RE:ENERGIZER MENTIONEDTHE EXCERT FROM THE ARTICLE WHICH CONTAINS ENERGIZER
TER: You also analyze graphite for Dundee. Any picks?
DT: We are seeing renewed interest in the graphite sector. The rumor that Apple will be building batteries for a driverless car has excited the market. Tesla remains a key topic of conversation. Graphite demand could grow at near double-digit rates, about 9% per year into the next decade.
Future demand will be powered primarily by the manufacture of electric vehicle batteries. We also see stable growth coming from historical industrial applications, such as refractories and crucibles. Graphite supply is 80% concentrated in China. Current demand is 1.2M tons per year, but supply exceeds demand by 200,000 tons. That picture is set to change. It will require two to three sizeable mines to maintain a stable supply balance going forward.
There are wildcards, of course, likeTesla Motors Inc.'s proposed Gigafactory. Graphite mine shutdowns in China due to pollution could pressure the supply/demand picture. It is worth noting that very few public companies operate graphite mines. But late last year we launched coverage on three graphite names. We have a Buy rating and a C.A. $0.90/share target on our top pick,Mason Graphite Inc. We have a Buy rating and a C.A. $0.60/share target on Focus Graphite Inc., and a Buy rating and a C.A. $0.40/share target on Energizer Resources Inc. It is our expectation that financing is key to which graphite companies survive, and that first to market is an important factor.
Energizer Resources has a 75% ownership interest in the Molo project in Madagascar. This project is predominantly large and jumbo flake, and it looks easy to mine at the surface. We see a potential for offtake that could expedite the big project financing required to develop Molo.
Madagascar remains relatively unknown to investors and poses a challenge to those seeking equity capital. But Energizer's location situates it well for quick and low-cost shipments to Asia. Energizer could lean more on the strategic alliance with end users. But the product stands up well in testing, meeting all the requirements for a variety of uses. A recent feasibility study provided good improvement over the two-year drill program. The study sets up the company for a potential project financing within in the next six months.