Gold futures rose to a seven-week high as the Federal Reserve’s pledge to keep U.S. borrowing costs low drove the dollar down, boosting demand for precious metals as alternative assets. Silver jumped to a two-month high.
The greenback fell to a six-week low against a basket of currencies. Yesterday, the Fed said that its benchmark interest rate will stay low until at least late 2014, and gold surged 2.1 percent, the most in three weeks.
The central bank’s statement “was very bullish for gold,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The weakness in the dollar is also helping gold.”
Gold futures for April delivery gained 1.7 percent to $1,731.50 an ounce at 10:15 a.m. on the Comex in New York. Earlier, the metal reached $1,734.50, the highest for a most- active contract since Dec. 8.
The price may “test” $1,800 next week, said Ong Yi Ling, an investment analyst at Phillip Futures Pte in Singapore.
Silver futures for March delivery climbed 1.5 percent to $33.62 an ounce on the Comex. Earlier, the metal reached $33.79, the highest since Nov. 17.
See article here:
http://www.bloomberg.com/news/2012-01-26/gold-rises-to-7-week-high-as-dollar-alternative.html
Thursday, January 26, 2012
Tuesday, January 24, 2012
India and Iran Trade Gold for Oil!
It begins!
Very interesting development. There is apparently a deal that has happened where two banks have made an agreement to use gold instead of dollars to trade in oil. The banks reportedly involved in this deal are India’s state owned UCO Bank and Turkey’s state owned Halkbank.
This is another sign that we are heading to a Gold Standard.
You can see the full article here:
http://www.forexcrunch.com/gold-for-oil-india-and-iran-ditch-dollar-report/
Very interesting development. There is apparently a deal that has happened where two banks have made an agreement to use gold instead of dollars to trade in oil. The banks reportedly involved in this deal are India’s state owned UCO Bank and Turkey’s state owned Halkbank.
This is another sign that we are heading to a Gold Standard.
You can see the full article here:
http://www.forexcrunch.com/gold-for-oil-india-and-iran-ditch-dollar-report/
Wednesday, January 18, 2012
Top 20 Mining Picks - Caesars Report
Caesarsreport has released its Top 20 Mining picks for 2012, looks like a few winners in there. I am quite bullish on #13, Gold Bullion Development (GBB.V) and have picked up 200,000 shares. we'll see how she does.
Caesarsreport is a highly respected information and research provider specializing in junior mining companies.
You can see their website here http://www.caesarsreport.com/
You can link to the free report here:
http://www.caesarsreport.com/freereports/CaesarsReport_MiningTop25_2012.pdf
Caesarsreport is a highly respected information and research provider specializing in junior mining companies.
You can see their website here http://www.caesarsreport.com/
You can link to the free report here:
http://www.caesarsreport.com/freereports/CaesarsReport_MiningTop25_2012.pdf
Friday, January 13, 2012
Gold Today
As of noon eastern time today, Gold is down 1% on profit taking to $1637/oz. A small pullback today is not really surprising after its biggest 2 week rise in over 8 weeks.
Coupled with the rise in the dollar amid downgrade talk of euro zone countries (the Euro is at a 16 month low below $1.27) it is a very modest pullback. We'll see what next week brings.
Coupled with the rise in the dollar amid downgrade talk of euro zone countries (the Euro is at a 16 month low below $1.27) it is a very modest pullback. We'll see what next week brings.
Is this the Next Gold Buying Opportunity?
Interesting article from Thomas Paterson.
There have been 3 great gold buying opportunities in the past 3 years… is/was that the 4th?
Read it here:
http://www.goldmadesimplenews.com/gold/there-have-been-3-great-gold-buying-opportunities-in-the-past-3-years-iswas-that-the-4th-5959/
There have been 3 great gold buying opportunities in the past 3 years… is/was that the 4th?
Read it here:
http://www.goldmadesimplenews.com/gold/there-have-been-3-great-gold-buying-opportunities-in-the-past-3-years-iswas-that-the-4th-5959/
Demand For Gold Likely to Rise in China in 2012
...Chinese wealth, in short, is going to gold, and coupled with households' fear of inflation, this new debate over actively devaluing the currency means Gold Investment demand is only likely to rise again....
See the full article here
http://goldnews.bullionvault.com/china_gold_011220111
See the full article here
http://goldnews.bullionvault.com/china_gold_011220111
The Financial System is a Farce
Interesting read from Sprott Management. The thing to take away is simply keep, and add to, your gold, silver and precious metals. You'll need em!
As the article says "We will maintain our exposure to precious metals equities and bullion"
You can read the full article here:
http://www.sprott.com/Docs/MarketsataGlance/2012/January-2012.pdf
As the article says "We will maintain our exposure to precious metals equities and bullion"
You can read the full article here:
http://www.sprott.com/Docs/MarketsataGlance/2012/January-2012.pdf
Thursday, January 12, 2012
Nicaragua goes back to gold
Record prices for gold have led to an influx of foreign investors and the reactivation of Nicaragua’s long-dormant mining industry. Annual gold production has more than doubled in just the past three years. Gold is now the country’s No. 3 export and has helped Nicaragua post the highest economic growth rate in Central America.
You can see the full article here:
http://www.globalpost.com/dispatch/news/regions/americas/120104/nicaragua-gold-mining-boom-is-back
You can see the full article here:
http://www.globalpost.com/dispatch/news/regions/americas/120104/nicaragua-gold-mining-boom-is-back
Graphite Set to go Critical in 2012
Full article here:
http://www.beatthemarketstockpicks.com/2012/01/graphite-set-to-go-critical-in-2012.html
I have a large position in Focus Metals (FMS.V) and a smaller one in Northern Graphite (NGC.V) - Both are very likely to be big players in the coming year or 2 in the Graphite/Graphene market.
Graphite… Set to go critical in 2012
Graphite is set to go critical in 2012. It is listed as being a critical metal by the EU because the commodity is vital in the greenspace revolution including a major component to electric cars. The Chevy Volt uses 30kg of graphite while Tesla’s Roadster requires over a 100kg of graphite to make. Graphite is the main component in Lithium Ion batteries and can require more than 15 times more graphite than they do lithium. This distant cousin of diamonds is set to go through the roof as affordable mainstream electric cars are now on the market with what is clearly the preferred choice for the battery of the future, at least the next 10 years anyway. Graphite’s qualities of being lightweight and a great conductor of electricity make it ideal for automobiles where shaving off pounds is important for the performance and efficiency of the vehicle. Tesla’s Model S leads the competition with a range of almost 500km per charge and a 3 – 5 hour charge time. With these type of stats and a price range that starts to makes sense for early adopters (Prius type customers), electric vehicles are about to make major inroads into the retail marketplace.
Demand for Graphite Could Double by 2020… Mines Needed!!!
Lithium Ion battery demand could add a million tonnes of demand to the market over the next 8 - 10 years. A majority of this demand is from the growing electric vehicle market is where a major portion of the incremental demand for graphite is seen to come from. Without incremental demand the industry is still expected to see strong growth. It is already a robust 1Mt per year industry and is expected to grow to 1.5Mt by 2020. Graphite has a strong industrial component and naturally tracks closely the demand of iron ore which also has strong demand projections over the next 15 years. With a minimal 500,000 tonne to 1.5Mt of demand to potentially fill over the next 10 or 15 years in all ranges of quality of graphite, there are several opportunities in the industry to build graphite mines in a sector that is slowly being starved for supply.
Estimates for the amount of mines needed to supply this growing market vary greatly depending on several factors including scalability of current projects, incremental demand etc… but graphite deposits tend to be smaller in scale therefore production is limited meaning investment will be needed in several new mines. Most graphite mines will be hard pressed to produce more than 50,000 tonnes of graphite a year. Northern Graphite’s operation at Bisset Creek 2% Cg slated for production in 2013 will produce less than 20,000 tonnes per year and is scalable to around 35,000 to 40,000 tonnes. You can do the math but with most companies producing between 10,000 tonnes to 40,000 tonnes per year, there is a big need for investment in mine development in this sector.
Don’t believe graphite is going critical? Just look at what the Chinese are doing, they control at least 70% of the supply of the material and have recently moved to impose a 20% export duty and a 17% value added tax on the vital material that is essential for powering a green future. The same developments that happened in the rare earth space in late 2009 and early 2010 are now happening in the graphite sector. When it became apparent that Li Ion battery technology was winning out, prices in the sector have shot up over the past year with premium large flake graphite going for $3000 per tonne with industry analysts expecting prices to rise further in 2012 until production outside of China can come online which will start mid-2013. China is doing everything they can to secure enough supply of this metal to meet their own electrification needs as China aims to be a world leader in electric vehicle market. Recently China formed a partnership with GM to collaborate on an electric vehicle that will be mass produced in China. One major reason that may have swayed GM in collaborating with Chinese authorities other than the lucrative Chinese market is that the Chinese will assure GM of security of supply of critical materials they need to build second generation Volts. If electric automobiles are adopted at even moderate rates, it will be tough for miners to ever keep up with demand in this industry. One key driver behind early adoption rates is peak oil theory and prices of fossil fuels are expected to steadily rise over this decade as peak oil nears.
There are many conditions that are coming together to create the perfect storm in the sector that could ignite a multi-year rally in these public companies exploring and developing graphite projects.
The Perfect Storm?
