Pat McKeough responds to many requests for advice on specific stocks and other questions on investment and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week, we received a question from one of our Inner Circle members about a junior mining stock’s attempt to achieve a breakthrough in graphite. Graphite has an increasing number of uses and 70% of the world’s supply is currently produced in China. Pat looks at Northern Graphite’s progress in developing its Bissett Creek property and how its prospects will be affected by the global outlook for graphite. Q: Pat: What is your current assessment of Northern Graphite? Thanks! A: Northern Graphite Corp., (symbol NGC on Toronto; www.northerngraphite.com) has been exploring and developing its wholly owned Bissett Creek graphite property near Mattawa, Ontario, since 2002. The company changed its name from Industrial Minerals Canada Inc. on March 1, 2011. Its parent company, Industrial Minerals Inc., based in Delaware, owns 31.5% of Northern Graphite. Northern Graphite first sold shares to the public in April 2011, when it raised $4 million by issuing 8 million common shares at $0.50 each. It subsequently listed on the Toronto exchange. The company believes its Bissett Creek deposit contains large crystal-graphite flakes, which command a premium price. It has also received positive results from tests to determine whether the ore can be processed into high-quality graphite concentrate that is ready for sale. Northern Graphite has completed a positive feasibility study and has started the permitting processes to build a mine. The company continues to drill to further expand the deposit to extend the life of a potential mine. [ofie_ad]
Graphite increasingly used in smartphones, laptops and tablets
Many investors are interested in graphite because it is used in the lithium-ion batteries that power electric cars. But it has a number of other profitable uses, as well. For example, when used as an additive, it increases steel’s carbon content and makes it stronger. In the automobile industry, graphite is used in gaskets, brake linings and clutch materials. It also has a range of other industrial uses, including in components of electric motors, batteries, lubricants and pencils. Graphite is increasingly used in electronic devices, such as smartphones, flat-panel displays, laptops and tablets. China now produces about 70% of the world’s graphite. It keeps about 60% of its output for its own use. Northern Graphite’s shares are down lately on lower prices for graphite. Prices have declined from highs of about $2,800 U.S per tonne for high purity, large flake graphite to between $1,400 and $1,800 per tonne due to the economic slowdown in China and continued weakness in the U.S. and Europe. Graphite demand should rebound as the global economy recovers. However, there are potentially mineable deposits elsewhere in Canada and around the world that could be brought into production if prices rise high enough. In the Inner Circle Q&A, Pat looks at the global outlook for graphite demand and whether higher prices might actually work to the disadvantage of Northern Graphite. He concludes with his clear buy-hold-sell advice on the stock. (Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members What factors do you look at when you consider a junior mining stock? Have you had at least one particularly good result with a junior? What do you think were the most important factors in the stock’s success? Let us know what you think.
