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Fluorspar for investors

October 23rd, 2012

A capacity crowd gets an essential perspective on this critical mineral

by Greg Klein

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A capacity crowd gets an essential perspective on this critical mineral

Over 200 people attended the Vancouver 2012 Fluorspar Pre-Conference Workshop aimed at investors.

(Update: On April 19, 2013, Prima Fluorspar Corp TSXV:PF began trading on the TSX Venture. Read more here.)

Since 2001 Industrial Minerals’ annual Fluorspar Conference has been touring the globe, bringing together producers and consumers of this widely used but apparently obscure commodity. What might distinguish this year’s Vancouver event, however, was the October 22 pre-conference workshop, which attracted over 200 potential investors. As the keynote speakers explained, fluorspar now tops the list of critical minerals and it’s irreplaceable in most of its uses. Shortages threaten unless new deposits are found and developed—and that, the audience heard, is exactly what some Canadian juniors are doing already.

Given the commodity’s low public profile, a quick Fluorspar 101 was presented by Simon Moores, a writer and Manager of Industrial Minerals Data for the authoritative journal Industrial Minerals. Miners report fluorspar (also known as fluorite) in percentages of calcium fluoride or CaF2. It can be processed into either of two grades. Metspar, or metallurgical grade, is widely used in steel making as well as ceramics and glass. About 60% of fluorspar production is acidspar, or acid grade, which starts at 97% CaF2 and is the most widely used, highly desired and expensive product, largely due to its use in hydrofluoric (HF) acid, one of the world’s most widespread industrial chemicals. “It’s the underlying and only feedstock raw material that feeds all these much, much higher-value products that some of the biggest industrial chemicals companies make,” says Moores. The list of applications goes on, but some of the most common include the coolants essential to refrigerators, freezers and air conditioners.

For most of its applications, fluorspar has no substitute. While North American chemical giants rank among the world’s consumers, neither Canada nor the U.S. currently mines fluorspar.

Simon Moores of Industrial Metals presented a Fluorspar 101 seminar to an October 22 Vancouver audience.

Simon Moores of Industrial Minerals presented a Fluorspar 101 seminar to an October 22 Vancouver audience.

Last year’s global production came to 6.3 million tonnes, with a drop projected for this year, Moores says. But as in other critical commodities, China looms large. “It produces 58%,” he says. “This has risen from 51% in 2006.” Although China’s not the biggest consumer of the high-value products, it’s the biggest end-user in the fluorspar production chain. “They’re decreasing fluorspar exports, they’ve also got resource taxes in place, so fluorspar is on their radar. Although it’s earlier days than graphite, ‘control’ is the underlying word for China’s approach.”

By factoring in the country risk of fluorspar producers, Moores points out, the EU assigns the mineral higher risk than graphite, lithium, cobalt, vanadium, molybdenum, tantalum, copper, zinc and titanium.

Although fluorspar prices have dropped a bit since January, “over 12 years it’s been price increase over price increase over price increase,” Moores says. “There was a 225% increase for acidspar between 2005 and 2012.”

Jon Hykawy, Head of Global Research, Clean Technologies and Materials Analyst at Byron Capital Markets offered some future projections. “We see very significant growth by 2017,” he says. “A large portion of that growth is in metallurgical applications, but more so in chemical applications. We see a very, very healthy growth in demand for acidspar, more than the Chinese can supply or other existing projects can supply through expansion.”

Hykawy sees 4% to 4.6% annual growth for basic uses such as catalysts, water fluoridation, glasses and ceramics, fluorine gas and steel manufacture. But the growth in fluorochemicals, he states, will be far more impressive.

“Chlorofluorocarbons [CFCs] were shown to be significant contributors to ozone depletion,” he explains. “It wasn’t the fluorine that was the problem, it was the chlorine.” CFCs were eventually replaced by hydrofluorocarbons [HFCs], a cause of global warming. “The current and best choice, and the chemical of the future, are HFOs, hydrofluoro-olefins—not a particularly more complex chemical, just different,” Hykawy explains. “CFCs are about 15% fluorine by weight, HFCs came in about 60% and HFOs about 67% fluorine by weight. So as you have a global economy that’s growing and increasingly using refrigerants, you also have an increasing proportion of fluorspar.”

