Graphite & Graphene Week-in-Review: Mason Graphite (+16.67%), Zenyatta (+6.28%) & Nouveau Monde (+4.76%)
Graphite & Graphene Week-in-Review (for the week ending December 13, 2013): Unless your name is Mason Graphite, it was a very tough week for graphite companies. The sector was down overall, with the InvestorIntel Graphite & Graphene members’ average falling -1.97% for the week. Of all the sectors, I firmly believe that graphite is the most promising. Irrefutably the demand is there (as is the case with many other commodities in various resource sectors); however, the major difference between graphite and other commodities is the comparatively low associated CAPEX costs. With a solid project and robust economics, a graphite company can actually get funded and advance into production. It’s a different story when CAPEX costs wildly surpass $1 billion — regardless of the commodity, regardless of demand, regardless of strong economics. Why? In a word: funding. An almost impossible-to-fund CAPEX renders an otherwise rock-solid project as nothing more than a phenomenal story with an impressive (and expensive) Feasibility Study to accompany it. Graphite is a completely different story and the low capital expenditures associated with graphite plays are why. There is little doubt that a select few of these graphite projects — flake graphite projects in particular — will actually go into production.
Mason Graphite Inc. (TSXV: LLG | OTCQX: MGPHF) decidedly took top honors for the week, with shares increasing +16.67% and +16.09% on the Canadian and American exchanges respectively. If that wasn’t impressive enough, on December 11th, Mason jumped +29.17% for the day (reaching CAD$0.62 on the Canadian exchange). Interestingly, Mason did not release any news last week. The company’s last news release was the major December 5th announcement in which Mason reported a 658% increase in measured and indicated mineral resources to 50 million tonnes, including 6.7 million tonnes grading 32.4% graphitic carbon (Cg). Mason is rapidly advancing its flagship large flake Lac Guéret Graphite Project in northeastern Québec and expects to complete its Feasibility Study by mid next year. Led by President and CEO Benoît Gascon and his highly experienced team, Mason is on very solid ground heading into 2014 and looks forward to achieving additional key milestones.
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Shares in Zenyatta Ventures Ltd. (TSXV: ZEN | OTCQX: ZENYF) were up +6.28% on the American exchange and +6.06% on the Canadian exchange last week on no new announcements. On December 2nd, Zenyatta announced the release of its long-awaited (and highly anticipated) maiden NI 43-101-compliant resource estimate for its Albany Graphite Project (a unique hydrothermal volcanic graphite deposit; not a conventional flake graphite deposit) in northeastern Ontario. Indicated Mineral Resources delineated total 25.1 million tonnes, at an average grade of 3.89% graphitic carbon (Cg), containing 977,000 tonnes of Cg. In addition, Inferred Mineral Resources delineated to date are estimated to total 20.1 million tonnes at an average grade of 2.20% Cg.
Nouveau Monde Mining Enterprises Inc. (TSXV: NOU) gained +4.76% for the week on no announcements. On December 5th, Nouveau Monde announcement that the company had completed its 2013 Fall Drilling Program on two areas of its Matawinie Graphite Property — and that Nouveau Monde intends to complete a non-brokered offering of $2 million in common shares. Nouveau Monde’s flagship Matawinie Graphite Property, which it acquired in February of this year, is located in the Matawinie region, north of St-Michel-des-Saints, Quebec (approximately 85 miles north of Montreal). This region of Quebec receives a lot of attention in the graphite world, as it is home to the only producing graphite mine in North America (Timcal’s Lac-des-Îles mine), as well as premier advanced-stage, high-grade, natural flake graphite explorers Focus Graphite Inc.’s Lac Knife graphite project and Mason Graphite Inc.’s Lac Guéret graphite project.
On December 12th, Flinders Resources Ltd. (TSXV: FDR) and Tasman Metals Ltd. (TSXV: TSM | NYSE MKT: TAS) announcement that the two critical-material companies (based in Sweden) have begun what they describe as preliminary negotiations for a merger. Flinders is developing the Woxna flake graphite deposit in central Sweden where initial production is scheduled for the third quarter in 2014. Woxna is expected to produce flake graphite at the rate of 10,000 tonnes per year. The mine operated between 1996 and 2001, when it was forced into care and maintenance by falling graphite prices. Woxna is fully-permitted and will require limited capital to get back into production — and be able to supply Europe’s lithium-ion battery makers. Tasman brings to the table the Norra Kärr project in southern Sweden, one of the world’s largest known heavy rare earth deposits, and is now also looking at the recently acquired Yxsjöberg tungsten project.
I promised myself I wouldn’t go on a rant here, but after looking at the current share price, I cannot help myself. While the traditional format of the InvestorIntel Week-in-Review is to highlight members whose share price performed well in the previous week, there are exceptions to every rule. With that in mind, I’d like to touch upon Focus Graphite Inc. (TSXV: FMS | OTCQX: FCSMF). Aggressively developing Lac Knife, one of the most advanced high-grade large flake graphite projects in North America, Focus’ share price experienced what I deemed to be a baseless decline last week. While share-price movements in the junior resource market can be seemingly illogical (for example, a share price in a particular company holds surprisingly steady for a protracted period of time; however, when said company has a positive or even ‘robust’ news release, the share price immediately trends downward), especially now, some just are beyond logic or comprehension. The market basically does the opposite of what it should do — at least in the short term. I’ve thoroughly investigated numerous major graphite projects in North America (especially in Canada). And I’ve spoken at great length to many of the top independent experts and consultants in the industry. In my opinion, investors should attempt to appreciate two aspects of any graphite exploration company. The first is project fundamentals (in the simplest of terms, corporate strategy, world-class leadership/talent and the strength/viability of the deposit), followed closely by project economics (will this project be one of the lowest-cost producers and exactly what end-user applications are being targeted?). If one truly understands and appreciates the (admittedly exceedingly complex) dynamics of the ‘critical’ flake graphite market (including, but not limited to the China paradigm and the fact that 20% of Chinese flake graphite production is currently on hold, present and future forecasted Lithium-ion battery demand, what ‘grade’ really means, accessibility, metallurgy/processing/purity and what the costs are to achieve technology-grade graphite, geographic location, political stability/support, infrastructure, limited North American production capability, etc.) one would readily be able to decipher the graphite projects with merit… and those projects with, shall we say, significantly less merit. Focus Graphite’s Lac Knife deposit is — without a doubt — one of the most promising high-grade flake graphite projects in the world. I assume the market will eventually realize this fact.
Here are your numbers for week:
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