition and development of domestic graphite mining opportunities, Graphite Corp believes the best alternate source of flake graphite is located in Alabama along with Montana. Hence, Graphite Corp is an investor’s best bet for a pure play graphite stock whose source of graphite is safely located in the USA should there be an interruption with supplies of graphite from China. Moreover, Graphite Corp has completed a total of $750,000 worth of equity financings to fund the acquisitions of its properties in Alabama and Montana and to begin initial work programs while budgets and exploration plans are being developed with work to beginning this quarter. Hence, Graphite Corp is a graphite stock investors should be watching. On Monday, Graphite Corp fell 2.56% to $0.760 (GRPH has a 52 week trading range of $0.20 to $1.05 a share) for a market cap $18.01 million plus the stock is down about 5% since last October.

Chart forGraphite Corp. (GRPH)

The Bottom Line. Irrespective of the economy, graphite will only meaning investors at least need to keep an eye on graphite stocks like Northern Graphite Corp, Standard Graphite Corp, Graphite One Resources, China Carbon Graphite Group, GrafTech International and Graphite Corp.