· Strong demand
o Steady industrial growth
o Strong incremental demand from green technologies
· Restricted Supply
o Chinese control 70% of the market
§ Declining Chinese quality and increasing mining costs
§ Chinese 20% Export Tax
§ 17% Value Added Tax
o Declining western nation graphite production
Discovery to Mine… Better Than Average Odds
There is no other sector that currently offers a better chance of investing from discovery to mine. The graphite projects being vended right now are the most prospective of the known graphite deposits in Canada. The Canadian Shield is the best place to explore for these economical deposits anywhere in the world and with an established mining investment community behind them, have the best chance of being advanced to production. Currently there are two graphite miens in production. The Eagle Graphite Mine operated by Eagle Graphite in British Columbia which commenced operations in 2007 and Lac des Iles operated by Timcal in Quebec which has been in production since 1989. The Deep Bay West Mine, the Kearny Mine and Bisset Creek are the 3 projects being fast-tracked to production. One thing to note is that opening up a graphite mine is not capital intensive and 4 of the 5 companies here with projects either in production or slated for near term production are private companies. The capex for these projects is cheap when considering 1,000 to 3000tpd mill and the shallow open pit high grade nature of most of these projects where milled ore is at least double operating costs and much more when considering a project with 10% to 15% grades translating into high IRR projects. This is the one sector where you can be from discovery to a production decision with less than $5M investment.
The Public Sector Leaders
In June there were only two public companies in this sector, Northern Graphite NGC-V $0.85/$32M (low grade open pit 2% Bisset Creek) and Focus Metals FMS-V $0.82/$69M (high grade 15% Lac Knife project). Both projects have their merit, although I always say grade is king in mining.. especially when the deposits have similar parameters. Scalability and economies of scale offer the second best advantage in mining and can overcome a lower grade if the deposit is big enough, as may be the case with Bisset Creek although it is not price sensitive to Graphite and a 30% decrease in the price of graphite would extremely affect Northern Graphite's profitability. If you can find a deposit that has a combination of large tonnage and higher grade like 4% - 8% then you might have something with potential economics that “Beat the Market”. Fundamentals you want to see a great mining project off are its ability to be a low cost producer, its ability to be scaled up to a 5,000 - 7,500 tpd and the projects ability to operate for 20 - 30 years. These are the two industry leaders with the 2 styles that are economic at current prices. Graphite companies will be comparing their results to these companies depending on which type of deposit they have.
Rules of thumb to follow in the graphite industry...
* Minimum 2% Cg grade
* Minimum 1Mt of insitu graphite
* Minimum 40% +80 large mesh (large flake) distribution
* Minimum 1000tpd for Lac Knife style desposit 10 year mine life
* Minimum 2500tpd for Bisset Creek style 20 year mine life
Northern Graphite’s Bisset Creek at a 1.5% cut-off contains 20Mt tons at 1.99% Cg for 397k tonnes of in situ graphite indicated and another 34Mt at 1.81% Cg for an additional 609k tonnes of insitu graphite inferred. That is a million tonnes of graphite with a market value between $2B to $3B in situ resource with a relatively low cap-ex mine that offers substantial returns at $3000/tonne Cg. At a 1% cut-off where NGC feels is appropriate because current prices can support lower grades at the mill... contained metal at Bisset Creek balloons another 33%. The one knock that I have on Bisset Creek is that Bisset Creek is not sensitive to prices and needs at least $2000/tonne to be profitable.
Focus Metals Lac Knife project has 5Mt measured & indicated at 15.67% Cg for ~780k tonnes of insitu graphite and another 3Mt inferred at 15.58% for another half a million tonnes of insitu graphite. What makes FMS much more valuable than Northern Graphite is that mining and milling costs are approximately the same for both projects and FMS is milling 7 or 8 times more valuable rock at the same cost which will translate into Focus being a low cost producer and having much better price sensitivity if there is ever a flood of graphite onto the market. It also means that capex costs will be a bit lower as the can mill a third of what NGC mills and still produce more graphite. Obviously Lac Knife is the superior deposit if they can add tonnage, but Bisset Creek has the advantage of being fast tracked to production by 2013 and taking advantage of high graphite prices. Northern Graphite will be taking advantage of the higher grading mineralization in the early years to maximize returns where there are large areas of mineralization grading well over 2% to take advantage of in the early years.
There is some question if Northern Graphite's Bisset Creek will survive the flood of new graphite production over the next 10 years as deposits are discovered and advanced. It is a project that will do well over the next 5 to 7 years while graphite is in short supply, but after that I project this market will ultimately be flooded with a log jam of new graphite mines. Graphite is not a scarce mineral, but there is a lack of projects in the industry due to lack of exploration and development for over 20 years making Northern Graphite viable short to medium to producer.
Company
Deposit
M & I
% Cg
Inferred
% Cg
In-situ Cg
Market Cap
Focus Metals FMS-V
Lac Knife
4.97Mt
15.67%
3.0Mt
1.81%
1.25Mt
$69M
Northern Graphite NGC-V
Bisset Creek
25.98Mt
1.81%
33.67Mt
1.57%
1.33Mt
$32M
The New Entrants
Since it has become obvious that Li-Ion is in and NiMh is out, the sector has exploded with companies entering into the market in a big way. Strike Gold SRK-V $0.17/$7M acquired some highly prospective projects in Saskatchewan. Most notably the Deep Bay East which could be a potential high grade open pit project which could be a resource similar to FMS but have a bit more tonnage like NGC. Deep Bay East is a near surface 10 - 15Mt graphite project grading 8% - 12% Cg and could be a carbon copy of Deep Bay West, a private mine slated for production within the next couple of years. Deep Bay East drill highlights include 35.05m @ 8.58% Cg and trenches grading as high as 27.52% Cg. Simon Lake is what could be a company maker with extremely high grades estimated over long historic intervals covering a very large area on the southeast margins of the Athabasca Basin.
