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Graphite Digest — June 1, 2012

June 1, 2012

“This isn’t a Bubble—Not Yet”

Writing in the May 30 edition of Morning Notes, Chris Berry remains cautiously optimistic about graphite stocks. Now tracking 44 companies with over 90 graphite projects, Berry’s index displays an obvious fall in share prices. It’s not just investors who are getting skittish, he reports. The graphite market itself has fallen, as Simon Moores reported in the online daily Industrial Minerals last week. Berry offers an additional way of looking at demand, through purchasing managers indices (PMIs). “If graphite is to be considered an industrial mineral and PMIs are reasonable gauges of industrial demand, the picture isn’t terribly promising in the near term,” he writes. “As an example, the HSBC China Flash PMI (an estimate of the official PMI data) registered at a 48.7 in May, which indicated the seventh straight month of economic contraction in China. Similar falling data points are to be found in other parts of the world, including Asian countries and the Eurozone. Generally, a score below 50 denotes economic contraction.”

Longer-term projections, however, have Berry more optimistic. Last week’s announcement that Graphit Kropfmuhl AG will reopen a German graphite mine for domestic production suggests “The company sees a solid future for high-purity graphite demand—something we should all remember as our graphite shares bear the brunt of near-term global economic uncertainty. Economic activity (aka growth) will return, and when it does, those companies with sound business models, sustainability and supply chains will be positioned to create shareholder wealth,” Berry argues.

The founder of House Mountain Partners concludes, “While we have heard talk about graphite being a bubble, we disagree—for now… That said, it behooves investors to pick companies in this space carefully, paying particular attention to cost sensitivities and the composition, or “footprint” [for example, flake size distribution, metallurgical results and marketability of the final product ], of a given deposit, as this can substantially improve economics.”

“Demand won’t grow fast enough” for everyone

In a Critical Metals Report interview reprinted May 29 in the Gold Report, Asbury Graphite Mills CEO Stephen Riddle says Chinese cutbacks in 4Q 2009 caught the industry off guard. “We’d just come out of the financial crisis, when everybody’s business dropped off by about 35%.” His company operates seven North American facilities that obtain graphite from selected mines and process it for customers. Demand notwithstanding, Riddle claims there are enough graphite resources outside China to meet needs for 100 to 200 years. He cautions that “Demand won’t grow fast enough” for all would-be graphite miners to into production.

“The bigger the flake…”

When it comes to graphite exploration, Australians are second only to Canadians. One ASX-listed company is Castle Minerals, whose CEO Michael Ivey told the Sidney Morning Herald that purity and flake size are key elements of a graphite deposit. “The bigger the flake the better. Don’t ask me why this is the case,” he reportedly said.

Lomiko announces $800K Private Placements of $500K and $300K Flow-Through

Lomiko Metals Inc TSXV:LMR announced June 1 a $500,000 private placement of two million units at $0.10. Each unit will consist of one common share and one warrant exercisable for a year at $0.15. The company will seek an additional $300,000 by issuing 2.5 million flow-through units which will consist of one common share at $0.12 and one warrant exercisable for a year at $0.15. The shares will be subject to a four-month hold.

Proceeds will go to exploration of the company’s Quatre Milles Graphite Property in southwest Quebec, its Vines Lake Property in north BC and for general working capital. The company has previously stated plans to verify historic, non-43-101 high-grade results on Quatre Milles and release a flake-graphite resource estimate by December.

Read a feature story about Lomiko Metals.

Valterra options South Ontario Graphite Property, announces VP Appointment

Valterra Resource Corp TSXV:VQA announced June 1 an option to acquire the Bobcaygeon Graphite Property in south Ontario. Under the agreement, Valterra pays $55,000, issues $400,000 in shares and spends $1.25 million by December 15, 2016. The optioner retains the right to mine vermiculite and limestone on the property and also retains a 1.5% royalty. Valterra may buy the royalty in 0.5% increments at $500,000 per increment.

Recent bulk samples from historical trenching on the 55-square-kilometre property show two grab assays of 51.98% and 66.15% carbon. Contingent on geophysical surveys, the company proposes trenching, sampling and 500 to 1,000 metres of drilling. The property is approximately 1.5 hours’ drive north of Toronto and is close to transport, power and numerous services.

Valterra also announced the appointment of Courtney Shearer as Vice-President and the resignation of Robert Liverant as director. Shearer has served as President, CFO, Corporate Secretary and Director for several public exploration and mining companies since 2000.

Rare Earth reports Ontario Graphite Trench Assays, Particle Size and Mineralogical Results

Rare Earth Metals Inc TSXV:RA reported May 30 trench assays and mineralogy-particle size results from its Manitouwadge Graphite Property in northwest Ontario. Trench assays show

  • 2.96% carbon over 12 metres
  • 3.92% over 8 metres
  • 4.18% over 6.5 metres
  • 2.04% over 6 metres
  • 2.13% over 4 metres

A particle size analysis of one sample showed 42.9% of flake sizes to be +35 mesh and 69.4% to be +65 mesh. Preliminary mineralogical analysis showed about 40% of the graphite is liberated at 20 mesh. An EM survey on the 2,072-hectare property shows a conductive trend over four kilometres long.

Rock Tech options Quebec Graphite Property for $140K, 4M Shares, 3% NSR, $300K Exploration

Rock Tech Lithium Inc TSXV:RCK announced May 30 an option to acquire a graphite property in southwest Quebec. Under the agreement, the company pays UniMera Holding Public Ltd an initial $20,000, $60,000 and 1.8 million shares three days after TSXV acceptance, $60,000 and 1.1 million shares 12 months after TSXV acceptance and $60,000 and 1.1 million shares 18 months after TSXV acceptance. UniMera retains a 3% NSR. Rock Tech may buy up to two-thirds of the NSR for $1 million per 1% NSR. The company must spend $300,000 on exploration within 12 months of TSXV approval.

The 1,923-hectare unnamed property is prospective for large-flake, crystalline graphite, the company states. The property hosts three graphite occurrences, the McLaren, Kelly and Burke, and two past-producing graphite mines, the Mayo and Plumbago. The property lies 45 kilometres from Gatineau, Quebec.

New Destiny options three Quebec Graphite Properties for $85K, 1.2M Shares, 2% Royalty, $100K Exploration

New Destiny Mining Corp TSXV:NED announced May 29 an option to acquire 100% of the North Low, Calumet and St-Aimé graphite properties in southwest Quebec. Under the agreement, the company pays an initial $10,000, $50,000 and 500,000 shares on TSXV approval, $25,000 and 500,000 shares six months after the execution date and 200,000 shares 12 months after the execution date. The vendors retain a 2% royalty on each property, half of which New Destiny may buy for $1 million. The company must spend $100,000 on exploration within 12 months of TSXV acceptance.

The 8.4-square-kilometre North Low Property is approximately 50 kilometres from Ottawa. Calumet covers 4.81 square kilometres, located 100 kilometres east of North Low. St-Aimé is contiguous to Timcal Graphite & Carbon’s Lac-des-Îles Mine, one of North America’s two flake-graphite producers.

Fortune delists from Frankfurt

Fortune Graphite Inc announced May 29 that it had voluntarily delisted from the Frankfurt Stock Exchange effective May 25. The company had been trading under the symbol ZTWN. Frankfurt now requires all listed companies to generate revenue. As an exploration company, Fortune doesn’t generate revenue, the company explained. Fortune had earlier announced that it was seeking a joint venture partner for its Superior Group of graphite claims in BC. The company also holds gold and silver properties, with the goal of entering production.

By Greg Klein

Read previous Graphite Digests here

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