INDUSTRY REPORT
//Graphite
INITIATING SECTOR COVERAGE
A Stress Test on Future Graphite Pricing
S T O R M C R O W
STRONG BUY
RGX TARGET | C$2.00
JUNE 9, 2014
Jon Hykawy, PhD
President
Tom Chudnovsky
Managing Partner
Why This Analysis Should be Regarded as Pessimistic
While this report contains some of the elements of a sector primer, it is not
intended as such. Numerous other organizations and individuals have produced
“Graphite 101” style primers, and we have decided that the market no longer
requires this sort of instructional document. While we have included some
graphite basics herein, the core message in this report is to establish a common
and pessimistic price deck for graphite, so that both fund managers and
individuals can compare graphite companies on an apples-to-apples basis, while
being confident that the worst-case scenario has been incorporated.
In order to arrive at this pessimistic price deck, we have determined the
economic limit of the market. That is, we have derived pricing on the basis of
adding sufficient supply, based on our latent demand projections, such that if
any additional suppliers enter the market, then it is very likely that prices will fall
to the point where some of the suppliers will be forced out. This should provide
comfort to the investor that a realistic, worst-case scenario (with the unrealistic
worst-case scenario being that flake graphite demand disappears) has been
taken into account. We believe, too, that our latent demand projections are
realistic and conservative.
The result is a price deck that provides a stress test for junior graphite
companies, and that a junior that can survive, or even prosper, under this
price deck will stand the greatest chance of being successful in whatever
conditions the market eventually finds itself.
-Stormcrow
See the end of report for important disclosures
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Summary
Graphite is a very old and very common material that has acquired a new sheen due to its
use in various high technology applications, chief among these being rechargeable lithium
batteries. We see a pending opportunity for a number of juniors to enter the market.
However, we also see that the current understanding of the graphite sector by the financial
industry is missing some key points.
We have taken a slightly novel tack on analysis of the industry, and have derived what we
believe is a defensible, pessimistic assessment of graphite prices through to 2020. Indeed,
we believe this deck is conservative enough that if a company can demonstrate profitability
using this deck and realistic costs, then that company will be financially successful. In
simple form, we believe that while larger flake graphite will be in increasingly tight supply,
with future prices reflecting this shortage, many of the smaller flake size ranges of natural
graphite are likely to see falling prices due to oversupply in the market.
Background — Graphite Basics
Graphite is a simple allotrope, or form, of carbon. Pure coal and diamonds are others. Graphite is a series of (relatively) loosely coupled sheets of carbon atoms, the atoms within the sheets arranged in a hexagonal array. A single-atom thick layer of these same carbon atoms is known as graphene, and has been causing no end of what we would consider, at this time, to be irrationally exuberant interest in the financial community.
Graphite can be obtained from two sources, and we could fill many pages with the details of this but do not feel it is overly relevant save for a few salient points. Graphite can be made from various carbon-rich feedstocks, including petroleum coke. The process is very energy intensive and expensive, with the feedstock being left at very high temperature for a very long time in order to allow the initial random ordering of carbon atoms to shift into the structure of graphite. The resulting synthetic graphite is chemically very pure, and depending on the chosen feedstock may have physical properties that make it of unique interest. For example, synthetic graphite is, at this point in time, the ONLY possible choice for making high-power electrodes, and is the ONLY possible choice for making carbon fiber materials.
Natural graphite can be found in various deposits, and mined. Graphite is always crystalline, but due to use we somewhat arbitrarily classify it as “jumbo” flake (+35 mesh), “large” flake (-35+48 mesh), “medium” flake (-50+100 mesh), “small” flake (-100+200 mesh), “very fine” flake (-200 mesh), amorphous (which also carries the far more technically accurate name “microcrystalline, since graphite is a crystalline material and not actually amorphous) and a final form known variously as “lump”, “vein”, “hydrothermal” or “Sri Lankan”. Amorphous graphite comes almost exclusively from China, and vein graphite’s sole point of production today is in Sri Lanka. Flake graphite deposits can be found worldwide, and vary in both grade and the distribution of flake sizes within the deposit. In general terms, the higher the in situ grade of graphite, the smaller the average flake size within the deposit. Also in general terms, the larger the flake size and the closer to 100% carbon the graphite contains, the higher the price paid.
