By: Tomas Ronolski - AllPennyStocks.com News

Tuesday, May 28, 2013

Graphite production has become a hot topic in recent months as investors wonder if China, far and away the world’s biggest graphite producer, will make good on its plans to hoard the majority of the graphite it unearths each year. China produces about 80 percent of the world’s graphite annually, but has announced plans to consolidate over 200 graphite mines to better regulate the industry, which alone will cut supply by about 10 percent. Further, China has raised export and valued-added taxes on graphite, moves that some claim are meant to help the country created an industry monopoly. Right now China is certainly in the driver’s seat. The U.S. produced no graphite in 2011, importing more than 50 percent of its needs from China. Europe gets nearly every ounce of graphite it needs from China. Graphite prices have risen more than 250 percent in the last decade and could continue upward given China’s initiatives to control supply. Byron Capital Markets said in December that the global demand will surpass supply by the end of 2015 at current growth and production rates. The European Union, the U.S. and China all have graphite listed as a “critical metal,” highlighting the importance of beefing-up supply to meet growing needs in industrial applications, electronics and electric vehicle batteries, to name just a few drivers.

This has created a sense of urgency for miners outside of China in development of graphite projects. The United States has a limited number of public companies vying for space, including Graphite One (TSX-Venture:GPH) with its Graphite Creek Project in Alaska and National Graphite Corp. (OTCBB:NGRC) with its Chedic property in Nevada, home of a past-producing graphite mine.

Canada only produces about 12,000 tons of graphite annually, according to privately-held Ontario Graphite Ltd., but there are a couple public companies looking to increase that figure, namely Northern Graphite Corp. (TSX-Venture:NGC) with its Bissett Creek graphite project in Ontario that is expected to go into production in 2014 and Focus Graphite Inc. (TSX-Venture:FMS) with its Lac Knife property in Quebec.

Outside of Canada, Flinders Resources Limited (TSX-Venture:FDR) is also looking to re-start production in 2014 at its Woxna Graphite Mine in Sweden. The mine, rated at a capacity of 13,000 tonnes per year in flake graphite, was in production from 1996 through 2001. Production was halted as graphite prices were only fetching about $600 per tonne. Graphite prices have significantly risen with premium product selling near $3,000 per tonne in 2012, although cooling back down near $1,700 at the start of 2013.

The company recently delayed production resumption by nine months in order “to incorporate all metallurgical and engineering characteristics into the process design, in anticipation of a better final outcome,” according to Martin McFarlane, president and chief executive at Flinders.

The company has been working with Aminpro Metallurgical Laboratories in Chile to create a new process flow sheet that will optimize graphite flake size, purity and recovery results. On Tuesday, Flinders reported that testing using a single stage coarser grind and rougher float has yielded “an encouragingly high proportion of large flake sizes.” The remaining tests are expected to be completed in the next few weeks.

Golders of Sweden is working to complete a re-designed mine plan that optimizes the first 10 years of a 4-phase, 20+ year plan that will reduce ore-to-waste ratios by up to 15 percent, according to today’s statement. The plan is expected at the end of May, at which time a Preliminary Economic Assessment will then be generated, which is expected to be completed in July.

It’s going to take some time for the China situation to play itself out as to just how much graphite will exit the country and where global demand will drive the price for graphite. Experts seem to agree that demand is going to be increasing worldwide, which will have savvy investors keeping their eyes peeled for companies that are producing, or will be producing, in the mid-term outside of China as the whole situation unfolds. Proper due diligence is, as always, encouraged.

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