Graphite Comps – Size Isn’t Everything
It is sometimes said that comparisons are odious but in the graphite space they go beyond that in being fraught because there are virtually no deposits that are directly comparable. In an industry that can have a confusing dialogue with investors at even the best of times the overlay of “flake sizes (and types)” on top of the basic geology has made graphite even more confusing than most. We have had a nagging feeling that while references are made to flake size in the technical NI43-101 (or equivalent) reports on deposits that this is NOT what the geologists or consultants are actually measuring and that they are focusing on the graphitic carbon content and that the companies are driving the designation of their “flake” as the mystery X factor in resource descriptions. Maybe we are wrong but we maintain a healthy dose of scepticism.
To Comp or Not To Comp – That is the Question
Certainly seeing companies in the same sector arrayed in a table can be educational. If a picture tells a thousand words then a table of comparatives can also be mind-changing. The eternal problem is whether one is looking at like for like (or apples to oranges).
I recently came upon this table of the flake distribution of a number of projects:
We would note on this that the comps don’t include the type of graphite held by the deposits of Zenyatta and Elcora (and the other Sri Lankan plays).
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Also we would note that these comps are not necessarily apples to apples as the grade cut-offs may be drastically different between the different projects and the companies may yet change these to reflect more up to date pricing and thus rejig totally their plans. Many of these plans were made during the “bigger is better” phase which some have pulled back from (Northern for example) while the rest may also be forced to follow suit.
Tesla & the Dangers of Association
It is reputed that Hermann Goering, of unfond memory, once made the comment “When I hear the word culture I reach for my revolver”. In fact he didn’t exactly say that, but I tend to know what he felt when I hear/read the word “Tesla” in a press release or a promotional piece of companies in the graphite or lithium space. If Tesla is the prop on which a company needs to support its mining thesis then one needs to wonder what is wrong with their deposit/project.
While cognizant that the word “Tesla” has a more stimulating effect upon those in the cheap seats of the mining investment universe, I am left with a nagging doubt that too many mining companies are hitching their wagons to the Tesla horse and if it ends up going to the glue factory then they will have lost their means of forward propulsion.
Many lessons were learnt in the Rare Earth space, but it seems they were mainly learnt by investors and NOT the companies because the graphite space is repeating some of the fundamental mistakes. Bamboozling the public with science only succeeds in making the company’s promotional task all that much harder when a blizzard of pseudo-science results in informational and comprehension whiteout. Who after all remembers the reams of paper and gallons of ink expended on Eudialyte?
Graphite processing and classification does not need to be rocket-science and we suspect some companies are eager to make investors think that there is more to the process than there actually is. The relatively straightforward processing of the mineral is evidenced by the fact that graphite has been mined and used for at least hundreds of years (e.g. the Yorkshire mine) and that the very basic operations in Sri Lanka have not needed to rely upon “disruptive technology” to maintain production and making profits for successive owners for over a hundred years.
At this point I would like to throw open the debate to wiser souls than I as to whether I am missing something here….
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>