What does a shrinking supply and skyrocketing demand equal? It equals happy investors if you can get in before the public participation phase. Right now, savvy investors are in the accumulation phase of the next massive resource trend, graphite. China controls much of the world’s graphite mines (about 75%), but a few solid companies outside of China will be well positioned to capitalize on this trend. Some analyst say investing in graphite will be a fad, some call it a fundamental change in the resource industry, whatever you call it, there is no reason you can’t profit.
The key to capitalizing on a graphite investment now is to identify the explorers and miners who are established now.
How is China positioning themselves to capitalize on the worlds upcoming need for graphite? Well, they are implementing a VAT and export duty on graphite and already importing flake graphite from North Korea. This could indicate that China is already experiencing a strain on its on graphite supply, despite being in control of three quarters of the world’s graphite. Even though China controls so much of the world’s natural graphite, much of that graphite is low grade (meaning no visible crystallinity)
So, how do you capitalize on the upcoming bullish graphite trend? I have narrowed down my research to several major criteria:
1) The country must be mining friendly
2) The projects must be close to infrastructure
3) The projects must have advanced deposit mines
4) The company must have experienced management
Given the above criteria, I found Canada, specifically the provinces of Ontario and Quebec, to be the best places to capitalize on the graphite trend. Now that the location is pinpointed, I looked at which companies have advanced deposit mines with experience management. I found Focus Graphite to fit that criteria. Focus Graphite has an extremely rich graphite deposit located at the Lac Knife deposit in Quebec. Another contender is Northern Graphite. The quality of graphite in their deposit is low-grade (2% graphite), but the deposit is open pit and with their experienced management they may be well capitalized to be a major player in the area.
If you’re still in doubt about investing in graphite, just remember, a mine is a terrible thing to waste.