Please read my Strike Gold article in October for more information on the company and its graphite projects.
Beat the Market Stock Picks: Strike Gold SRK-V
OR-V Orocan Resources $0.29/$6M (Standard Graphite when the name change goes through) has acquired a package of 12 properties which make these guys the leaders when it comes to quantity of graphite projects. Orocan’s portfolio consists of a depleted mine in Ontario and some early stage properties in the right areas in Ontario in Quebec but with just samples and no trench or drill results to work off all of these projects are early stage. Quantity does not mean quality or that OR is the best early stage investment, at this stage a company acquiring one project has just as good a chance as a company acquiring a portfolio of 12 and the company with one project is focused.
Considering one needs to drill 10,000 - 20,000 meters to bring a project up to Northern Graphite type numbers (160 historic holes and 50 current ones) or at least a 5,000 meter drill to define a deposit like Lac Knife. You could spend a lot of money just drilling testing a 1000 meters on each before deciding where to concentrate your efforts. Wasting a couple million dollars just trying to find that one development project as a penny can hurt you. It is easy and cheap to get value out of one project like FMS or NGC, but when you are trying to work the value out of 12 at once, this proposition can find a company spinning its wheels. The better strategy and certainly more cost effective for junior company is to focus spending the dollars on one or two projects with quality historical leads instead of trying properly investigate 12 prospects at once in a cost effective manner. I am not saying OR-V doesn't have anything of merit, but currently Orocan lacks a flagship project.
That being said, Orocan has some intriguing targets on their Ontario projects including Black Donald which has drill results ranging in grade from 2.67% to 5.8% Cg and widths ranging between 3m and 15m. The Little Bryan property in the same region has trenches results over 1k in length indicating a wide orebody than Black Donald between 10m and 22m and ranging in grade from 3.72% to 5.15% cg.
Two Companies that are about to enter the Graphite Arena…
Lomiko Metals LMR-V $0.05/$2.7M and Solace Resources SOR-V $0.10/$1.3M are two companies that have stated intentions of evaluating and acquiring high impact graphite projects. Both companies are tight lipped about what they are up to, but are actively engaged in entering in this sector. These two companies are my top picks in this sector because they simply are the cheapest, have the highest leverage, have very little retail float to sell into the bid and make great ground floor stories going forward in a brand new theme. All of the projects being vended at this point have the same value and worth meaning the projects vended into these two companies have just as much merit or more as the projects Orocan has. Word on the street is that Lomiko's project has historical drill intercepts. It also allows these companies to be more focused in development plans. At $2M market cap or less for each company, these offer the best opportunities as an investment vehicles going forward for new projects in a brand new theme. At $0.05 LMR doesn’t get much cheaper and offers great potential speculation returns and has the added marketing value of being known for their Lithium project which gives them a great promotional angle 'supplying materials for a green age".
Since this article was written Lomiko announced a major graphite acquisition in Quebec called Quatre Milles with 26 holes drilled for 1600 and a project best intercept of 28.6 meters of 8.07% Cg. The project is said to average around 4% grade and potentially be as large as a 30Mt resource. This district is highly prospective for graphite, is in the same area where Orocan and Geomega have acquired properties. and. This 500km long graphitic trend extending from southwestern Quebec to North Bay in Ontario is host to Canada's largest graphite producer operated by Timcal, Lac des Iles and near term producers; Bisset Creek and the Kearney Graphite mine slated for production by 2013.
Lomiko Signs Agreement for Property in Quebec to Explore for Lithium-Ion Battery Grade, High Purity, Large Crystallite Flake Graphite
Geomega GMA-V $1.17/$26M has also staked a portfolio of prospective graphite properties but as a grassroots investment in a new industry is not as appealing as a company that has leverage and can easily add value to with a high $22M market cap and starting with a portfolio that is the same as a Lomiko or Solace or Orocan.
GMA entering into the graphite sector… More proof rare earth industry insiders see the writing on the wall.
Energizer Resources EGZ-V $0.175/$27M has announced a major graphite discovery on their Green Giant Property in Madagascar. Within their Ni 43-101 compliant Vanadium resource is also host to graphite that grades 4% to 17%. The graphite is of the amorphous type which commands only $850/tonne but the company has completed a exploration program outside of the resource where they have reported both larger flake size and higher carbon content than the graphite associated with the vanadium. The company has just finished a recon program with10 holes totaling 1157 meters of drilling and 16 trenches for a total of 1912 meters. An additional 19 holes for 2700 meters was completed in early January where the company has identified several graphitic trends extending off the Green Giant Property. This may very well be one of the largest graphite resources in the world and one of the higher grading resources with almost 60Mt of Vanadium defined with graphite grading 4% to 17% in addition to the graphite discovery outside of the Vanadium deposit.
