Graphite industry shows signs of heating up, but local players still have scope by: Robin Bromby From: The Australian July 22, 2013 12:00AM
SINCE 2007 we have seen waves of investor bubbles. First there was uranium where, at one stage, more than 200 ASX listed companies had either acquired uranium projects or had suddenly decided their existing ground (acquired for some other minerals) might just contain the odd bit of yellowcake. Investors didn't discriminate: they bought anything that had uranium in the latest ASX release's headline.Subsequently it was a case of ditto with phosphate and then rare earths. Then the bottom fell out each time.So is graphite headed for the same rise and fall?Hard to say. It looks as if the industry has, as with those earlier frenzies, got ahead of itself. According to one count, there were just two listed graphite companies globally three years ago; now there are 80, 50 of them on the Toronto exchange. The Canadians are exhibiting all the tell-tale signs of a sector heating up, vying with each other to pick up more and more ground (especially around others' successes). Money is being raised, too.It is interesting to note that the heat has already come out of most Australian graphite stocks.Taking a 52-week chart, Talga Resources (TLG), which has been exploring for graphite in Sweden, has gone from a 43c high to 5.8c on Friday, Archer Exploration (AXE), with significant ex-ploration on Eyre Peninsula, has dropped from 28c to 11c andalso on that part of South Australia, Lincoln Minerals (LML) is down from 15c to 4.5c. As for demand, the information is complicated.Last week, London-based Industrial Minerals reported that in 2012 the demand for flake graphite -- the most valuable form, the others being amorphous and vein, besides synthetic graphite -- had dropped by 27 per cent.Yet now another British market analyst, Roskill Information Services, has brought out a 413-page report on graphite, saying demand for flake and synthetic graphite is continuing to grow.But prices for flake graphite have almost halved since early 2012 (although far higher than the early part of last decade). Roskill doesn't sound too confident that this increased demand will do much for prices.Among the bigger uses of graphite are in carbon brushes and batteries -- there's 20 times more graphite than lithium in lithium-ion batteries (used in electric vehicles -- and associated with the 787 Dreamliner dramas). About a quarter of all graphite goes into steel, about 14 per cent into brakes and about 7 per cent into pencils. Graphite is also the source of the new wonder material graphene, which threatens with its strength and lightness to revolutionise many industries from construction to aerospace.Some of the graphite activity revolves around reopening old mines closed in the early 1990s when our mates in Beijing flooded the world with cheap graphite. The Kearney mine in Canada will reopen before the end of the year, another Toronto hopeful has picked up three closed mines in Mexico, and there's much activity in Alabama, once an important source of the material for American industry. East Africa is a hotbed of exploration.Roskill has a warning, though: "If lower prices continue, companies developing new graphite projects will face competition for a shrinking pool of investment opportunities." So, they add, understanding the market, finding right end-users and arranging off-take deals will be vital to their success.Kibaran Resources (KNL) will, therefore, be taking some comfort. The stock went up 26.6 per cent on Thursday (to 10c, which tells all you need to know about the state of the market, even for wonder materials) after the junior said it had signed a memorandum of understanding with a European graphite trader.Yes, we're all a little over MOUs after all the Chinese ones that have fallen through, but this one seems to have some substance. According to the announcement, the party is a "sophisticated" European graphite trader that supplies companies around the world. The non-binding agreement is for 10,000 tonnes a year of flake graphite from Kibaran's Epanko deposit in Tanzania.Meanwhile, some investors -- no doubt by sheer chance -- two days ahead of an announcement from Uranex (UNX) pushed up its share price 15.9 per cent.Then on Friday we learned the company had delineated 977m of graphite mineralisation at its Nachu project, also in Tanzania.Long-term investors can take comfort from the fact that graphite will be in demand for emerging technologies.Then the Chinese, who supply 61 per cent of the world's flake output, are seeing mines in Shandong, one of the two provinces producing the bulk of their flake, nearing exhaustion. - See more at:
