Western Graphite Inc. (OBB: WSGP, Stock Forum), a heavily promoted bulletin board stock with properties in British Columbia and Turkey, has seen its share price skyrocket in recent weeks to a high of $1.19 from 55 cents in early April.
Trading at $1.17 on Thursday, Western Graphite has a market cap of $68 million based on 58 million shares outstanding, making the stock a huge leap of faith for investors in what is evidently an early stage exploration play.
Whether they will be rewarded remains to be seen.
The surge in value came after the Toronto-based company changed its name from Lucky Strike Exploration and began trading on March 26, 2013 following a 10 for one stock split. This was obviously a move to take advantage of investor interest in the graphite market.
Michael Noble resigned as president, chief executive officer, treasurer, CFO, secretary and director on March 6, 2013, and has since been replaced by Seyit Kucuk a former lead prospector with Deutsche Rohstoff AG of Heidelberg, Germany. He is described in regulatory filings as a graphite specialist.
While Kucuk is now President and CEO, he is joined by former Source Gold Corp. (OTCQB: SRGL, Stock Forum) President, Lauren Notar, who worked as an investment executive at Canaccord Capital Corp. in Vancouver from March 2004 to June 2006.
At Western Graphite, Notar has taken on the multiple roles of treasurer, chief financial officer and board member, according to the company’s regulatory filings.
As reported by Stockhouse, graphite became the mining sector’s flavor of the month last year when a combination of factors sparked renewed interest in the industrial mineral, which is normally associated with steel production, lead pencils, and golf clubs.
They included 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.
But there is little doubt that Western Graphite is getting a lot help from paid stock alerts in tout sheets such as BuyPennyStocks.com, Superstockplays.com, MiningStockAlerts.com and The Penny Stock Professor.
PennyStockProfessor.com describes Western Graphite as a “massive opportunity for early stage investors’’ in a report, which also discloses that the tout sheet was paid $8,500 by a third party non-affiliate for the dissemination of information and other services.
Footnotes in a research report by Next Big Thing Investor reveal that Ohio-based Cranwood International Inc. has a total production budget of $1.8 million from Wilshire Foundation for its “advertising effort.’’ The footnotes also disclose that Next Big Thing Investor is a ChangeWave, Inc. NBT Communications publication, which received a $25,000 “editorial fee” from Cranwood.
These stock alerts highlight the fact that Western Graphite’s Pure Flake Graphite property is adjacent to privately-owned Eagle Graphite Corp.’s Black Crystal graphite quarry, one of the few producing graphite mines in North America.
However, according to the Western Graphite website, exploration at the Pure Flake property is at a very early stage. That also applies to the company’s Amorf Graphite property in south Turkey.
It may be worth noting, for the sake of comparison, that Northern Graphite Corp. (TSX: V.NGC, Stock Forum) has completed a NI 43 101-compliant bankable feasibility study for its Bissett Creek graphite project in Ontario and expects to start production next year, subject to financing.
Yet Northern Graphite has seen its stock price tumble to around the $1 from a 52-week high of $2.70. The same applies to Zimtu Capital Corp. (TSX: V.ZC, Stock Forum), a former graphite sector high flyer, which is trading this week at 40.5 cents, down from a 52-week high of $1.25.
So at a time when investor interest in graphite stocks appears to be on the wane, we find that Western Graphite’s predecessor had only $73 in the bank at the end of 2012, a year when the company was losing money and generating zero revenue.
For anyone who bought in at much higher levels and wonders how they will recoup their investment, it is not clear from subsequent regulatory filings, or the company’s website, how much money is available to fund graphite exploration in the future.
It suggests that investors would be well advised to heed the footnotes in The Penny Stock Professor stock alert.
“Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment,’’ it warns.