Graphite market up 14% in 2014 — and 2015 promises to be even better?
The graphite market was very competitive in 2014 and the sector showed overall gains of +14.5% for the year. The Graphite space features in most respects companies that are operating in politically stable locations with access to acceptable to excellent infrastructure. Most of the graphite companies covered by InvestorIntel, moreover, have shown wise management, while just about every deposit seems able to quench the need for a stable and high quality graphite supply, capable of being used in technology ranging from Li-Ion battery anodes to graphene. Overall, the fundamentals of graphite demand have not changed and none of the cited companies published any significant news to warrant a shift in market performance, whether up or down. Indeed, many companies’ share prices suffered largely because of falling industrial metal prices at the London Metal Exchange, reflecting weaker economic signals from China. Meanwhile, more jobs were created in the US, which strengthened the US Dollar, hurting commodities.
Zenyatta Ventures Ltd. (TSXV: ZEN | OTCQX: ZENYF) continued to perform strongly, closing the year at CAD$ 1.5/share on the TSX and USD$ 1.21/share on the OTC. Zenyatta can boast a graphite deposit that is entirely different than the vast majority of its competitors, which have flake graphite. Its geological formation, through igneous hydrothermal processes, accounts for a superior purity and crystallinity. The Albany project, located in northern Ontario, is the largest & only, “high purity’ hydrothermal graphite deposit being developed in the world. The important and simple fact that investors should consider is that the Albany deposit has been proven to present a very high carbon graphitic content, which means the graphite is pure enough to compete with synthetic varieties. Zenyatta’s target customers are precisely the ones, who, until recently, had no alternative to synthetic graphite. There are incentives to switch from oil based synthetic graphite to naturally occurring graphite of Zenyatta’s caliber. The processing has delivered a nice high-grade, pure product with minimal cost and minimal detrimental environmental effects. The synthetic graphite market accounts for a potential USD$ 13 billion-dollar market.
Focus Graphite Inc. (TSXV: FMS | OTCQX: FCSMF) was down for the year, but it started to recover in December, rising 19.51% in Toronto and 21.16% on the OTC thanks to Dundee Securities having started coverage, giving it a ‘buy’ recommendation and the fact that, as investors start to realize the huge potential of lithium-ion batteries. Focus announced that it has successfully produced, and processed for maximum performance, spherical graphite, which is ideal for the manufacturing of anodes. Focus also announced significant widths of graphitic mineralization in a new zone at its wholly owned Lac Tétépisca Project southwest of the Manicouagan reservoir in Québec, comparing favourably with the mineral derived at the Lac Knife graphite deposit this year. Focus is developing one of the most important graphite projects in North America at Lac Knife, Quebec. Focus has already signed a 10-year strategic agreement for up to 40,000 tons per year (400,000 ton total) of graphite concentrate with a Chinese-based industrial consortium located in the port city of Dalian, Lianing Province, China; one of the China’s most important centers for trade and industry, and home to many of high-tech companies. Grafoid Inc. is Focus Graphite’s graphene research and development partner, which has been cooperating with a number of companies worldwide to achieve a commercially viable graphene material.
Alabama Graphite Corp. (‘Alabama’, TSXV: ALP | OTCQB: ABGPF) performed very well in 2014 and the Company has a compelling story that make it a leading contender in the graphite sector. Alabama gained 142.86% on the TSX and 91.37% on the OTC for the year. Alabama Graphite has completed ground geophysical surveys at its prior producing Bama Mine Graphite Project, starting exploration in additional zones at the Coosa Project in Alabama. The two projects encompass over 43,000 acres and are located in an area with significant historical production of crystalline flake graphite. The Company has the largest NI 43-101 indicated flake graphite resource in the United States based on drilling 0.18 square miles (0.3% of the total acreage). The Alabama deposits are unique in that a significant portion of the graphite-bearing material is oxidized and has been broken down into an extremely soft rock, which suggests that operation al costs from mining to grinding should be lower than average.
