Graphite Investors Should Look For Large Flakes

investingCompanies that boast 80,000 ton-per-year production or high purity levels don’t always impress Kiril Mugerman, mining analyst with Industrial Alliance Securities. Why? Because finding buyers for all those tons is a huge challenge, and thrifty end-users like to purify lower-grade graphite in-house. In this interview with The Mining Report, Mugerman explains why he looks for smaller projects that can hit revenue targets, and indicates which of the 176 graphite projects out there are worth your attention.


The Mining Report: In May 2012, you described graphite as “the black gold of the 21st century.” Do you still believe that?


Kiril Mugerman: By “black gold,” I was referring to both the rush-in exploration for graphite and to the potential high demand for it. I still believe in strong demand for graphite, and that could result from the proliferation of electric vehicles, new modes of power storage, graphene and many other applications.


TMR: Are new applications behind graphite demand?


KM: For new growth in demand, our main focus remains the increased use of graphite in batteries and energy storage. As for the more traditional demand, because graphite is a unique material, it is used in many different applications that contribute to a steady growth in demand over the long term. It’s used in refractories like crucibles and in blast furnaces, for friction materials like brake linings and pads in cars, as well as in lubricants, electrodes, steel making and nuclear reactors. Construction materials, industrial paints and heating and heat conductivity systems that use graphite are all already being used in the industry.


As far as exponential growth in demand goes, electrification of vehicles and energy storage are the two technologies most likely to accomplish this.


TMR: Graphene has been described as a material with almost unlimited potential. Do you think that’s true or hype?


KM: The potential is certainly there. I’ve had the opportunity to visit some of the private companies in this field and see some samples and applications they are working on. It’s fascinating. Unfortunately, it’s still in the R&D stage, and it’s too early to say which applications will become reality.


TMR: What’s your forecast for graphite supply and demand?


“For new growth in demand, our main focus remains the increased use of graphite in batteries and energy storage.”


KM: Chinese growth slowed down over the last 18 months, and the steel industry slowed down with it. So, of course, demand for graphite for the steel industry declined as well. But as we expect to see increased growth from the BRIC countries (Brazil, Russia, India, China), we should see short-term demand increase by 1–2%.


In the longer term, we model a 2.5% annual growth in demand and a 2% annual increase in production.


TMR: So graphite supply will not meet demand.



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