This “Pure Carbon” pitch from the Angel Investing folks has driven quite a few questions our way, so it’s time for some answers — let’s pull the Thinkolator out of the garage and see what it can find.
The as is for Gerardo Del Real’s Resource Stock Digest Premium, and the spiel is mostly about how there’s a rare material with “0% production” in the US, and with huge demand — and that a “brand-new source is about to open for business.”
And, of course, the key claim:
“If you act now, one flip of the switch could make you wealthy.”
Which is the main problem, of course — how on earth are you supposed to rationally consider an investment once you’ve got that “make you wealthy” idea planted in your brain?
So first, let’s all just clear our heads. Get rid of the “make you wealthy” bit.
OK, so what’s this “one of the rarest materials in the entire world” thing about? Let’s pull a few clues from the ad for our edutainment:
“You’ve probably already heard on the news about global shortages of uranium, lithium, and precious metals.
“And it’s true… those resources are in high demand… investors who buy stock in the right resource companies can make millions.
“There are thousands of success stories of investors who have earned returns like 75%… 125%… even 291% and higher.”
“I want to show you how to make money by supplying the one rare element that the U.S. military, Apple, and Tesla MUST HAVE for almost every technological device they build.
“I’m not talking about silicone or copper — this resource is even more rare and essential.
“You see, this resource is the primary ingredient in the lithium-ion batteries that power your cell phone and laptop…
“These lithium-ion batteries power electric cars, fork lifts, trains, submarines, battleships… even entire power grids.
“As the Washington Post reports, ‘the demand keeps on increasing…'”
And he makes the point that yes, there’s a lot more of “other ingredients” in a lithium-ion battery than there is lithium… and he says that 80% of what goes into these in-demand batteries is “Pure Carbon.”
So what the heck is that? Are we going to run out? As with all battery pitches, the focus is on Tesla’s Gigafactory…
“When it comes fully online, Tesla’s Gigafactory will produce more batteries in a year than were produced in the entire world just five years earlier.
“These batteries already power the 1,235,000 electric cars on the road today…
“And they’ll power the millions more vehicles expected to be on the road by 2020.Are you getting our free Daily Update
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“Currently there are only 85,000 tonnes of Pure Carbon produced in a year — and the Gigafactory is expected to consume 115,000 tons a year all by itself.”
OK, so that conjures up some enticing notions about resource scarcity and higher prices… what exactly is this stuff?
It is, broadly speaking, graphite. Graphite is a crystalline form of carbon, and it is both mined directly in fairly high-purity flake form and created synthetically from other forms of carbon (like coal). And it is used in most lithium-ion batteries as an anode material.
The larger user for graphite is still steelmaking — graphite is used in refractories and as a carbon-raiser for molten steel, in addition to other industrial demand for lubricants, brake linings and, yes, pencils. And yes, like with some other strategic metals, China is the major producer and refiner of graphite — partly for strategic reasons, partly because steelmaking is concentrated in China, and partly because no one much wants to have a graphite processing plant in their backyard.
And, apparently, there’s an exciting new graphite project just starting up in Sweden…
“The UK, Europe, Japan, and South Korea are all in the same boat.
“The entire world is forced to buy from China.
“That is, until now.
“One Flip of the Switch Is About to Change It All…
“Up in the forests of rural Sweden, a brand-new mining operation is about to open for business.
“Mining bulldozers are already moving the earth away to reveal one of the highest-quality lodes of Pure Carbon on the planet.
“And it’s about time…
“Up until two years ago, there hadn’t been a new non-Chinese mine since the 1980s!”
And it’s not enough to make up a name (“pure carbon”) for this highly refined graphite, we also have to make up a name for the little company who owns the mine…
“This mine is owned by a small raw materials company I sometimes call ‘Rare Inc.,’ because it specializes in supplying the world’s rarest and most valuable raw materials that are absolutely essential to today’s technologies.
“These raw materials are literally what make all modern technology possible.
“Rare Inc. opened this mine in 2014 and it’s spent the last few years streamlining its production.”
Most of the rest of the spiel is an argument that the billions being poured into lithium-ion batteries and electric vehicles will bring a windfall for graphite… and, as these ads so often do, he quotes some reputable sources:
“‘Now the rise of the electric-car industry promises a huge surge in the [Pure Carbon] business. Making batteries big enough to power cars will cause a daunting leap in demand.’ —The Washington Post“
That’s from an article about the environmental impact of China’s graphite factories, in case you’re curious.
And he implies that Buffett is investing in this big growth story, too…
“All of this demand has attracted even the most conservative investors…
“Including Warren Buffett.
“His current investment includes heavy ownership in lithium-ion batteries, electric buses, and industrial equipment.
“Buffett has reviewed the same numbers that I have, and that’s why he’s comfortable making big bets in strategic companies.
“But here’s the unfortunate part: you don’t have access to the same opportunities that Buffett does.
“Even if you wanted in on his electric battery business, you’re completely shut out as an individual investor.
“That’s what makes this mine in Sweden such a rare opportunity.”
That’s not really true. Buffett’s Berkshire Hathaway does have a substantial (though still fairly irrelevant in the vast scheme of things for Berkshire) investment in BYD, which is a lithium-ion battery maker that has gradually turned itself into an electric car and bus company over the past decade. And you could buy shares if you wanted to, they’re listed in Hong Kong with ticker 1211 but also trade with some liquidity OTC in the US at BYDDF and BYDDY. Not that it’s really a play on this “pure carbon” or even on pricing of other battery raw materials, since the price of lithium or carbon or cobalt is not a major component of the cost of a new electric car or bus.
But anyway, back to this “Rare, Inc.” pitch — how about some more info about the company being teased?
“I got the CEO of this mine in Sweden on the phone to discuss the breathtaking potential of this mining property.
“He confirmed that demand has been growing by leaps and bounds, and that its Pure Carbon refinement facility has never been more needed than right now.
“‘We’re in a unique position with our facility in Sweden, which is fully permitted and operational ready… we’re able to supply this growing demand.’ —CEO of Rare Inc.”
And apparently this mining company is also planning to produce some other valuable minerals:
“Rare Inc. knows that once Apple, Tesla, and the U.S. military have locked in contracts, it will be easy to sell them hard-to-find commodities with even fatter margins.
“That’s why Rare Inc. has secured mines and sources for lithium and tungsten.
“But best of all is its unique plan to sell rare earth elements (REE)…
“It has another mine in Sweden, just a few hours away from its Pure Carbon mine.
“It’s the most significant rare earths source in all of Europe, and it