“This Makes Everything Obsolete” Graphite Pick from Nick Hodge

Following up on a long string of graphene teasers from Early Advantage

By Travis Johnson, Stock Gumshoe, April 10, 2012

“This Makes Everything Obsolete

“50,000x thinner than a human hair…
“230x more powerful than silicon…
“200x stronger than steel…

“New ‘miracle material’ promises breakthroughs in everything from batteries and medical science… to oil exploration and defense systems…

“Here’s your chance to be first in line for 300% gains.

That’s how the ad from Nick Hodge gets everyone going this time around — the “thinner, more powerful” stuff is all a reference to graphene, which is a relatively new material (discovered in the 1960s, but only isolated in a stable form less than ten years ago — by researchers who won the Nobel Prize for their breakthrough). Graphene is a nanomaterial, effectively a sheet of graphite that is only one atom thick, and has remarkable properties for conductivity, heat transfer, strength, and flexibility.

Of course, the fact that it’s relatively new doesn’t mean we aren’t sick of it. We are. The royal “We,” that is, the we that has been sitting through the endless ads trumpeting graphene from Nick Hodge and Byron King and most of the other resource-focused newsletter guys. I’m pretty sure that the first ad I saw touting a graphite company and using the miraculous properties of graphene to sell the story was in the late Spring of last year, and it has not let up since.

(That was back when Byron King pitched Focus Metals as his pick by saying they were on the forefront of the “new silicon” — that particular stock, though a fine and compelling story, somewhat similar to the pick being hyped now by Nick Hodge, is up by only about 25% since last June. Not bad, but a bit short of the imminent gains of 4,510% that he expected … perhaps it’s just early days.)

I should also note that though I’m very skeptical of buying graphite mines as a play on graphene (largely because graphene is a hugely expensive nanomaterial, with most of the cost coming from the processing, and it is a nanomaterial … meaning that even large scale use — which is not here — might not consume it by the ton) … that doesn’t mean that graphite isn’t a worthwhile investment. Graphite is controlled by China, at least marginally (they produce perhaps 80% of the stuff, and they sunk global prices and stifled exploration 20+ years ago when they flooded the market with low-priced supply, much as they did with the rare earth metals), and consumption and pricing have risen quite dramatically in the last few years … not because of graphene, but because of increased steel demand and lithium batteries, among other current uses. Graphene, as an extreme value-added version of graphite, could probably be produced using far more expensive methods to generate synthetic graphene, but other uses, particularly in steelmaking, are probably more economically sensitive.

Graphite’s highest-volume use is in the steel industry, where graphite electrodes are critical for furnaces, and increasing steel production as China has built skyscrapers and railways means pricing increases. And graphite’s fastest growing application is in lithium ion batteries, which use far more graphite than they do lithium. So demand is real and growing, particularly for the highest quality graphite supplies, and there is a “strategic” nature to the graphite story even if it’s not quite as clear cut as the “strategic” aspect of the Chinese rare earth monopoly that, we were often teased during the rare earths runup of 2010, had them in a “panic at the Pentagon.”

Which is the long way of saying that graphite may well be the next hot thing in mining investment, and it is certainly in demand even if there’s concern that the demand might be cyclical, but that it’s the current uses of graphite that will drive pricing, not the next-generation nanomaterials. For the nano research angle, I’m much more comfortable with the semiconductor equipment companies that are focused on supplying equipment and supplies to graphene researchers and other nanomaterial labs and prototype producers … but for lithium batteries and arc furnaces, sure, graphite prices are high and may be going higher. And that means, we’re told, that graphite reserves and potential mines should become much more valuable …

… and, as you’ve guessed by now, that’s what Hodge is teasing. A new graphite miner.

I’ve already speculated on which one it might be in past emails, and loyal Gumshoe readers have done the same from time to time in our discussion section, but now that we’ve got an actual ad with a few real hints in it we can get much more certain about the identification of the stock.

Here’s Hodge’s basic background on “why pick a Graphite miner:”

“So how can you best position yourself to profit from this astonishing mega-trend?

“Surprisingly enough, it’s not with graphene producers or distributors…

“Don’t get me wrong; I believe investors who pick the right ones will do very well.

“But the truth is the money behind the money lies with the source.

“Because without graphite, there is no graphene.

“It’s that simple.

“Now, many people simply assume graphite is as common as the rock from which it’s mined. And that assumption was right for a long time…

“While commodities like copper gold, silver, and even corn and wheat have been surging higher for a decade, graphite was one of the last commodities to respond — and prices were actually in the tank from 1990 through 2005.

“There was plenty of spare capacity from China, which still dominates graphite mining to this day.

“But gradually, growth in automobile and steel demand began to eat up that spare capacity and prices began to rise, growing steadily through 2008.

“The discovery of graphene has pushed demand even higher.

“Today, the startling truth is that it’s mined in only five countries.

“One of these countries is North Korea.

“Another is China, which produces 70%-80% of the world’s graphite.

“That puts graphite in a rare earth-type situation, in that China has a near stranglehold on the market — and is already adding export and Value Added Taxes (VAT) as graphite’s dominant future creeps closer and closer.

“Like with rare earths, China sold its abundant resources on the cheap when demand was low, and then when demand rose, the Chinese manipulated the market to sell what was left at much higher prices.

“That’s what set off the rare earth boom of 2009 and 2010, sending any company with access to rare earths outside of China soaring thousands of percent”

And then we get some clues about which specific project he’s teasing:

“Prices are up 300% in the last five years, giving a long-abandoned Canadian graphite mine the chance to be developed at a huge profit.

“Back in the 1980s, a mining company found a large graphite deposit a few hours northwest of Ottawa in the middle of thousands of acres of Crown Land.

“It ordered a full study on the property, known as a 43-101, and the engineering firm confirmed it was one of the largest graphite deposits the world had ever seen.

“Unfortunately for that mining company (but very fortunately for you and the rest of the world), the price of graphite fell off a cliff.

“The company built a processing facility and blasted for about a month, but it was soon out of business. And the entire operation — over a million tonnes of graphite — has been left idle…

“Until now.

“But with graphene’s endless potential and Chinese manipulation pushing graphite prices higher and higher, one man has decided to bring this mine back to life….

“University testing has confirmed the graphite at this site is superior to China’s in terms of flake size, higher conductivity, and greater transparency….

“And with an extremely high carbon content of 98%, the 1.37 million tonnes of graphite this mine contains are ideal for producing unfathomable amounts of graphene for generations to come.

“The bottom line: With carbon-rich graphite now at $2,500 to $3,000 per ton, this little miner is sitting on a $3.37 billion fortune!”

And as a final few clues, he tosses out that the stock has a market capitalization of around $100 million, and trades for less than three dollars per share.

So yes, we toss that info straight into the Thinkolator for confirmation and the answer comes out nice and clean: this is indeed Northern Graphite (NGC in Toronto, NGPHF on the pink sheets)

Which has indeed been running up over the last few months of teaseriffic touting from Hodge and others, and is at about $2.50 per share with a market cap of just over $100 million. The shares have been getting a big boost from Hodge and his “special seminar” on graphene over the last couple weeks so are substantially higher than they were in January when Northern Graphite went public as a sort of reverse merger IPO, but they are off slightly from the euphoric highs (almost $3.50) of a week or so ago.

The company knows exactly how to market themselves, this is how they describe their asset and their potential in press releases:

“Northern Graphite Corporation is a Canadian company that has a 100% interest in the Bissett Creek graphite project which is located 17kms from the Trans Canada highway between Ottawa and North Bay, Ontario. The Company has completed a preliminary assessment on the project and is in the process of completing a pre-feasibility study and permitting with the objective of initiating construction, subject to the results of the study and the availability of financing, in the first part of 2012.

“Graphite prices have increased substantially due to the ongoing modernization of China and other emerging economies which has resulted in strong demand from traditional steel and automotive markets. In addition, new applications such as lithium ion batteries, vanadium redox batteries, fuel cells and nuclear power have the potential to create significant incremental demand growth. However, production and exports from China, which produces 70% of the world’s graphite, are expected to decline and an export tax and a licensing system have been instituted. Both the European Union and the United States have declared graphite a supply critical mineral. With limited worldwide exploration and few potential development projects on the horizon, the Company is well positioned to benefit from the continued improvement in graphite demand and prices. High growth, high value graphite applications require large flake and/or high purity graphite which will represent 100% of Bissett Creek production.”

And yes, the deposit is real, and the graphite prices are real — I do fear that economic slowdown might hurt graphite pricing at some point, which can make projects like this hit snags, but I don’t really know the graphite business particularly well and I would have also been skeptical a few months ago before the stock had a 200% run, so being an old fuddy duddy sometimes slows me down when it comes to niche mining stocks (yes, I have often had qualms about rare earths miners too, and personally missed the big runs in those stocks even as I covered many of them). So I don’t know if it will do you much good to listen to skepticism from me, particularly if the graphite sector gets into the same kind of extended run that benefitted the teensy rare earths juniors a couple years ago. It is, at least, encouraging that this is a well-known deposit, in a friendly country, near infrastructure, and with some experienced folks at the helm, so if graphite prices remain high I expect they’ll probably do just fine.

Speaking of rare earths, the guy who I often turn to for opinions on “strategic metals” and who has done a great job of following many of these stocks is Jack Lifton — and he’s also singling out Northern Graphite, you can see his opinion in an interview from early February here. Northern Graphite also does a pretty good job, as befits a junior resource company that has to pitch investors, of explaining the market for graphite in its factsheet.

Oh, and if you’re looking around for other graphite-focused picks, the “big three” juniors that I see mentioned frequently, and that I bet we’ll continue to see teased by well-known newsletters, are Northern Graphite, Focus Metals, and Flinders Resources (FDR in Canada, FLNXF on the pinks — Flinders was teased even before it was public, if you recall) — all are tiny, in the neighborhood of $50-$100 million valuations, and with actual deposits identified of different types (ie, they’re not just “exploring” in “prospective areas”), and all seem, to this uninformed observer, to have reasonable prospects for producing graphite within a few years.

Will they make you rich? Well, that I don’t know — if it’s anything like the rare earths story for junior resource investors, you’d be wise to be nimble, and to remember that if a newsletter with a few thousand subscribers sends out a recommendation about a stock that might trade less (far less, in some cases) than a million dollars worth of shares in a day, well, the company’s business and immediate prospects might be a lot less important than the fact that there are a lot of investors enticed by the story right this minute. One thousand investors who each want to buy $10,000 worth of Northern Graphite shares in a day, for example, would bring in orders for six times as many shares as typically change hands in a day, which can swamp any rational market for the stock and send it flying — and if those same investors are disappointed in a month, look out below.

Heck, even the mention of these kinds of tiny stocks here at Stock Gumshoe can bump the shares around, humbled as we are by our massive (and unusually handsome and erudite) readership, so do your research into these stocks if you’re interested, be wary of the wild trading swings you might see, and let us know what you think with a comment below. Enjoy!


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32 Comments on "“This Makes Everything Obsolete” Graphite Pick from Nick Hodge"

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Sharon Logue
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Sharon Logue
April 10, 2012 2:44 pm
Thanks Travis, I think I’ll read what the Nobel prize winners had to say about graphene, and how they made it stable. Several universities do have nanotechnology departments, where we are more likely to find out where graphene is likely to be developed into viable technology. I have family in the aerospace industry, that I will ask. If this is a single atom compound, I agree with you, it won’t take a lot of graphite. I’lll search clinical trials too. I believe it does have valuable implications, as it may have existed in previous ancient civilizations with inexplicable capabilities. So,… Read more »
Ronald Schumacher
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Ronald Schumacher
April 10, 2012 2:46 pm
While I cannot comment on the virtues of the graphite mine, I can comment on uses for graphene that have not been exposed. First, a NY university has on going research in graphene cells designed to store hydrogen. The US Dod has long looked at this as an alternative fuel cell but has set a 14% (in that neighborhood) volume/weight ratio. Researchers, using graphene have designed a cell that will hold 25% of its weight in H, quite an increase. Also, in conjunction with Boeing, a Wisconsin Univ researcher has developed a moldable form of graphene. This allows for super… Read more »
alex
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alex
April 10, 2012 3:45 pm

while many are focusing on existing graphite plays, i plan to watch for the mega ipo that i believe will trump the field as a producer, is more likely to succeed at present than start ups,and they have the graphite[large flake],what is the boards thoughts,i do not say that others will not succeed,but with the private companies coming into mass production shortly and graphine still a early discovery,the market may have the demand they need,agree china plays a big role in the juniors success,Kearny production this year

Usishkin
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Usishkin
April 12, 2012 5:27 am

I am not an expert in this field, but stumbled across – CVV and ZOLT. Initiated small position on both… good luck.

