Why Invest in a company looking for ‘pencil lead’?

Lomiko TSX

There are times that investments look odd on the surface but make a lot more sense once you perform due diligence. With debate circulating over the production of oil and pipelines in Canada, pencil lead might just be what we need to help move Canada to a ‘green economy’.

Graphite pencil lead is only one form of a very common substance – carbon. Coal, another form of carbon shaped our modern Industrial Revolution and the coal-bearing areas of Ozark mountains made America an Industrial giant in the early 20th century. Another form of carbon creates diamonds, one of the hardest and most beautiful gemstones in the world. The picture below does not show diamonds, but its cousin flake graphite, taken as samples from Lomiko’s La Loutre property in Quebec.

Graphite is best known as pencil lead, but it has an incredible array of new uses that make it a miracle material. A primary use for graphite is to create refractories, which are heat-resistant materials used in manufacturing steel, molds and as insulating bricks in steel foundries. In addition, graphite is useful as a dry lubricant in area liquids can’t be used, heat sinks in outdoor and stadium lighting, vehicle brakes, and as an additive in manufacturing.

However, graphite’s primary use and the reason it is considered a critical element by both the European Union and America is its crucial role in the green economy. Demand for graphite is shown in the chart below as compared to other ‘green materials’.

It exceeds copper in the ability to handle electrical current, and to conduct and contain heat. Further, it is much easier to combine into 3d printing materials – a bright future in additive manufacturing. However, the most exciting use is as an anode in a Lithium-ion battery, the most prevalent power system for Electric Vehicles.

Electric vehicles will be 50% of the cars on the road by 2040. The current EV technology depends on the Lithium-ion battery. There is 15 times more graphite than lithium in these batteries. Lithium has increased 4-fold in price due to demand. The demand for graphite is now increasing as the price for battery grade graphite materials has doubled in the last 3 years and is slated to move higher.

In 2012, China supplied 90% of the world’s graphite but that percentage has been dropping every year until. In 2018 the number was 70%. More graphite is being consumed by the Chinese lithium-ion battery manufacturing boom led by e-bikes, EVs and cellular phones and tablets. Both the European Union and the United States have declared graphite a critical mineral which indicates there is no economic alternative. This is good news for graphite companies in Canada. Canada has a good reputation as a country which is able to supplant Chinese supply of graphite and provide secure supplies. Quebec is especially important due to the proximity to Eastern American industrial centers and Quebec’s long-term and stable approach to mining industry.

Graphite prices have increased 100% in the last 3 years to over $2,000/tonne. If this were the gold markets, investors would be dancing in the streets. However, in the battery materials space, we must see a multi-year, sustainable run to call it a bull market. This will likely occur, as it did in the lithium market, as demand outstrips supply. Speculative interest in the graphite market is already beginning to take off and this should help attract major customers or partners to Lomiko’s La Loutre Project.

From the Editor

A. Paul Gill is the CEO of Lomiko Metals Inc. a Canada-based, exploration-stage company. The Company is engaged in the acquisition, exploration and development of resource properties that contain minerals for the new green economy.

Lomiko’s La Loutre is situated in the heart of Quebec’s graphite area with neighbours like Northern Graphite TSXV: NGC, Nouveau Monde TSXV: NOU and Imerys Carbon and Graphite, which has the only operating mine in North America. Infrastructure is excellent as the project is 1.5 hours from the International Seaport of Montreal along a paved highway. They are ready to drill their second resource in a high grade (10%+ Cg). At present, the project is one of the most promising in the world. The La Loutre Flake Graphite Property of 18.4 million Tonnes of 3.19% in the indicated category and 16.7 million tonnes at 3.75% Flake Graphite Inferred with a cut-off of 1.5% at the Graphene-Battery Zone.

In 2018, Lomiko signed a deal to increase the ownership of the La Loutre Property to 100%. Further, it was able to raise $ 1.5 million for development of the project and, in addition, launched several technology initiatives which will be going to the public markets in 2019.

Lomiko plan’s to complete drilling at the Refractory Zone of the La Loutre Property concentrating on an area that produced 135 m of 7.74 metres and 110 metres of 14.56% to create a second resource, complete metallurgy and a 3D model of the property and by the end of the year 2019, a Pre-Economic Assessment (PEA) which will establish a book value for the project.

Original article first appeared on http://moneytalks.net on October 22 2018

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