Great Value… Even Better Value Creation
What makes this sector unique and a great early stage value investment is that it is early, all these companies are extremely cheap and won’t get any cheaper…
I have seen shells worth more than Lomiko and Solace!
You have a great chance at creating real value from a grassroots acquisition into a FMS or NGC type story on the fast track lane to production. These companies require little investment dollars to develop these near surface deposits and exploration is relatively low risk with these deposits sticking out like sore thumbs on cheap mag surveys. It is easy to turn a $1M – $5M investment into $30M - $60M value in market cap with these early stage but highly prospective properties being vended. With most drilling not much more than 100 meters deep; a 5,000 meter drill program will give you enough information to take you to initial resource and PEA stage. Advancing a project to a production decision will take 18 to 24 months and be the best bang for your dollar in any sector with the best chances of actually investing in a future mining operation.
One major advantage to the low cost exploration is that most investors who want exposure to this industry will have to buy at market as this sector will not be flooded with private placement funds making the demand on the market side for these companies that much greater.
Company
Location
Project(s)
Market Cap
Orocan Resources OR-V
Ont / Que
12 early projects – limited drilling 3% - 6%, trenches 3%-5%,
$8.6M
Strike Gold Corp SRK-V
Saskatchewan
Deep Bay East (35.05m @ 8.58%), Simon Lake
$5.3M
Lomiko Metals LMR-V
Quebec
Quatre Milles (advanced) 26 holes – 28.6m @ 8.07%
$2.8M
Geomega Resources GMA-V
Quebec
Early stage Mont-Laurier projects – samples up to 20%
$25.7M
Energizer Resources EGZ-V
Madagascar
Green Giant – awaiting results of drill program - amorphous
$27M
http://www.beatthemarketstockpicks.com/2012/01/graphite-set-to-go-critical-in-2012.html
I have a large position in Focus Metals (FMS.V) and a smaller one in Northern Graphite (NGC.V) - Both are very likely to be big players in the coming year or 2 in the Graphite/Graphene market.
Graphite… Set to go critical in 2012
Graphite is set to go critical in 2012. It is listed as being a critical metal by the EU because the commodity is vital in the greenspace revolution including a major component to electric cars. The Chevy Volt uses 30kg of graphite while Tesla’s Roadster requires over a 100kg of graphite to make. Graphite is the main component in Lithium Ion batteries and can require more than 15 times more graphite than they do lithium. This distant cousin of diamonds is set to go through the roof as affordable mainstream electric cars are now on the market with what is clearly the preferred choice for the battery of the future, at least the next 10 years anyway. Graphite’s qualities of being lightweight and a great conductor of electricity make it ideal for automobiles where shaving off pounds is important for the performance and efficiency of the vehicle. Tesla’s Model S leads the competition with a range of almost 500km per charge and a 3 – 5 hour charge time. With these type of stats and a price range that starts to makes sense for early adopters (Prius type customers), electric vehicles are about to make major inroads into the retail marketplace.
Demand for Graphite Could Double by 2020… Mines Needed!!!
Lithium Ion battery demand could add a million tonnes of demand to the market over the next 8 - 10 years. A majority of this demand is from the growing electric vehicle market is where a major portion of the incremental demand for graphite is seen to come from. Without incremental demand the industry is still expected to see strong growth. It is already a robust 1Mt per year industry and is expected to grow to 1.5Mt by 2020. Graphite has a strong industrial component and naturally tracks closely the demand of iron ore which also has strong demand projections over the next 15 years. With a minimal 500,000 tonne to 1.5Mt of demand to potentially fill over the next 10 or 15 years in all ranges of quality of graphite, there are several opportunities in the industry to build graphite mines in a sector that is slowly being starved for supply.
Estimates for the amount of mines needed to supply this growing market vary greatly depending on several factors including scalability of current projects, incremental demand etc… but graphite deposits tend to be smaller in scale therefore production is limited meaning investment will be needed in several new mines. Most graphite mines will be hard pressed to produce more than 50,000 tonnes of graphite a year. Northern Graphite’s operation at Bisset Creek 2% Cg slated for production in 2013 will produce less than 20,000 tonnes per year and is scalable to around 35,000 to 40,000 tonnes. You can do the math but with most companies producing between 10,000 tonnes to 40,000 tonnes per year, there is a big need for investment in mine development in this sector.
Don’t believe graphite is going critical? Just look at what the Chinese are doing, they control at least 70% of the supply of the material and have recently moved to impose a 20% export duty and a 17% value added tax on the vital material that is essential for powering a green future. The same developments that happened in the rare earth space in late 2009 and early 2010 are now happening in the graphite sector. When it became apparent that Li Ion battery technology was winning out, prices in the sector have shot up over the past year with premium large flake graphite going for $3000 per tonne with industry analysts expecting prices to rise further in 2012 until production outside of China can come online which will start mid-2013. China is doing everything they can to secure enough supply of this metal to meet their own electrification needs as China aims to be a world leader in electric vehicle market. Recently China formed a partnership with GM to collaborate on an electric vehicle that will be mass produced in China. One major reason that may have swayed GM in collaborating with Chinese authorities other than the lucrative Chinese market is that the Chinese will assure GM of security of supply of critical materials they need to build second generation Volts. If electric automobiles are adopted at even moderate rates, it will be tough for miners to ever keep up with demand in this industry. One key driver behind early adoption rates is peak oil theory and prices of fossil fuels are expected to steadily rise over this decade as peak oil nears.