Big Doubter
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Big Doubter
April 10, 2012 3:13 pm

Maybe it’s only me, but I’m a little suspicious of anything that Nick Hodge recommends. Most of his recos seem to soar shortly after he recommends them, only to come crashing back to earth after the hyping stops. Some might call him the King of the Pump and Dumpers. I don’t know. All I can say is be careful.

rotrob80
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rotrob80
April 10, 2012 3:41 pm

I have learned my lesson on all these get rich quick pitches..If it does not pay a dividend ..FORGET IT

Allan Robinson
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April 10, 2012 6:43 pm

Being regularly swamped with emails and a heavy work-load every day, this is one of the few selected Fact Sheets I routinely read and enjoy, for its clarity and objectivity.
Thanks, and keep up the good work.

Myron Martin
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April 10, 2012 6:33 pm
Healthy scepticism is certainly justified and being “nimble” is a requirement to make any money, but contrary to the “sceptics” I have made a lot of money playing these niche markets, even some 10 baggers and lots of Doubles and Triples, but I agree, these are not “Buy and Hold” type stocks in most cases. I have a disciplined program where I sell 1/3rd when I am up 50% and another 1/3rd on reaching a double. Doing that consistently I have gotten my original investment off the table in over 200 stocks in the past 3 years. In fairness I… Read more »
vic
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vic
April 10, 2012 7:33 pm
Rick Maricle
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Rick Maricle
April 10, 2012 8:31 pm

Graphite can be made sythetically from petroleum coke. This should provide an upside limit on graphite price (and mine profitability).

Rich T
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Rich T
April 10, 2012 10:14 pm

The tie-in to graphene is pure hype. Graphene has been successfully made from carbon sources as diverse as plexiglas and sugar. The processes which currently show the most promise for producing usable graphene sheet of significant size, including the SiC and copper foil methods, do not use graphite as a source material for the graphene.

whgo noze
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April 10, 2012 10:57 pm

auggest graphtec intl. [[GTI]] they are developing graphene for the long haul

Gary W
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Gary W
April 10, 2012 10:59 pm

I agree – graphene has awesome potential but (a) it won’t be monetized for at least another decade, and (b) it is a synthetic material which can be made from many sources. There’s more of a critical need and market for rare earths than for graphite. That’s not to say that graphite stocks can’t go on a little roller coaster of their own!

blackjack
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blackjack
April 10, 2012 11:14 pm
Graphite has many uses and each day more the GREEN revolution will use more quality graphite in batteries, large storage capacitors etc. This is happening. Graphene is the next big thing – make no mistake – sure it can be made from different things – but large flake graphite is the BEST and cannot be replaced. It is not hype if you have done your homework. Billions of dollars are being poured into R&D on graphite/graphene. Graphene has successfully been made in a CD burner and so this new technique should start development in that direction. Graphite has been listed… Read more »
ArchGrafiX
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ArchGrafiX
April 12, 2012 4:03 pm

Graphene has been made in a CD burner, blackjack?

Edward Maddox
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Edward Maddox
April 11, 2012 2:32 am
So there is another story very similar to the one pitched. It is Flinders Resources with a very important graphite mine that was essentially mothballed when it could not profit soon after it was built. The mine sits on a very large amount of the prized large flake graphite. Flinders Resources recently started trading in Toronto with the identity as FDR. I have some and am waiting for some distinct improvements as mining is starting already. We shall see. I watch it carefully and the results reported so far are very hopeful. By the way, the mine is not in… Read more »
Sharon Logue
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Sharon Logue
April 11, 2012 6:35 pm
Well, I went to wikipedia and found paragraphs about graphene, and yes, its Carbon…. We are a carbon based planet and species, so yes, graphene has been made from sugar (in 10 minutes) as well as other carbon bearing sources. It can be made by burning magnesium metal in dry ice. There’s lot’s of references about scalable production. Sounds easy to a layman like me. Boeing is indeed experimenting with it for lighter stronger planes. That’s just the start. It’s worth the read, as its apparent it may replace binary coding with something called spintronics. Also, it does have weird… Read more »
who noze
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April 11, 2012 9:29 pm

doonnt overlook gragt ic intl [gti]v they are developing graphene for commercial use

Jack murry
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Jack murry
April 17, 2012 4:49 pm

All I know about graphite is that a guy told me my handwriting looked like s–t.
I stopped using No 2 pencils and now it’s really nice.
BaDumDum!