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Exhibit 1 – Uses for Natural Graphite (2011)
Source: Industrial Minerals
The primary use of natural graphite is in refractory parts. Graphite is able to resist very high temperatures for a very long time because, although this is not obvious when one considers it being a solid lump of carbon atoms, it is able to conduct heat rapidly enough that the heat must effectively peel away the outer layer of carbon atoms, one at a time. Synthetic graphite can be used in this application, as well, but is far more expensive. And in spite of what we have written above with respect to graphite flake costs, most refractory parts are made from a mixture of large and medium flake graphite, as this lowers the quantity of expensive binders that must be used to form the final part and also reduces the amount of time and energy required to convert the part to solid graphite in a furnace. However, if a refractory component requires the highest levels of performance, then the part is made from very fine, very pure flake and a large amount of binder. The use of very fine flake reduces the potential for microscopic voids to form in the part.
Graphite has been known to humans for a very long time, but does deserve renewed interest by investors at present. The least expensive, longest lived and highest performing battery anode known today happens to be graphite. This has been leading many to predict a huge boom in graphite demand in the future, and perhaps this will occur although natural graphite is in competition with synthetic graphite and various inorganic materials for the same application. Even so, with production of graphite being dominated by China, the growing concern regarding supply chain security by end-users and the lack of new graphite mines opened in the last 10-20 years creates the potential for good new graphite mines to make money.
Exhibit 2 – Natural Graphite Production, by Country (2012)
Source: Industrial Minerals
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Of course, a major question that then immediately arises is “but how MUCH money?” And the only way to properly answer that question is to complete an analysis on the markets and to determine just where the prices for various grades of graphite may go.
The Market — How Big and How Soon
The bottleneck in the synthetic graphite industry is not a lack of feedstock, but a lack of manufacturing capacity. Turning petroleum coke feedstock into synthetic graphite can take weeks of high temperature treatment in sealed furnaces. Because of the large energy consumption, and the lack of processing capacity, synthetic graphite is expensive, with various sources conjecturing that, dependent on purity and other physical parameters, the price can range from $7,000-$20,000 per tonne.
Natural graphite comes as flakes of various sizes, down to the microscopic. As mentioned above, the larger the flake size and the higher the purity, the more expensive the graphite. A rule of thumb is that the reason that flake graphite breaks down into smaller flakes is that it is contaminated with some material other than carbon. These contaminants thus are carried at the periphery of smaller flakes, so larger flake sizes tend to have a higher graphite grade. There are both chemical and thermal techniques for purifying natural graphite to arbitrarily high levels, but these also have high associated costs.
The market for graphite powders, which includes all flake sizes down to the microcrystalline, sees competition between natural and synthetic products. According to Asbury, and with both good commercial data and physical reasons for these divisions, the markets for each are as shown in Exhibit 1. Note that “microcrystalline” is also referred to as amorphous graphite (microcrystalline being the technically accurate term). Primary synthetic is the material made within a furnace, while secondary synthetic is what is left over following the machining and processing of primary synthetic into final form.
Exhibit 3 – Suitability of Various Graphite Types for Applications
Source: Asbury Carbon
Application Microcrystalline Flake Secondary Synthetic
Primary Synthetic
Batteries x x x
Carbon brushes x x x
Conductive coatings x x x
Expandable x
Foundry Coatings x x
Friction materials x x x x
Fuel cells x x x
Gaskets and seals x
Pencils x x
Plastics x x x
Powder metals x
Refractories x x
Steel and ironn x x
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Where the above chart shows that natural flake graphite is in competition with synthetic
products, it is obvious that the largest flake and/or highest purities of natural flake are being
used. If it were possible to use the smallest and/or most contaminated flakes, then expensive
synthetic would never be considered. Similarly, where the chart shows natural flake graphite in
competition with amorphous graphite, the smallest and cheapest flake is being used.
