written by reader Thoughts from Myron — Graphene to the Forefront

by takeprofits | February 17, 2014 9:01 pm

[Ed. note: Here is our latest contribution from longtime reader Myron Martin. He has agreed to our trading restrictions, and, as usual, we have not reviewed, approved or screened his stocks or ideas, and the opinions he expresses are solely his own.  Many of the stocks Myron covers are microcap “penny stocks” that can move dramatically with or without fundamental reasons, so please be cautious. Myron’s past commentaries can be seen here.[1]]

Hello again Gumshoers! I was planning on making one of my next columns about copper, but sometimes one’s hand is forced by new events that affect the market. This news item about a copper producer is important enough that I would be remiss if not mentioning it. I try to cover everything of importance in the market in as timely a fashion as possible, but nobody can anticipate in advance what the next news headline will be that affects a specific sector or individual company. A lot can happen in any two-week period and in this case there is a situation that requires close watching, which is why I am issuing this alert in respect to a takeover offer from Hudbay Minerals (HBM in New York and Toronto) for Augusta Minerals (AZC in New York and Toronto).[2] I owned Augusta years ago and made good profits as its project developed, but finally decided to sell to avoid years of “dead money” that often results from long permitting times, etc. The most money in juniors is made on “first discovery” of a significant resource, and then again when the “grunt work” has been done and a 43-101 report is made on a project, then a PEA, and finally a mine development decision is made. Timing on whether to be in or out in the development process is crucial, and often dependent on many different factors.

In this case, as in many I expect in 2014, investors will be making decisions on whether the premium being offered by larger established companies adequately reflects the assets and potential of the junior being bid for. In this case, I would be happy to own HBM should a takeover of Augusta actually result. However, as in the case of Goldcorp’s (G.TO GG) bid for Osisko (OSK.TO), there is a good chance the bid will be turned down as inadequate, so even though prices have been bid up close to the offer price, there may still be a profit potential in the company being acquired, if they elect to solicit higher bids. These are situations to watch closely, and should be on your stock watch list and press release and e-mail list, so you get the latest information the same time as I do.

While not as big as Freeport-McMoRan (FCX), it should be noted by those “connecting the dots” that HBM is also a major copper producer, and there are many more good copper projects in Arizona besides Augusta that I will be reporting on as a follow-up at the end of the month.  HBM as the “operator” of the Reed copper mine in Manitoba, due to the 70% interest they acquired from VMS Ventures (VMS.V VMSTF), illustrates the advantages of the prospect generator model in that VMS is “carried to production” by its more senior partner (see update on the Reed copper mine[3]). This gives them more immediate returns, in addition to the cash they acquired by the sale, while still retaining a 30% stake without having to finance the mine buildout. Providing a double reason to buy VMS (still on my buy list) is the fact they hold a roughly 25% interest in North American Nickel (NAN.V WSCRF), for long term gains. NAN may be a little quiet for a few months until spring drilling resumes, but be assured drill core is being assessed over the winter and one never knows when a new announcement will grab the market’s attention. I plan on holding, as I believe strongly this will ultimately be a great project and it may take years to fully manifest its huge potential. Here is a quick point-by-point summary on NAN achievements in 2013.

Still on copper, for those not following Turquoise Hill Resources (TRQ), I did finally buy a small stake (see announcement in comments section of previous column[4]), because I believe strongly in the ultimate success of this huge copper, gold and coal project, and want to monitor price for good entry points as negotiations with the Mongolian government continue and production ramps up during 2014. This is definitely one of those projects where the adage of “buying when others are fearful” could pay off handsomely. If you need some contrarian reinforcement for buying junior mining stocks, here are a few resources to tap into[5].

There has been a nice rally in precious metals stocks since the New Year, and nothing gives me more satisfaction than seeing my portfolio go up on days when the market in total goes down. It tells me I am properly positioned. That being said, I have not managed to buy all the stocks I have profiled as I would prefer to do. Right now the gold stock experiencing the highest accumulation level with high daily volume is B2Gold (BTO.TO BTG), which fortunately I do own and would like to buy more. The two I wanted to buy before they make too big a recovery are Detour Gold (DGC.TO DRGDF) and Allied Nevada (ANV in New York and Toronto), and I will be watching them for another good entry point below current prices, should there be a pullback. Those of you who bought when I profiled them should be happy campers.

