Three Sharp Pencils in the Graphite Game

A Monday Morning Musing from Mickey the Mercenary Geologist

I always try to get in early on a new area or commodity play. If I’m not in early, then I will simply choose not to play. Obviously I miss some opportunities with this conservative philosophy but, as a contrarian, I refuse to follow the sheeple. 

Let’s look at the seven junior resource bubbles that have blown up and burst since 2008. Two attracted my speculative dollars: REEs and the pre-Fukushima uranium boom. I ignored the following: Saskatchewan coal, potash, lithium, Colombia, and the Yukon. 

It appears that graphite is next in line for a commodity boom. The market is driven by increasing demand from traditional applications, new technology uses, and China’s 75% control of supply, its depleting reserves, and efforts to consolidate operations and restrict exports to the industrialized world. These factors led to graphite prices going parabolic from 2010-2012. Despite 2012’s price fall as the world’s economy slowed, graphite is still selling at more than double its early 2007 price and has stabilized recently. In fact, I don’t think this play is over:                                                                                                                      

 

Chart Courtesy of Northern Graphite Corp. 

I was first introduced to the supply and demand fundamentals of graphite and a potentially looming shortage over two years ago by one of my dedicated subscribers in the Chicago area. Tom Hartel is a lay investor who quickly learned to do his own due diligence and has become a savvy speculator in the junior resource sector. 

So when Tom has an idea, I listen. In the fall of 2010, he asked me about the commodity and soon thereafter introduced me to an opportunity in what is now Northern Graphite Corp (NGC.V). Knowing little about graphite at the time, I researched the commodity and the company, and declined the offer. My rejection had little to do with the company’s share structure, its people, or its Bissett Creek, Ontario project. 

It was mainly because its predecessor had an OTCBB listing and the corporate presentation I received did not indicate a future listing on the Toronto Venture Exchange. Folks, I don’t do the bulletin board. In hindsight, I missed a great opportunity.

Also around that time, I came across another graphite play, Focus Graphite Inc’s (FMS.V) Lac Knife project in northern Quebec. I reviewed the company, met with the CEO, and ultimately passed on the opportunity because its main focus at the time was as a graphene R&D company. Again, this was another one missed; FMS stock went up over 1,000% from the time of my first evaluation to a spike five months later.

In early Q2 2011, these two companies remained the only Toronto-listed junior resource companies dedicated to graphite space.

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