There are many conditions that are coming together to create the perfect storm in the sector that could ignite a multi-year rally in these public companies exploring and developing graphite projects.
The Perfect Storm?
· Strong demand
o Steady industrial growth
o Strong incremental demand from green technologies
· Restricted Supply
o Chinese control 70% of the market
§ Declining Chinese quality and increasing mining costs
§ Chinese 20% Export Tax
§ 17% Value Added Tax
o Declining western nation graphite production
Discovery to Mine… Better Than Average Odds
There is no other sector that currently offers a better chance of investing from discovery to mine. The graphite projects being vended right now are the most prospective of the known graphite deposits in Canada. The Canadian Shield is the best place to explore for these economical deposits anywhere in the world and with an established mining investment community behind them, have the best chance of being advanced to production. Currently there are two graphite miens in production. The Eagle Graphite Mine operated by Eagle Graphite in British Columbia which commenced operations in 2007 and Lac des Iles operated by Timcal in Quebec which has been in production since 1989. The Deep Bay West Mine, the Kearny Mine and Bisset Creek are the 3 projects being fast-tracked to production. One thing to note is that opening up a graphite mine is not capital intensive and 4 of the 5 companies here with projects either in production or slated for near term production are private companies. The capex for these projects is cheap when considering 1,000 to 3000tpd mill and the shallow open pit high grade nature of most of these projects where milled ore is at least double operating costs and much more when considering a project with 10% to 15% grades translating into high IRR projects. This is the one sector where you can be from discovery to a production decision with less than $5M investment.
The Public Sector Leaders
In June there were only two public companies in this sector, Northern Graphite NGC-V $0.85/$32M (low grade open pit 2% Bisset Creek) and Focus Metals FMS-V $0.82/$69M (high grade 15% Lac Knife project). Both projects have their merit, although I always say grade is king in mining.. especially when the deposits have similar parameters. Scalability and economies of scale offer the second best advantage in mining and can overcome a lower grade if the deposit is big enough, as may be the case with Bisset Creek although it is not price sensitive to Graphite and a 30% decrease in the price of graphite would extremely affect Northern Graphite's profitability. If you can find a deposit that has a combination of large tonnage and higher grade like 4% - 8% then you might have something with potential economics that “Beat the Market”. Fundamentals you want to see a great mining project off are its ability to be a low cost producer, its ability to be scaled up to a 5,000 - 7,500 tpd and the projects ability to operate for 20 - 30 years. These are the two industry leaders with the 2 styles that are economic at current prices. Graphite companies will be comparing their results to these companies depending on which type of deposit they have.
Rules of thumb to follow in the graphite industry...
* Minimum 2% Cg grade
* Minimum 1Mt of insitu graphite
* Minimum 40% +80 large mesh (large flake) distribution
* Minimum 1000tpd for Lac Knife style desposit 10 year mine life
* Minimum 2500tpd for Bisset Creek style 20 year mine life
Northern Graphite’s Bisset Creek at a 1.5% cut-off contains 20Mt tons at 1.99% Cg for 397k tonnes of in situ graphite indicated and another 34Mt at 1.81% Cg for an additional 609k tonnes of insitu graphite inferred. That is a million tonnes of graphite with a market value between $2B to $3B in situ resource with a relatively low cap-ex mine that offers substantial returns at $3000/tonne Cg. At a 1% cut-off where NGC feels is appropriate because current prices can support lower grades at the mill... contained metal at Bisset Creek balloons another 33%. The one knock that I have on Bisset Creek is that Bisset Creek is not sensitive to prices and needs at least $2000/tonne to be profitable.
Focus Metals Lac Knife project has 5Mt measured & indicated at 15.67% Cg for ~780k tonnes of insitu graphite and another 3Mt inferred at 15.58% for another half a million tonnes of insitu graphite. What makes FMS much more valuable than Northern Graphite is that mining and milling costs are approximately the same for both projects and FMS is milling 7 or 8 times more valuable rock at the same cost which will translate into Focus being a low cost producer and having much better price sensitivity if there is ever a flood of graphite onto the market. It also means that capex costs will be a bit lower as the can mill a third of what NGC mills and still produce more graphite. Obviously Lac Knife is the superior deposit if they can add tonnage, but Bisset Creek has the advantage of being fast tracked to production by 2013 and taking advantage of high graphite prices. Northern Graphite will be taking advantage of the higher grading mineralization in the early years to maximize returns where there are large areas of mineralization grading well over 2% to take advantage of in the early years.