It is also important to remember that users of graphite have been attempting to substitute
expensive synthetic graphite with less expensive flake graphite, for any application in which the
substitution is even remotely possible, for a very long time. We should not be eager to predict
a switch (say, from synthetic to natural in batteries, or synthetic to natural in electrodes) without
very good reason.
Ultimately, what we are concerned with now is how much natural graphite, and in what form, is
used in each meaningful application, and how these demands will change with time. In order
to begin this analysis, we need to know how the consumption of natural graphite was
distributed at some point in time. Industrial Minerals has provided us with some of this
information:
Exhibit 4 – Natural Graphite Uses (2011)
Source: Industrial Minerals
There are some natural limits to pricing. For example, it is overwhelmingly large and jumbo
flake sizes that are used in batteries. This graphite must be spheroidized, converted from its
flat natural shape, which could clump together and blind the material to electrolyte exposure in
a battery, rendering it useless, to a rounded shape that will maximize surface exposure.
Spheroidizing wastes graphite, requiring roughly 2.5 times the final mass in initial flake, with
the scraps sold for use in other low-end markets. But this means that if synthetic graphite
costs roughly $7,000-20,000 per tonne, which seems to be a consensus for reasonable quality
synthetic materials, then the price of even the largest and best quality flake cannot exceed
$6,500 per tonne (incorporating our estimate for the costs of chemically purifying the natural
flake graphite to the level necessary for battery use). We would argue that even during the
peak of 2011 prices, the largest flake graphite at purity of 94-97% did not exceed $3,500 per
tonne in price. However, the smallest flake is competing, in many applications, with
amorphous material or secondary synthetic scraps. This means that there is only a very weak
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floor under small flake and fine flake prices. The recent low prices of 2013 likely saw fine flake
graphite priced as low as $500 per tonne. It is conceivable that such prices could go
substantially lower, if sufficient supply enters the market.
The US Geological Survey has given us figures for the production of natural graphite in each of
2011-2013. From the point of view of our analysis, the USGS values do not vary meaningfully
from those generated by other sources, such as Industrial Minerals or Roskill.
Exhibit 5 – Natural Graphite Production, Ktpa
Source: USGS
We have evaluated a cross-section of technical papers on graphite from various parts of the
world, including China, India, Brazil and Canada. We have also combined the USGS
information in Exhibit 5 with information from Industrial Minerals and our own estimates
regarding proportions of amorphous, flake and vein graphite produced per year.
Exhibit 6 – Proportions of Sales of Various Forms of Graphite
Source: Industrial Minerals, Stormcrow
From the above, we have built a bottom-up model of demand. Growth in some industries
mirrors the growth in GDP. For example, flake use in pencils or the catch-all “other” category
are both assumed by us to grow at rates mirroring global GDP (as taken from predictions by the
World Bank and IMF). Rates for consumption in refractories and crucibles are a composite of
expected growth in the steel and aluminum industries (from the World Steel Association and the
International Aluminium Insitute).
Growth in batteries is a more complex issue. We looked to figures for electronic industry growth
from the SEMA and other research groups, but also made our own estimates with respect to the
decline in primary alkaline and other secondary battery technologies versus growth in lithium
battery use. The result is a growth rate that increases to levels of 10-11% per annum, with a
shift toward larger flake sizes of graphite as higher-quality lithium batteries are required.