An example of how quickly things can move, and in particular how fast juniors can deliver profits at low prices, is Avrupa Minerals (AVU.V AVPMF). This one stayed around $0.10 for months and suddenly on one press release[6] jumped to $0.14 this week, so two more positive press releases could easily see it at a double.

Lakeland is another good example of how quickly the right junior can double your money or more. Lakeland Resources Inc. (LK.V LRESF) would like to provide this update to shareholders[7]. The merger of Asanko Gold (AKG in Toronto and New York) and PMI Gold Corporation (PMV.V PMVGF) (which I owned) has now been completed, and I look forward to buying more shares, as circumstances warrant in the stronger and excellently-positioned combined company assets in Ghana. The country is rapidly taking over from South Africa as a primary gold producer. Here is a corporate update of Asanko[8]. 

Well that takes care of old business, so now on to some exciting new business. By now you know I focus on undiscovered niche players that the establishment analysts tend to ignore. A couple of months ago I discovered one that I was anxious to profile because of some unique qualities I found that put them head and shoulders above the herd. Graphite was the strongly-hyped sector of the past 18 months and dozens of companies consequently acquired a graphite property so they could take advantage of all the media attention. Simple truth is that probably not one in 10 with a graphite property will develop a viable mine and market in the next 5-10 years. There may well be at best a half dozen serious contenders, and we already had one, Mason Graphite (LLG.V MGPHF). When I profiled the company[9], quick-acting investors had an opportunity to earn as much as 150% in just over two to three months. I think it is still in a good buy position, having dropped back a bit. While I cannot, of course, guarantee that the stock profiled below will produce those kind of returns as quickly, given its low price, it is a distinct possibility.

The case for Lomiko Metals (LMR.V LMRMF) ($0.11) is very strong because of their seasoned, well-experienced management and their affiliation with the research department of Stony Brook University, where professor Michael Gouzman is vice president of engineering and technology. They also have a cooperation agreement with Graphene 3D Labs, an innovative private company that is researching new uses for graphite. And, most importantly, Graphene Labs has a patent on a low-cost way of converting the high quality graphite from Lomiko’s Quatre Milles project to graphene on an exclusive basis.

You can research  the Lomiko, Stony Brook University, and Graphene Labs relationship further, here[10], here[11] and here[12].  Plus, check out this article about the group’s graphene supercapacitor prototype[13]. In particular note this compelling paragraph:

“Under the SAA signed February 12, 2013, Lomiko and Graphene Labs agreed to co-develop a vertically integrated supply chain that includes a secure supply of high-quality graphite, cost-effective and scalable processing, tight quality control and integration of graphene-based products in end-user products. The end goal is to find commercially viable routes to make graphene-based energy storage devices as well as graphene-based nano composite materials. In particular, Graphene Labs and Lomiko recently launched a new venture, Graphene 3D Lab Inc. focused on development of the graphene-based composite materials for applications in 3D Printing.”

This is an excellent summary of the breadth and scope of this strategic alliance that makes Lomiko stand head and shoulders above the many claimants to a mere graphite deposit somewhere.

Graphene is being hailed as the miracle material that will be “game changing” for many industries (and no, it is not “all hype,” serious progress is being made) and Lomiko and its associates are leading the way. Pay particular attention as well to the highly-qualified personnel at Graphene Labs, where both Dr. Elena Polyakova and Dr. Daniel Stolyarov are on the advisory board of Lomiko. There is a three-way association of a commercial company with a social network following of 5,000 people, highly qualified researchers at a prominent university, using graphite exclusively from Lomiko’s Quatre Milles 3780 hectare property in Quebec with near-surface mineralization, only 70KM from the original Timcal graphite mine in Quebec. Here are just some of the things that impress me:

  1. Insiders own 27% of the shares.
  2. An average of 1.4 million shares (101,603,950 total shares out) have traded daily over the past few months.
  3. They have already raised $2 million in flow-through financing in Quebec and have an additional $2 million in the works to add to working capital. The lack of capital being my main concern that caused me to defer a profile when first discovered.
  4. A highly qualified scientist from Europe, Dr. Dietmar Siebholz, with extensive graphene experience is not only on Lomiko’s Advisory board, but also a significant investor. His impressive resume is found here[14], where you should read all the management profiles.