There is some question if Northern Graphite's Bisset Creek will survive the flood of new graphite production over the next 10 years as deposits are discovered and advanced. It is a project that will do well over the next 5 to 7 years while graphite is in short supply, but after that I project this market will ultimately be flooded with a log jam of new graphite mines. Graphite is not a scarce mineral, but there is a lack of projects in the industry due to lack of exploration and development for over 20 years making Northern Graphite viable short to medium to producer.
Company
Deposit
M & I
% Cg
Inferred
% Cg
In-situ Cg
Market Cap
Focus Metals FMS-V
Lac Knife
4.97Mt
15.67%
3.0Mt
1.81%
1.25Mt
$69M
Northern Graphite NGC-V
Bisset Creek
25.98Mt
1.81%
33.67Mt
1.57%
1.33Mt
$32M
The New Entrants
Since it has become obvious that Li-Ion is in and NiMh is out, the sector has exploded with companies entering into the market in a big way. Strike Gold SRK-V $0.17/$7M acquired some highly prospective projects in Saskatchewan. Most notably the Deep Bay East which could be a potential high grade open pit project which could be a resource similar to FMS but have a bit more tonnage like NGC. Deep Bay East is a near surface 10 - 15Mt graphite project grading 8% - 12% Cg and could be a carbon copy of Deep Bay West, a private mine slated for production within the next couple of years. Deep Bay East drill highlights include 35.05m @ 8.58% Cg and trenches grading as high as 27.52% Cg. Simon Lake is what could be a company maker with extremely high grades estimated over long historic intervals covering a very large area on the southeast margins of the Athabasca Basin.
Please read my Strike Gold article in October for more information on the company and its graphite projects.
Beat the Market Stock Picks: Strike Gold SRK-V
OR-V Orocan Resources $0.29/$6M (Standard Graphite when the name change goes through) has acquired a package of 12 properties which make these guys the leaders when it comes to quantity of graphite projects. Orocan’s portfolio consists of a depleted mine in Ontario and some early stage properties in the right areas in Ontario in Quebec but with just samples and no trench or drill results to work off all of these projects are early stage. Quantity does not mean quality or that OR is the best early stage investment, at this stage a company acquiring one project has just as good a chance as a company acquiring a portfolio of 12 and the company with one project is focused.
Considering one needs to drill 10,000 - 20,000 meters to bring a project up to Northern Graphite type numbers (160 historic holes and 50 current ones) or at least a 5,000 meter drill to define a deposit like Lac Knife. You could spend a lot of money just drilling testing a 1000 meters on each before deciding where to concentrate your efforts. Wasting a couple million dollars just trying to find that one development project as a penny can hurt you. It is easy and cheap to get value out of one project like FMS or NGC, but when you are trying to work the value out of 12 at once, this proposition can find a company spinning its wheels. The better strategy and certainly more cost effective for junior company is to focus spending the dollars on one or two projects with quality historical leads instead of trying properly investigate 12 prospects at once in a cost effective manner. I am not saying OR-V doesn't have anything of merit, but currently Orocan lacks a flagship project.
That being said, Orocan has some intriguing targets on their Ontario projects including Black Donald which has drill results ranging in grade from 2.67% to 5.8% Cg and widths ranging between 3m and 15m. The Little Bryan property in the same region has trenches results over 1k in length indicating a wide orebody than Black Donald between 10m and 22m and ranging in grade from 3.72% to 5.15% cg.
Two Companies that are about to enter the Graphite Arena…
Lomiko Metals LMR-V $0.05/$2.7M and Solace Resources SOR-V $0.10/$1.3M are two companies that have stated intentions of evaluating and acquiring high impact graphite projects. Both companies are tight lipped about what they are up to, but are actively engaged in entering in this sector. These two companies are my top picks in this sector because they simply are the cheapest, have the highest leverage, have very little retail float to sell into the bid and make great ground floor stories going forward in a brand new theme. All of the projects being vended at this point have the same value and worth meaning the projects vended into these two companies have just as much merit or more as the projects Orocan has. Word on the street is that Lomiko's project has historical drill intercepts. It also allows these companies to be more focused in development plans. At $2M market cap or less for each company, these offer the best opportunities as an investment vehicles going forward for new projects in a brand new theme. At $0.05 LMR doesn’t get much cheaper and offers great potential speculation returns and has the added marketing value of being known for their Lithium project which gives them a great promotional angle 'supplying materials for a green age".
Since this article was written Lomiko announced a major graphite acquisition in Quebec called Quatre Milles with 26 holes drilled for 1600 and a project best intercept of 28.6 meters of 8.07% Cg. The project is said to average around 4% grade and potentially be as large as a 30Mt resource. This district is highly prospective for graphite, is in the same area where Orocan and Geomega have acquired properties. and. This 500km long graphitic trend extending from southwestern Quebec to North Bay in Ontario is host to Canada's largest graphite producer operated by Timcal, Lac des Iles and near term producers; Bisset Creek and the Kearney Graphite mine slated for production by 2013.
