“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 o