After changing its name and installing new management, First Graphite Corp. (TSX: V.FGR, Stock Forum) has entered the race to develop viable graphite projects in three Canadian provinces.
Like other companies in the space, the Vancouver-based junior (previously known as Solace Resources Corp.) will be hoping that its graphite properties in British Columbia, Saskatchewan and Quebec are sufficiently attractive to generate offtake agreements with end users in the lithium battery, fuel cell and nuclear reactor industries.
The Holy Grail in the graphite exploration sector is the high purity, large flake graphite which is consumed in the steel and battery industries. As a result, would-be suppliers must show that they can produce graphite in sufficient quantities and of a quality that is likely to attract end users who are willing not only to purchase the product, but also to participate in financing new mines.
However, in an interview with Stockhouse, First Graphite director Benjamin Curry said the company’s biggest challenge will be attracting the technical experts in the geology field that are needed to assist the company in evaluating new projects.
“The difficulty with a lot of companies in the graphite space is that there are not a lot of graphite geologists out there,’’ said Curry. He said this is because investor interest in graphite has only recently picked up after a long hiatus that goes back to the 1980s when China ramped up its production and global prices sank.
Another mining official agreed. “There aren’t that many people who are readily available,’’ said Gary Economo, Chief Executive Officer of Focus Metals Inc. (TSX: V.FMS, Stock Forum), which is working to update a 20-year-old feasibility study for its flagship Lac Knife graphite project near Fermont, Quebec.
As Stockhouse reported in January, a combination of factors has sparked renewed investor interest in graphite, an industrial mineral that is normally associated with steel production, lead pencils and golf clubs.
They include export restrictions in China (producer of roughly 70% of the world’s graphite) and speculation that an already growing market will be spurred on by demand from new applications, including lithium ion batteries, fuel cells and nuclear reactors.
Industry officials are also eyeing the potential impact of Graphene, a new “wonder material,” that was discovered in 2004 by researchers at Manchester University in England, and could be used to manufacture transparent electronics that are stronger, cheaper and more flexible, researchers say.
This type of speculation has enabled companies such as Northern Graphite Corp. (TSX: V.NGC, Stock Forum), Focus Metalsand privately-owned Ontario Graphite Ltd. to raise almost $50 million last year for graphite projects.
That prompted Vancouver investment firm Zimtu Capital Corp. (TSX: V.ZC, Stock Forum) to acquire a portfolio of early stage graphite properties which have been optioned out to companies such as Lomiko Metals Inc. (TSX: V.LMR, Stock Forum), Standard Graphite Corp. (TSX: V.SGH, Stock Forum) and First Graphite.
Under an agreement announced on April 10, 2010, First Graphite has been granted an option to earn a 100% stake in the Henry graphite property, which covers 22,853 hectares in north east Saskatchewan, near La Ronge.
Under the deal, First Graphite has agreed to make a cash payment of $155,000, and issue two million shares to the optioners (Zimtu and privately owned Dahrouge Geological Consulting Ltd. of Edmonton, Alta.), who can also retain a 2% net smelter royalty on the property.
Zimtu currently holds roughly 10% of First Graphite, which traded this week at 45 cents, giving the company a market cap of $8.3 million, based on 18.4 million shares outstanding.
Located about 20 kilometres southwest of the Strike Graphite Corp.’s (TSX: V.SRK, Stock Forum) advanced Deep Bay graphite project, the Henry property is thought to host multiple zones of graphite mineralization.
While actively seeking to acquire additional advanced stage projects, Curry said First Graphite wants to complete a 43-101 compliant report on at least one of its properties and nail down offtake agreements with end users.
In keeping with those goals, the junior is working to raise $1.4 million from a non brokered private placement priced at 40 cents that could be used to fund initial exploration on the Henry property and any further acquisitions. “We could do a drill program on the Henry property with that capital,’’ Curry said. “But we want to see further acquisitions before we commit any capital to actual drilling.’’
Looking ahead, Curry said management thinks the company could be a good fit for a bank led financing that could raise up to $6 million. Proceeds may be used to fund drilling programs and any testing or processing work that is needed to attract end users. “Our plan is to be fairly aggressive,’’ Curry said.