Lomiko Signs Agreement for Property in Quebec to Explore for Lithium-Ion Battery Grade, High Purity, Large Crystallite Flake Graphite
Geomega GMA-V $1.17/$26M has also staked a portfolio of prospective graphite properties but as a grassroots investment in a new industry is not as appealing as a company that has leverage and can easily add value to with a high $22M market cap and starting with a portfolio that is the same as a Lomiko or Solace or Orocan.
GMA entering into the graphite sector… More proof rare earth industry insiders see the writing on the wall.
Energizer Resources EGZ-V $0.175/$27M has announced a major graphite discovery on their Green Giant Property in Madagascar. Within their Ni 43-101 compliant Vanadium resource is also host to graphite that grades 4% to 17%. The graphite is of the amorphous type which commands only $850/tonne but the company has completed a exploration program outside of the resource where they have reported both larger flake size and higher carbon content than the graphite associated with the vanadium. The company has just finished a recon program with10 holes totaling 1157 meters of drilling and 16 trenches for a total of 1912 meters. An additional 19 holes for 2700 meters was completed in early January where the company has identified several graphitic trends extending off the Green Giant Property. This may very well be one of the largest graphite resources in the world and one of the higher grading resources with almost 60Mt of Vanadium defined with graphite grading 4% to 17% in addition to the graphite discovery outside of the Vanadium deposit.
Great Value… Even Better Value Creation
What makes this sector unique and a great early stage value investment is that it is early, all these companies are extremely cheap and won’t get any cheaper…
I have seen shells worth more than Lomiko and Solace!
You have a great chance at creating real value from a grassroots acquisition into a FMS or NGC type story on the fast track lane to production. These companies require little investment dollars to develop these near surface deposits and exploration is relatively low risk with these deposits sticking out like sore thumbs on cheap mag surveys. It is easy to turn a $1M – $5M investment into $30M - $60M value in market cap with these early stage but highly prospective properties being vended. With most drilling not much more than 100 meters deep; a 5,000 meter drill program will give you enough information to take you to initial resource and PEA stage. Advancing a project to a production decision will take 18 to 24 months and be the best bang for your dollar in any sector with the best chances of actually investing in a future mining operation.
One major advantage to the low cost exploration is that most investors who want exposure to this industry will have to buy at market as this sector will not be flooded with private placement funds making the demand on the market side for these companies that much greater.
Company
Location
Project(s)
Market Cap
Orocan Resources OR-V
Ont / Que
12 early projects – limited drilling 3% - 6%, trenches 3%-5%,
$8.6M
Strike Gold Corp SRK-V
Saskatchewan
Deep Bay East (35.05m @ 8.58%), Simon Lake
$5.3M
Lomiko Metals LMR-V
Quebec
Quatre Milles (advanced) 26 holes – 28.6m @ 8.07%
$2.8M
Geomega Resources GMA-V
Quebec
Early stage Mont-Laurier projects – samples up to 20%
$25.7M
Energizer Resources EGZ-V
Madagascar
Green Giant – awaiting results of drill program - amorphous
$27M
India - Gold Prices Rise
MUMBAI: Gold prices advanced at the bullion market here on Thursday on sustained jewellery offtake and stockists buying amid a firming trend in overseas markets.
Silver continued to surge on the basis of consistent speculative as well as industrial demand.
Standard gold of 99.5 per cent purity spurted by Rs 150 to end at Rs 27,690 per 10 grams from Wednesday's close of Rs 27,540.
Pure gold of 99.9 per cent purity also climbed by Rs 155 to finish at Rs 27,820 per 10 grams from Rs 27,665. Silver ready (.999 fineness) hardened by Rs 290 per kg to conclude at Rs 52,795 from Rs 52,505 yesterday.
In Europe, gold rose on higher euro following Spanish bond auction, though the gains were capped on uncertainty ahead of ECB meet on interest rate later. Spot gold was quoted higher at USD 1,650.34 an ounce in early trade.
Silver spot was up at USD 30.32 an ounce.
Full article here:
http://economictimes.indiatimes.com/markets/commodities/gold-advances-on-global-cues-silver-strengthens/articleshow/11463664.cms
Silver continued to surge on the basis of consistent speculative as well as industrial demand.
Standard gold of 99.5 per cent purity spurted by Rs 150 to end at Rs 27,690 per 10 grams from Wednesday's close of Rs 27,540.
Pure gold of 99.9 per cent purity also climbed by Rs 155 to finish at Rs 27,820 per 10 grams from Rs 27,665. Silver ready (.999 fineness) hardened by Rs 290 per kg to conclude at Rs 52,795 from Rs 52,505 yesterday.
In Europe, gold rose on higher euro following Spanish bond auction, though the gains were capped on uncertainty ahead of ECB meet on interest rate later. Spot gold was quoted higher at USD 1,650.34 an ounce in early trade.
Silver spot was up at USD 30.32 an ounce.
Full article here:
http://economictimes.indiatimes.com/markets/commodities/gold-advances-on-global-cues-silver-strengthens/articleshow/11463664.cms
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