Year Production
2011 1,150
2012 1,170
2013 1,190
Amorph Flake Vein
2011 55% 44% 1%
2012 50% 49% 1%
2013 49% 50% 1%
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Our figures for graphite demand by application are:
Exhibit 7 – Graphite Demand by Application, by year, to 2020, Ktpa
Source: Stormcrow
With respect to our above discussion regarding Exhibit 3, we make some assumptions
regarding the use of various flake sizes in these industries. For example, pencils likely use
the least expensive graphite possible, since flake is competing with microcrystalline. Hence,
we believe that 100% of the flake graphite used in pencils is very fine flake, with mesh size of
less than 200. Foundry coatings use inexpensive graphite, but there is some need to use
larger graphite flakes to provide necessary physical parameters such as ease of release
while also maintaining low costs. Hence, we believe that foundry coatings use 30% small (-
100+200 mesh) and 70% very fine (-200 mesh).
As a category, batteries, carbon brushes and expandable graphite use a much larger range
in sizes. Particularly in later years in this study, a higher proportion of larger graphite flake
sizes is required as more, larger and higher performance lithium batteries are needed. In
2011, we project that demand in this segment was 10% for jumbo graphite, 40% for large,
40% for medium and 10% combined for small and very fine material. By 2020, this has
shifted to 19% jumbo, 48% large, 24% medium and 8% combined for small and very fine
material. Expandable graphite preferentially uses larger sizes, medium and up, while good
lithium batteries use jumbo and large flake, replacing large and medium used in other battery
types.
Refractories, the largest segment of use across the entire study period, do not utilize jumbo
graphite in our simplified analysis, because they do not need to. Depending on price,
however, large and medium flake graphite provides for a less expensive final refractory
product owing to decreased need for binders and a shorter furnace finishing time. There is
also a proportion of small and very fine flake used, to reduce cost but also to create higher
performance refractories. We believe that the appropriate ratio here is 7% large, 27%
medium, 30% small and 37% very fine flake.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Refractories 177 163 166 173 180 187 194 202 210 219
Batteries 127 127 129 135 146 158 171 184 199 215
Lubricants/Crucibles
51 48 49 50 52 54 55 57 58 60
Foundry 35 33 33 35 36 37 39 40 42 44
Pencils 20 20 20 21 21 22 23 23 24 25
Other 96 93 96 99 102 105 108 111 115 118
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When all this is combined, we believe that demand for the various flake sizes through 2020 is
reflected below:
Exhibit 8 – Graphite Demand by Flake Sizes, through 2020, Ktpa
Source: Stormcrow
Now, we must look to the supply side. Assuming the sources of production did not change
markedly from 2011 through 2013, the data suggest that the amounts of various flake sizes
produced would be:
Exhibit 9 – Flake Graphite Production, by Size, Ktpa
Source: Stormcrow
Based on projections of output from various regions and firms, we anticipate that the level of
incumbent supply is flat through 2016, and then decreases at a rate of 1% per year beyond
that. There are numerous concerns regarding declining in situ grade and rising costs among
current producers across China, potential consolidation and environmental issues leading to
mine closures in Heilongjiang and Shandong provinces in China, longstanding worries
regarding when the Timcal mine in Canada will cease production, and similar ongoing issues
regarding output from Brazil.
If we examine this profile for incumbent production, we see a supply shortfall of almost
100,000 tonnes in flake graphite output by 2020, between our projections of demand and the
projected incumbent supply. Obviously, this creates the potential for new suppliers to enter
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Change
(2011-2020)
Jumbo 15 15 15 16 18 22 28 37 41 45 31
Large 81 80 82 85 91 99 109 121 131 142 61
Medium 127 123 125 130 135 138 138 135 141 146 19
Small 121 114 117 121 126 130 135 140 145 151 29
Fine 161 151 155 161 167 173 179 186 192 200 38
Total 506 482 494 514 537 563 590 619 651 684 176
2011 2012 2013
+35 15 17 18
-35+48 81 92 95
-50+100 127 143 149
-100+200 121 138 143
-200 162 183 190
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the business. It is easy to conjecture that four new mines producing an average of 25,000
tpa each would fill that gap, but the reality is that doing so across all size ranges of flake will
be far more difficult. Our demand projections show an increasing need for larger flake sizes,
and finding projects with this type of production profile is not trivial.
