Why Are Graphite Shares Soaring?
Published February 25, 2013 by Alan Goddard
Above: Billionaire investor Warren Buffett made a quick $285m buying and selling silver. Some experts think graphite could be next.
2013 Stock to Watch: National Graphite Corp. (NGRC)
In 2012 shares of low-priced graphite companies unabashedly exploded in price.
Have you heard of Montezuma Mining? They’re a small, diversified outfit with an interest in graphite. From its low to its high, Montezuma exploded from 2 cents to 36 cents a share.
Such a gain is uncommon but not unheard of – Especially in the high-risk, high-reward mining industry.
But what is unheard of is many companies (all in the same industry) making equally…
Eye-Popping Share Price Movements
Ever heard of Graphite One Resources? No? It went from 7 cents a share to 36 cents. Any $7,500 invested turns into $38,571! (Up 5.1 times)
What about Buxton Resources. They did even better… From 3 cents a share to 34 cents. $7,500 turns into $84,999 (Up 11 times)
In fact, I bet you haven’t heard of any of them:
•UP 9.4 times – Graftech International – $2.85 to $26.00. $7,500 turns into $68,421
•UP 21 times – Zoltek – $2.20 to $46.00. $7,500 turns into $159,818
•UP 17 times – Montezuma Mining – 2 cents to 36 cents. $7,500 turns into $135,000
•UP 6.4 times – SGL Carbon – $7.25 to $47.00. $7,500 turns into $48,620
•UP 7.4 times – China Carbon Graphite Group – 44 cents to $3.25. $7,500 turns into $55,397
•UP 4.1 times – Northern Graphite – 80 cents to $3.30. $7,500 turns into $30,750
Like popcorn kernels on the kitchen stove, these low-priced graphite miners have one by one exploded in price. I have constructed a proprietary index of junior mining companies involved in graphite exploration – Click the chart for a closer look.
Above: my custom index of graphite stocks.
I’m less interested in the macro reasons why graphite is rocketing in price. As a bottom-up investor I’m interested in…
Which Graphite Company Will Be Next
To Go 10-For-1 On Investors’ Money?
As regular readers of my column know, every year I name a “stock to watch”. A company I believe will handedly outperform the market in the next 12 months. And if you haven’t guessed already, this year I’ll be picking a graphite stock! (I admit; graphite has been something of an obsession for me in the past three months!)
Before I tell you which graphite stock I believe will be next to soar – Let me quickly recap why everything to do with graphite is booming.
You’ see the reason graphite stocks are soaring is because the price of graphite has rocketed in recent years. And many experts think this is just the beginning of what could be a huge graphite boom.
Obviously as the price of graphite rises, the value of companies who own graphite properties also rises in lock-step.
A Quick Lesson in Economics:
When you’re analyzing the price of a commodity it all comes down to supply and demand.
Think about it this way; why are waterfront homes so expensive? Because supply is restricted naturally and demand is high for obvious reasons.
This combination of high demand and low supply leads to a very high price level.
When analyzing commodities the logic is exactly the same. Analysts look at current and expected demand and they look at current and expected supply.
The Supply/Demand Imbalance in Graphite…
First let’s take a look at supply.
Put simply, the supply of graphite is being forcibly restricted by China.
China already controls 69% of Graphite production. In the past they’ve been willing to export the graphite they didn’t need.
But recently China has stopped exporting their graphite and instead started BUYING up all the graphite they can.
China knows they’ll need a lot of graphite to supply their industrializing economy and see control of this vital resource as a strategic advantage.
The International Resource Journal recently revealed the Chinese stranglehold that will drive prices higher: “You’ll see the Chinese authorities continue to tighten the rein around graphite and keep more of it for their own uses.”
Reuters says China can’t be trusted to share graphite: They state, “Prices rose last year in part because of concerns that China, which controls 70% of global supply, will choke off exports as it did with rare earth metals.”
The Street says governments are getting nervous—as they should: They write, “Government bodies are taking notice of just how crucial secure supplies of graphite are.”
China is Forcibly Restricting Supply
And what about demand?
Demand is already towering above available supply. This is clearly shown in the rise in price of Graphite over the past decade. (Remember, when demand is greater than supply the price rises).
Graphite has already risen in price from $500 to $3,000! But unlike Gold, demand is widely expected to continue rising.
Experts believe green initiatives like li-ion batteries, fuel cells, solar energy, semi-conductors and nuclear energy could use more graphite than all current uses combined.
That’s not to mention graphite is a key component in many of the now top selling products in the world: smart phones (think apple, android, blackberry), tablet computers (think ipad, kindle), electric & hybrid vehicles (think tesla motors, toyota prius).
So here’s the situation: Demand is expected to double or more and supply is being purposefully held down by China.
What Will Happen?
I believe the only thing that can happen is the price of graphite will rocket. I’m not alone in that belief – and it’s no big secret. Pretty much everyone on Wall Street knows the price of graphite can only go one way.