Deveron Resources Ltd. (‘Deveron’, TSXV: DVR), a diversified mineral exploration company, was another of the top market performers in 2014, gaining 42.86%. Deveron announced a new zinc and graphite discovery near Thunder Bay, Ontario through its association with Greencastle Resources (TSXV: VGN). Deveron will earn a 60% interest in the property over a three year period while retaining an option to acquire 100% interest by incurring all expenditures required to produce a bankable feasibility study, subject to Greencastle retaining a 3% net smelter return royalty. Deveron has already started to re-evaluate various conductive features identified during Greencastle’s 2012 campaign for further exploration, given strong evidence of a substantial base metal resource, including a distal copper zone, and it intends to drill test some nearby conductive anomalies and targets. The new exploration phase will evaluate both the base metal and the graphite potential at the property, given evidence of high grade zinc, copper and graphite. Zinc has been facing a production deficit, which is expected to last for the next few years as many mines are old and about to be depleted or forced to shut down.
Elcora Resources Corp., (TSXV: ERA) aims to produce premium graphite and graphene through a vertically integrated business strategy. Elcora’s Sri Lankan graphite comes out of the ground already possessing purity levels of about 93%, presenting an orderly crystal like structure. This makes it easier to process, achieving very high purity levels. Great Lakes Graphite (TSXV: GLK) acquired its Lochaber property in southeastern Quebec last March. It has a historical record from previous explorers but Great Lakes has moved very fast to determine the type of resource while also talking to potential customers in the area to establish a ready market base for their flake graphite. Northern Graphite Corporation (TSXV: NGC | OTCQX: NGPHF) is developing the Bissett Creek deposit, which is unusual in that its production will consist primarily of large-flake (+80 mesh), high-purity graphite. Recent metallurgical test results have shown that 50% of production will be even larger, +48 mesh jumbo flake, which will result in premium pricing. Graphite One (TSXV: GPH | OTCQX: GPHOF) completed another drill campaign at its Graphite Creek deposit, which is claimed to be the largest flake graphite deposit in North America; certainly, it is one of the most significant large flake deposits in the United States. Having completed the drilling campaign, Graphite One can now proceed toward completing the preliminary economic assessment. Triton Minerals Limited (ASX: TON), meanwhile, performed remarkably, gaining 193.65% as it presented its maiden JORC compliant resource estimate for the Nicanda Hill graphite deposit at the Balama North project in Mozambique. Triton claims it now has the single largest known graphite deposit in the world as well as one of the largest vanadium deposits.
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Apart from the graphite mining companies themselves, one of the key protagonists for 2014 was Tesla Motors. The Californian manufacturer of electric cars shocked the market last February, when it announced that it would build a ‘giga-factory’ to produce lithium-ion batteries with a planned investment of USD$ 5 billion. This was perhaps the single most important graphite news of the decade, given that Tesla’s battery needs will greatly increase demand for natural graphite. Tesla has announced that the Gigafactory would be built in Nevada and that the project would be ready a year ahead of schedule, which will put pressure on graphite miners to reach production stage in 2015 or shortly thereafter: the race is on. Others followed Tesla’s tracks, announcing their own battery production projects, including LG Chem and Foxconn Technology. Both will build their factories in China – just as the availability of Chinese graphite could start to decline due to increasing mining restrictions. Indeed, in 2015, both graphite market leaders and ‘followers’ will have cause to celebrate because there are growing concerns that current Chinese graphite supply is unable to meet demand in the near future.
At the end of 2013, China was forced to shut down production of graphite in Pingdu for environmental reasons. And then there is the issue of purity. Therefore, if 2014 was not a champagne popping year for graphite prices, expectations for 2015 are very optimistic because, even if the refractory market (used in steel production) could continue to be slow, the battery market could grow in a much more sustained manner.