Near the end of this presentation[15], you will find a very impressive list of just a few of the prominent academic and industry/commercial customer list Graphene Labs has already attracted. Note also in their presentation the association of graphene with lithium and rare earths. In both of those areas I was “early to the party” and had numerous 10 baggers.

Here are just some of the key markets in which this virtually integrated cooperation of three entities is pioneering: 1) pebble bed nuclear reactors; 2) 3D printer technology; and 3) fuel cells, which may become a future column as this sector is on fire with at least three companies making over 100% gains over the past year or even a few months. Those who think the graphite industry is still 10 years away from viability are likely to miss a lot of profit available for speculative investors in innovative companies like Lomiko. With a market cap of only $9.7 million, this is indeed a true penny stock, but remember: a lot of highly successful companies, which you now wish you owned 10 years after their debut, started out as penny stocks! Before the market meltdown the stock price was as high as $0.19 and I could have bought it at its low of $0.05, had I acted as soon as I discovered it. But, I wanted to make sure I was not selling you on a “pig in a poke” by profiling it before major financing was assured.

Finally, and perhaps best of all, this is not a “one trick pony,” given they have another 5400 hectare property in British Columbia that has a history of 150 years of placer mining in the area of their Vines Lake zinc and gold property. So, not only is there some diversification, but the option remains to: develop the property; joint-venture it if the graphite property development takes priority; and/or sell it if further financing is required. No inside knowledge, just speculation on my part. Well that’s it for this time, even though this is a little shorter column than normal because I had to start again from scratch, but that might be a good thing because I think you will find there is a lot of research to do if you check out every website and video to validate my profiled companies you may have missed out on.

Late Breaking News: Learning from a billionaire…Eric Sprott explains his perception of what the precious metals markets are likely to do[16].

Reviewing I find that I own only three companies mentioned, B2Gold, Turquoise Hill, and Asanko, who bought out my PMI Holding, so I have more to buy when hold period is over.

Endnotes:
  1. Myron’s past commentaries can be seen here.: http://stockgumshoe.com/author/takeprofits/
  2. alert in respect to a takeover offer from Hudbay Minerals (HBM in New York and Toronto) for Augusta Minerals (AZC in New York and Toronto).: http://online.wsj.com/article/PR-CO-20140212-917916.html
  3. update on the Reed copper mine: http://www.hudbayminerals.com/English/Our-Business/Development/Reed/default.aspx
  4. see announcement in comments section of previous column: http://www.stockgumshoe.com/2014/01/microblog-thoughts-from-myron-ending-the-month-on-three-high-notes/#comment-1240945
  5. here are a few resources to tap into: http://upturn.caseyresearch.com/
  6. on one press release: http://www.avrupaminerals.com/news/index.php?&content_id=155
  7. this update to shareholders: http://www.lakelandresources.com/_resources/LK_Shareholder_Letter-Jan_10_2014.pdf
  8. Here is a corporate update of Asanko: http://online.wsj.com/article/PR-CO-20140213-909491.html
  9. I profiled the company: http://www.stockgumshoe.com/2013/11/microblog-thoughts-from-myron-rare-earths-colored-diamonds-and-graphite/
  10. here: http://www.lomiko.com/public/files/others/3D%20Graphene%20Lab_Overview_Dec_2013.pdf
  11. here: http://www.graphenelabs.com/Company-News-s/1828.htm
  12. here: http://www.graphenelabs.com/Media-Coverage-s/1823.htm
  13. this article about the group’s graphene supercapacitor prototype: http://www.menafn.com/28a18a1b-4536-48b6-aec9-2de6c01e942f/Lomiko-Graphene-Labs-and-Stony-Brook-University-Project-ProducesGraphene-Supercapacitor-Prototype?src=main
  14. here: http://www.lomiko.com/corporate/management.html
  15. Near the end of this presentation: http://www.lomiko.com/public/files/others/LOMIKO_(LMR)__Powerpoint.pdf
  16. Eric Sprott explains his perception of what the precious metals markets are likely to do: http://www.sprottmoney.com/sprott-money-weekly-wrap-up

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