The problem is finding a low-priced mining company with large exposure to graphite pricing. Note the key word here “low-priced” – As detailed at the top of this article most mining stocks with exposure to graphite have already soared in price.
So Which Graphite Stock Will Be Next?
I did a lot of research. I spent countless nights searching for an undiscovered mining company with exposure to graphite.
Not only that, I wanted to find a company with the highest quality mining property. With my background in resources I was able to analyze the geological data behind each graphite property.
After much digging, sifting, sorting and analyzing I came across a small Nevada based company called National Graphite (NGRC). What interested me at National Graphite was their Chedic Voltaire graphite property just outside of Carson City, Nevada.
Warning: This Might Bore You
For the resource bugs and trained geologists amongst you; here’s what I found:
The Chedic Graphite mineralized zone has a strike length exceeding 3,000 feet and has a width that ranges from 30 to 75 feet. The self-potential geophysical survey has delineated a continuous enriched graphite structure from the mine workings to Exploration Pit #2 located about 2,200 feet west of the Chedic Mine open cut.
The graphite enriched zone varies from 30 to 75 feet in width, a strike length of 3000 feet and has the potential to exceed 1,000 feet in depth based on the vertical dimension of the metavolcanic pendant. Based on the above assumptions the Chedic Graphite enriched structure has the potential to contain over one million tons of graphite mineralization.
Did you miss it?
“[National Graphite’s Property] has the potential to contain over one million tons of graphite”
I didn’t miss it. That fact hit me like a Mack truck.
Not only is National Graphite trading at less than 20 cents per share (at time of writing). This undiscovered gem also owns one of the most impressive graphite properties I have ever seen.
As if it couldn’t get any better… The Chedic Volatire property is located just 4 miles west from Carson City. Which means infrastructure and road access is not problem. This graphite property is also located in Nevada which happens to be one of the most mining friendly states in America.
Could National Graphite be the next Montezuma Mining? China Carbon Graphite Group? Or Northern Graphite?
I’m not sure, but I am confident enough to make National Graphite (symbol: NGRC); a burgeoning mining company from Nevada my 2013 Stock to Watch.
Your move, Buffett.
14 Responses to Why Are Graphite Shares Soaring?
Jeff newman February 25, 2013 at 12:37 pm
Hello warren. the reason graphite stocks are soaring or holding steady is simple. towns, cities, countryside are not going to live in the dark. this is all about orgin/ manufacture. also as i learned on the tv to contract or even replenish let say an amusement park you are still going to need graphite and this will not last forever. the clock is ticking, the future will be bright. build.
william sweeney February 25, 2013 at 10:36 pm
this should be an interesting stock to watch, and for 20 cents a share can’t go wrong
DJ February 26, 2013 at 1:49 pm
Please send me more information. Please include how to purchase some of this stock.
Sung B. Hsu February 26, 2013 at 4:46 pm
Please let me how to invest some in NGRC.
Idania February 26, 2013 at 6:21 pm
I would like to invest in this stock and take a chance on it. But could you first give me some advice as how to do this. I am not rich or anything like that but willing to see how I would come out at doing this. Your attention and advice would greatly appreciated.
Lwanda Okello February 26, 2013 at 9:14 pm
If Dr. Buffett said it, you can put your money on it.
Kent Hadsell February 27, 2013 at 12:26 am
I would realy like some info on how to get into this stock. I am in some other stocks that are not doing very good and would like a chance on this one.
Christine February 27, 2013 at 5:34 pm
How long has this company been in existance and question: why has this company not soared along with all of the other graphite companies at this point?
robert hamilton February 27, 2013 at 8:41 pm
please send me all the imformation
Yvonne Kennedy February 27, 2013 at 8:41 pm
I would like to invest in this stock and take a chance on it. I don’t have much money I am a retired female living off of a pension and social security. But I would like to invest in this stock (National Graphite). But could you first give me some advice as how to do this. I am not rich or anything like that but willing to see how I would come out at doing this. Your attention and advice would greatly appreciated.
Annie Williams February 27, 2013 at 11:06 pm
I am a senior and have never invested in stock before but this have gotten my interest. How can I get started.
Lorna Graben February 28, 2013 at 1:37 am
Let me know how to invest in NGRC please.
Edward Reeve February 28, 2013 at 2:33 am
I would like more info on minimum amount to invest.
Beverly Hammond February 28, 2013 at 11:31 am
I too would like to have more info on NGRC for investing the mínimum amount…
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I agree Gary. You can't underestimate the impact the Chinese economy is having on the demand for natural resources and industrial materials on a global scale. Most people don't realize the importance that graphite has in modern battery technology and it's burgeoning use in supercoductors and nanotechnologies. It's not about pencils anymore!
As a fairly successful small cap stock investor, I've done some research on NGRC and believe this company is one to watch.
Sentiment: Strong Buy