Mason Graphite’s Strategic Plan addresses current demand, and positions for the future
Mason Graphite (TSXV: LLG | OTCQX: MGPHF) is a Canadian mining company focused on the development of its 100% owned Lac Guéret property, located in northeastern Quebec. Its Management Team consists of President/CEO Benoit Gascon, Executive Vice President/CFO Luc Veilleux, Executive Vice President of Process Development, Jean L’Heureux, and Simon Marcotte, Vice President of Corporate Development, and Nathalie Guillemette, Geologist.
On November 12, Mason Graphite began trading on the OTCQX International – the highest market tier on the over-the-counter market. This move, which should lead to increased visibility by U.S. investors, may be able to substantially broaden – on a global basis – Mason Graphite’s potential shareholder base.
The understanding of and uses for graphite have come a long way since it was named in 1789 by a German geologist who was working on an early theory about stratification of the earth’s crust. The term he used, “graphite”, is derived from the Ancient Greek meaning “to draw/write”. As InvestortIntel readers of numerous columns about graphite/graphene in general and followers of Mason Graphite in particular understand, nowadays it’s about a whole lot more than just pushing a pencil.
Graphite, which has the highest natural strength and stiffness of any material, is an excellent conductor of both heat and electricity. It is a critical component of lithium-ion (e.g. cellphones/tablets) and alkaline batteries, not to mention for steel production and its use throughout the automobile production process.
When speaking of synthetic graphite (produced from a carbon precursor) the yield is fine powder rather than flake. At up to four times the cost compared to flake, synthetic becomes prohibitive for many uses. A number of important applications require graphite flake rather than powder. As a measure of how significant graphite is deemed to be on the international scene, the European Union has designated graphite as one of 14 critical raw materials.
Current research shows that Mason Graphite’s Lac Guéret property consists of flake graphite only (29% large flake graphite), with a recovery potential in excess of 96%. It has a strip ratio of < 1:1, at an estimated a cost of $390/tonne of finished product, based upon an estimated selling price of $1,500/tonne.
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In a revealing moment during a video interview Jim Rogers (co-founder of the Quantum Fund with George Soros) asked Benoît about the possibility of an obstacle to Mason Graphite’s plans for bringing their mine on stream and producing by 2015. Jim commented, “I’m trying to figure what could go wrong here. The price of graphite could collapse, I guess.”
Benoît answered, “I’ve been able to make the Stratmin Mine in Quebec profitable at $600/tonne back in the ‘90’s (with graphite currently @ $1,500/tonne) when we had severe competition from the Chinese.”
He went on to explain that at the time, the Chinese were not using graphite, and were instead producing and exporting most of it. After 2000, things changed, since the Chinese decided, rather than continue exporting their graphite, to use it domestically in a wide range of value-added applications.
Implying a trifecta of convergent positive factors in the evolving supply-demand equation, Benoît continued, “The Chinese started to use more graphite internally – reducing supplies on the export side, there has been no addition to natural graphite mining outside of China over the last 20 years, and demand is increasing.”
Benoît explained in terms that all of us can understand, how the graphite flake is like a deck of cards. “One layer would be one card. And they are linked together – all the cards. If you peel off one layer of graphite – that’s graphene, so it’s like a card.”
There has been a lot of attention focused on the potential for graphene, but Benoit cautions investors not to become excited too soon, because from the time of awarding the Nobel Prize, to commercial reality “you have more than just a few years”.
Mason Graphite is being positioned to address existing market demand. Looking out a ways, Benoit remarks that “If and when graphene demand comes in interesting volume, it will be all upside for our shareholders.”
An important marker for a resource sector development company is how much “skin in the game” its individuals have invested. This factor alone can tell you volumes about how management views the upside for what they are doing. In the case of Mason Graphite, Management and Insiders hold roughly 40% of the shares. Institutions hold another 40%, and the remaining 20% are allocated to the public float.
Part of what constitutes being a visionary of course, is being “out there”. But for a CEO with responsibility for successfully guiding an operation to production in a sustainable and profitable manner, it’s probably safer to keep most of one’s attention on what makes sense, just beyond the here and now – say into the 2015 time-frame. If Mason Graphite reaches a production decision and can fulfill its strategic plans to be up and running by then, it’s likely to be in a position, both operationally and financially, to address, at that time, whatever the conversation about what graphite and graphene is telling them.
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