Deshepherd
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April 20, 2012 3:51 pm

thank you edward maddox.
Flinders Resources has to be the one to put your money into as it isb in a position to produce unlike focus metals,etc. Thank you for that

TONY PARED
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TONY PARED
April 20, 2012 4:50 pm

can’t wait for OLED wide adoption for ‘physical electronic paper-display’, so you buy your news’paper’ only once… and save some trees and ink

being “twitting” about it for years and years, it took 10 years for LED outdoor billboard/signs to become ‘normal’ – a tangent here 🙂

cdchi1
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cdchi1
April 25, 2012 6:08 pm
Anyone interested in graphite (and everyone should be) MUST take a look at a (not so) little (anymore) Aussie company called Syrah Resources (ASX.SYR). There’s a reason why its shareprice has gone up around 1,000% in the last 4 months and now has a market cap over $100M, despite having not even drilled a hole yet (though drilling starts VERY shortly). Anyone who thinks they have a clue should take a look at their recent trenching results (ann dated 18 April) to get a feel on just how big their project will be. As the SYR MD said in a… Read more »
whynotm
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whynotm
May 23, 2012 8:03 am

Furthur to the above : Syrah early today just released impressive exploration results from its first drill hole at the Balama graphite deposit in Mozambique. Shareprice jumped nearly 100% in one day. Good start, maybe worth a punt?

cdchi1
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cdchi1
May 23, 2012 4:00 pm
Ecstatic, but not surprised. 287M of graphite, from surface, at probably around 14-15% grapjhite, mostly coarse or very coarse flake. Probably goes deeper as hole ended in mineralisation. And the ground is so easy to drill, they will be doing a drill hole ever 3 days. Is it worth a punt? Yes. They have 7km of strike, and they can drill one hole every 3 days since the ground is so soft (which makes it great for production too by the way). This will be a billion plus tonne resource…the biggest graphite mine currently is in China and is 360… Read more »
whynotm
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whynotm
May 24, 2012 8:03 am

Thanks Carlo, I took the plunge…..assays out in a few weeks with maiden JORC by years end – everything so far points to something big.!!

cdchi1
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cdchi1
May 31, 2012 8:42 pm

Hope you’ve enjoyed the ride Alexis. JORC will be WELL BEFORE year’s end – unless your referring to financial year END of course in a months time…touch and go whether will be out by then though i doubt it as resutls so far have been ‘visuals’ only…still waiting for actual lab assays.
Having said that, probably worth taking profits on at least a few shares. I haven’t because of a serious capital gains tax issue – need to hold until at least July. Hopefully SP can hold on until then (or better, keep going up).

whynotm
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whynotm
June 1, 2012 4:31 am

Hey Carlo, SYR has definitely kept a smile on my face recently (unlike some of my other shares). Im going to keep holding until lab assays out in early July and than decide wether to cash in on some profit.
Another company that looks quite promising as a speculative buy that has jumped on the graphite train is Kibaran Nickel (KNL on the asx) – in the process of aquiring tansgraphite.

cdchi1
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cdchi1
June 1, 2012 10:43 pm

Alexis
From what I’ve just heard, your decision not to sell could be a stroke of genius. As for KNL, project has been looked at and rejected before…this is just a case of ‘me too’. Mind you if you bought in a few days ago, you wouldn’t care since its rocketed…just be wary with it.

Alan Coburn
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Alan Coburn
May 24, 2012 8:44 am
I REALLY DON’T GET IT,IF YOU LOOK AT THE WHOLE PICTURE THIS IS MINIMUM 10 YEARS AWAY.THE PLAY I SEE IS NAT. GAS. BUT WHO I’M I ,I’M A DICK YOUNG FOLLOWER WHICH I’VE NEVER SCENE ANY PRINT ON THIS SITE. SINCERELY AL
joffa
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joffa
August 13, 2012 10:57 am

bought these shares at about 3 dollars ….now at 96 cents and dropping

David Allenson
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David Allenson
August 23, 2012 10:37 am

I’d rather invest in a SURE bet- USU or DNN in the Uranium Sector when it comes to these “penny stock plays”

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