Standard Graphite (SGH-TSX.V) is Super Charged
Guest Commentary–Metal Investment News–
Graphite is hot and getting hotter. Global demand is expected to double in the next 8 years catalyzed by a 20% a year growth rate in the lithium ion battery space which uses high carbon, “large flake” (+80 micron) graphite selling for $2,400 a tonne.
Rapid adoption of battery-driven technologies in emerging countries – cell phones, laptops, e-readers, hybrid cars – is fueling the demand side of the equation. Hybrid cars require 40 pounds of graphite.
There are no monster graphite mines. Economic deposits are rare and the ore tends to be constrained along zones that only run for a few kilometers.
Some commodity analysts have described the production landscape as a collection of “Mom and Pop” mines. A 40,000 tonne/year large flake graphite mine is considered large. It will take 25 new mines to service the projected demand coming in the next 8 years.
China produces around 73% of the world’s graphite. The Chinese manufacturing sector uses most of that. China’s 20% export and 17% VAT ensures very little graphite leaves China. Supply concerns outside of Asia are mounting. The European Union and USA have named graphite a supply critical mineral.
Standard Graphite (SGH-TSX.V) is well-positioned to ride this wave. SGU has a portfolio of 12 graphite projects in Ontario and Québec, some of which are adjacent to the former Black Donald graphite mine and Northern Graphite’s Bissett Creek project.
The company’s nine Quebec properties are centered on sedimentary belts with geological anomalies considered essential to host a large flake graphite deposit.
The 12 property acquisitions were masterminded by Chief Geologist, Antoine Fournier, who has 20 years’ experience in the exploration of high-tech metals and minerals. Most significantly Mr. Fournier was involved in the discovery of the Lac Knife graphite deposit in Quebec.
The shallow depths of the ore body shorten the time-line from discovery to production. The cost of the building a mine is modest. Milling is also a low cost affair as graphite is typically crushed, ground and floated.
Unlike copper, gold, silver, iron ore – there is no futures market or bulk contract for graphite. Each mine negotiates its own deals with end users. For this reason, a progressive graphite company needs marketing and sales expertise to position itself for future cash flow.
On April 19, 2012 Standard Graphite appointed Benoît Gascon as its new Senior Vice-President of Business Development. Mr. Gascon has 20 years’ experience in the graphite industry. He was President of Stratmin Graphite, which owned one of North America’s only producing graphite mines, “Lac des Iles”.
“Developing a graphite deposit requires very specific geological, operational and deal-making expertise,” states President and CEO Chris Bogart, “you cannot hire copper men or gold men, and expect to get good results. Our team has been assembled for the sole purpose of creating a profitable large flake graphite mine in Canada.”
“Our objective in 2012 is to narrow the 12 properties down to one Flagship property,” says Bogart, “If we were looking for gold we’d need $100 million, but graphite is inexpensive to explore. There are two reasons for this. One, graphite is extremely conductive and therefore responsive to EM surveys. Two, the deposits are typically close to surface so we don’t have to drill 3,000 meters deep.”
The Little Bryan Property in Ontario was originally thought to have graphite mineralisation along a 1.3 km east-west trend. The 2012 EM survey shows something bigger and potentially more significant.
Twelve projects within three highly prospective districts in Quebec & Ontario
All projects are in districts amenable to large flake, high purity graphite deposits
All projects have the geological characteristics amenable to a major graphite discovery
Airborne Electromagnetic – ~3,500 line km’s – Commenced
Ground EM Survey, Mapping, Sampling, Trenching
First Phase drill program on a minimum 5-6 prioritized targets
Standard Graphite is positioning itself as North America’s premier pure-play graphite exploration company. An aggressive 2012 exploration strategy will be executed by a veteran graphite geologic team.
According to a World Market Report, lithium-ion batteries for transportation will grow 700% in the next five years. Currently trading at .74 with 22.8 million shares outstanding and a market cap of $16 million, Standard Graphite is positioned to profit from this macro-trend.