Alabama Graphite
- Jan 10, 2013
- 7 min read
Alabama Graphite
GRAPHITE RISING
One of the most exciting metal stories at the moment is graphite. Graphite is not sexy or talked about like gold or silver or some other precious metals. The uses for graphite are widely known . Graphite is used in steel, carbon fibre technology (most new planes and cars are being made of graphite based material because it is lighter and saves on gas costs). The new Boeing 787, for example, is almost entirely graphite based. It is also used in lithium ion batteries.
Here is some background information on graphite per wikipedia:
Graphite is an allotrope of carbon . It was named by Abraham Gottlob Wernerin 1789 from the Ancient Greek γράφω (graphō), “to draw/write”,[4] for its use in pencils, where it is commonly called lead (not to be confused with the metallic element lead). Unlike diamond (another carbon allotrope), graphite is an electrical conductor, a semimetal. It is, consequently, useful in applications such as arc lamp electrodes. Graphite is the most stable form of carbon under standard conditions. Therefore, it is used in thermochemistry as the standard state for defining the heat of formation of carbon compounds. Graphite may be considered the highest grade of coal, just above anthracite and alternatively called meta-anthracite, although it is not normally used as fuel because it is difficult to ignite. There are three principal types of natural graphite, each occurring in different types of ore deposits:
1. Crystalline flake graphite (or flake graphite for short) occurs as isolated, flat, plate-like particles with hexagonal edges if unbroken and when broken, the edges can be irregular or angular; 2. Amorphous graphite occurs as fine particles and is the result of thermal metamorphism of coal, the last stage of coalification, and is sometimes called meta-anthracite. Very fine flake graphite is sometimes called amorphous in the trade; 3. Lump graphite (also called vein graphite) occurs in fissure veins or fractures and appears as massive platy intergrowths of fibrous or acicular crystalline aggregates, and is probably hydrothermal in origin. Highly ordered pyrolytic graphite or highly oriented pyrolytic graphite (HOPG) refers to graphite with an angular spread between the graphite sheets of less than 1°. This highest-quality synthetic form is used in scientific research, in particular, as a standard for scanner calibration of scanning probe microscope.[5][6] The name “graphite fiber” is also sometimes used to refer to carbon fiber or carbon fiber-reinforced polymer. The highest grade also can go for up to 2500 dollars a ton whereas the lower grade graphite will sell in the 1500 dollar range.
Graphite is interesting because of the China factor and robust demand.
The U.S. right now imports 100 percent of its graphite . I have enclosed a graph below of graphite supply. Note that China controls over 70 percent of world graphite supply. As you can observe from our graphs, this is a very strategic mineral. The European Union has actually just judged it as a strategic metal.
Source: resourceinvestor.com courtesy of Micky Fulp
The problem with graphite as a investment is that the community of graphite producers is very small. As most of the production is done in China, there are very few companies outside of that country. Most of the companies are small companies. However, the problem with a lot of these companies is that they are really nowhere close to production and realistic profitability.
Alabama Graphite
The graphite story first came to me a few months back. I was up in Toronto on one of my business trips. I was there to visit a few companies and contacts and spend time with my family. Some friends in the industry suggested I meet a guy named Daniel Spine who ran a hedge fund out of Atlanta, Georgia. We hit it off. Firstly, we had the sports connection going on as he is a big University of Georgia and Steeler fan and I am a big LSU and Raiders fan. He also had a real feel for the macro story of the looming U.S. debt crisis. We talked about money printing, record deficits and the coming tank in the dollar. He was asked to sign on as CEO of Alabama Graphite as he understands how to get things done in Alabama and he has visited and studied more than 70 mining projects around the world in the past thirteen years. He knew exactly what a well-run exploration should look like. And he wanted to model an exploration company from his personal expectations and from the few well-run explorations he had seen over the years.
In addition, he told the graphite story fantastically . I decided to go down to Alabama to see their property. Few people know that Alabama had a graphite boom in the earlier part of the 20th century. From 1910 to 1953, Alabama had 43 major mines and 30 processing plants and produced over 100 tons of graphite .
However, as resource prices dropped in the fifties and sixties, these mines went out of production.
When I go to a property, the most important thing for me is to see whether this thing can actually go into production. The problem with many projects is that they are never going to go to produce anything other than high expectations and big disappointments. Lots of these exploration projects, especially in South America, can be surrounded by bush in the middle of no where. It would take literally tens, if not hundreds, of millions of dollars to get these things into production.
What I liked from Alabama from the beginning was the closeness of sophisticated infrastructure to the exploration properties. We got off at the Atlanta airport, then drove about 2 ½ hours to the office near the Coosa project . All of this travel occurred on a paved highway that goes through the beautiful hills of Alabama. We then hit a dirt road near the property, which was well manicured and just fine for transporting minerals. The property was right near power lines, infrastructure etc…
In addition, the people on the ground want to have this mine there. This is in an economically distressed area of Alabama where a lot of jobs have been lost over the past twenty years. Alabama Graphite has taken the first steps to meet with the regulatory bodies responsible for issuing permits in Alabama. They have also met and corresponded with the local community and local and state environmental groups to make sure that every stakeholder is apprised of plans and the progress on the ground. Remember, Alabama is a red state and poor and they want jobs. When you put in the nationalistic factor of securing a supply of a strategic metal for the country, it works out even better.
Graphite Prices
I was on the ground there and also thought it was one of the quickest moving operations I have ever seen. Drill holes were up everywhere (we even saw one of them being drilled) and the the developing of the property was moving very quickly. With the people on the ground wanting to be part of this mining project, I do not think advancing the project will be too tough. It is estimated that they can build up a proper 43-101 resource within the next few months and then maybe be in production by 2014 or so.
Core from the core shack.
Recent drill results were very encouraging. Holes AGC-12-007C and -009C are two of twelve stratigraphic holes drilled to gain an understanding of the lithologic section across the company’s mineral lease in Coosa County. Both holes were on the northeast fence of holes that will be used to guide resource development drilling within the same suite of rocks. Samples were logged and sampled at the company’s facility in Sylacauga and shipped to ALS Minerals in Elko, Nevada, for analysis. The samples were analyzed for graphitic carbon (Cg) by the LECO method.
Above is very high grade graphite from the property.
Both holes were drilled at an azimuth of 300° and a -50 degree dip in order to intersect the graphitic schists perpendicular to foliation. In AGC-12-007C the interval from 36.58 to 83.82m (120 to 275 feet) averaged 2.87% Cg. Included in this 47.24m (155 feet) interval was 6.10 meters (20 feet) grading 4.62% Cg. In AGC-12-009C the interval from 27.43m (90 feet) to the bottom of the hole averaged 2.97% Cg. Included in this 124.97m (410 feet) interval was 9.14m (30 feet) grading 3.55% Cg and 19.81m (65 feet) grading 3.78% Cg.
In addition, most of the graphite seems to be in the middle to higher end in terms of grade which means higher prices when the mine finally goes into development and production. . The company is also in talks with the local government about permitting and moving forward with the mine.
I was very impressed when I visited the property and it’s rare that I see a project moving on so quickly. I recommend Alabama graphite which trades on the Symbol ALP on the CSNX at under 0.75 a share. Please note that I am a consultant to the company and have stock options in the company. Again note that it trades on the CSNX not the TSX! In addition, the stock also has just gotten a ticker on the pinksheets in the United States and trades under the ticker ABGPF .
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