As for fluoropolymers, “the one most of us knows is DuPont’s Teflon. It’s ubiquitous because it’s highly chemically and thermally stable. You can put it in frying pans, heat the bejeezus out of them and it doesn’t break down,” he says.

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Reuters urges Caution on Graphite

May 7th, 2012

Resource Clips - essential news on junior gold mining and junior silver miningAsking “Will graphite go the way of rare earth?”a May 6 Reuters story states that shares of companies involved in graphite “have soared, probably to unsustainable highs.” The report says graphite prices “rose last year in part on concerns that China, which produces some 70% of global supply, will choke off exports much as it did with the rare earths.”

But as Chris Berry noted at OnPage Media’s Graphite Express-Conference in Toronto on May 2, a pullback in graphite stocks began about a month ago, well before the “unsustainable highs” now reported by Reuters. “Phase One of this graphite boom is completed,” Berry said. “But the trends that put graphite on the map are still intact.” The co-author of Morning Notes and founder of House Mountain Partners states that even without lithium batteries and other next-generation uses, “and assuming global GDP growth of 5% over the next eight or nine years, you’re looking at about a 1.8-million- or 1.9-million-tonne market.”

Reuters quotes Asbury Carbons CEO Stephen Riddle as saying, “In a three-month period we had prices double, just that quickly.” The story states, however, that his company, which manufactures a range of products from graphite, “has had no trouble finding graphite supplies, and prices are even softening.”

Reuters suggests that projected demand for lithium-ion batteries has been overstated and that manufacturers prefer synthetic graphite to the natural flake product. The article acknowledges that “synthetic graphite can cost more than $20,000 a tonne, while unprocessed flake graphite costs $1,500 to $3,000 a tonne. Add in processing and coating, and the price is about $8,000 a tonne, meaning natural graphite represents major cost savings.”

Nevertheless, Jonathan Lee, a battery materials analyst with Byron Capital Markets, says a shift to the natural product “will take time, and I don’t think that it is imminent.”

Reuters concludes with a comparison to the rare-earths bubble, in which stocks rose and fell sharply when China slashed exports in 2010. “You could double your money on a company that has nothing. However, there’s no way to tell when a flavour of the day will become a flavour of yesterday,” says Louis James, a mining investment strategist at Casey Research.

The article noted that “Northern Graphite TSXV:NGC, Focus Metals TSXV:FMS and Energizer Resources Inc TSXV:EGZ are often mentioned by analysts as promising development-stage companies.”

The US Geological Survey pegged 2011 world graphite production at 1.1 million tonnes. That amount is expected to drop in 2012, according to Simon Moores, an authority on graphite and other strategic commodities who writes for Industrial Minerals. Moores has also pointed out that China produces about 80% of world supply, not 70% as reported by Reuters.

Moores, Berry, geologist Mickey Fulp and others have pointed out a number of contrasts between the graphite space and the circumstances leading to the rare-earths bubble. They include the fact that graphite has a wider range of both current and emerging uses; graphite’s 2011 world production was about 10 times that of rare earths; graphite’s exploration and mining is simpler, faster and cheaper; graphite’s metallurgy is much simpler; and graphite expertise exists outside China, as does a graphite supply chain.

While Berry remains bullish on graphite, he cautions investors that a project “shouldn’t be too slanted toward a given end use, say batteries. A balanced footprint is the best bet because it insulates a company from demand shocks. What you need to remember is with a graphite deposit it is not one size fits all. Mesh size and carbon content can vary. It’s great to be able to say we have a certain percentage that is perfect for the battery industry, based on flake and carbon content. But if that’s only 20% of a given deposit, you need to be thinking about what’s going to happen with the other 80%.”

Disclaimer: Focus Metals Inc is a client of OnPage Media and the principals of OnPage Media may hold shares in Focus Metals.

Graphite Digest

April 27th, 2012

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