Exhibit 10 – Proportions of Flake Demand, by Year
Source: Stormcrow
We hypothesize that new supply will come from four suppliers. Our intent in a price deck
such as this is to try and determine the economic limit of the market. That is, we bring
sufficient new supply into the market such that the resulting prices allow all the entrants to
maintain positive cash flow, but additional supply would result in prices declining to the point
that at least some of the new suppliers will be forced out of business due to negative cash
flows. For all practical purposes, one can consider this price deck a lower limit, a pessimistic
analysis based on the ability to bring supply into the market as long as the new supply can
generate any positive cash flow at all.
Our list of new suppliers does include Syrah Resources (SYR-ASX) of Australia, and its
Balama project in Mozambique. Syrah has released the highlights of studies that suggest
low costs, but coupled to a very large output, 220,000 tonnes per year, of smaller flake
material. We believe that, with necessary financing, Syrah could begin production in 2017.
Readers should be aware that there are significant risks attached to the Syrah story, in our
minds. One significant risk is the ongoing sale of a very significant amount of lower value
material. While Syrah’s economics look acceptable to us assuming the sale of all its
production at our projected market prices, we have not seen details of the company ’s
announced MoU to negotiate off-take with a Chinese firm for smaller flake material (a final
off-take agreement was expected soon), and most readers would be aware that there are off
-take agreements, and then there are off-take agreements. Syrah management has also
stated publicly that removal of vanadium from the flake graphite is straightforward and easy
to accomplish. We have seen no details, however, regarding the purity of various flake size
grades down to the level of individual metallic contaminants. But our early financial
modeling on the graphite space indicates that Syrah can deliver positive economics,
assuming sale of all of its production and assuming acceptable quality, even at costs of
production per tonne that are significantly higher than those quoted in the company’s JORC
reports.
We also incorporate three other suppliers that can enter the market prior to 2017, and that
are likely to produce greater proportions of larger flake sizes. Our supply model is thus:
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Change
(2011-2020)
Jumbo 3% 3% 3% 3% 3% 4% 5% 6% 6% 7% 212%
Large 16% 17% 17% 17% 17% 18% 19% 20% 20% 21% 74%
Medium 25% 25% 25% 25% 25% 25% 23% 22% 22% 21% 15%
Small 24% 24% 24% 24% 23% 23% 23% 23% 22% 22% 24%
Fine 32% 31% 31% 31% 31% 31% 30% 30% 30% 29% 24%
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Exhibit 11 – Supply Projections by Flake Size, by Year, ktpa
Source: Stormcrow
Comparing Exhibit 8 and 11, it is clear that there is an oversupply of flake graphite on a gross
basis. However, what is more illuminating is comparing potential supply and demand on a
category-by-category basis:
Exhibit 12 – Shortfall in Production by Flake Size, by Year, Ktpa
Source: Stormcrow
Even with an overall excess supply of 350,000 tonnes of flake graphite by 2020, supplies of
jumbo flake graphite remain tight through 2017 and fall into shortfall thereafter. The supply of
large flake material is in surplus, but not at levels high enough to collapse prices. However, all
of medium through very fine flake are in dramatic oversupply under these assumptions, and
prices would be likely to collapse.
Our price projections, detailed below, were used to model earning power of each of the selected
new graphite suppliers. All of them continue to generate positive cash flow throughout the
entire period of our study. However, these producers also have some of the lowest costs and
strongest product baskets of any of the junior graphite companies globally. Should any
additional producers enter the market, the likelihood is that prices will be further depressed, and
some portion of incumbent or new producers will be forced out of business.
What is interesting is that we have recently heard reports that a significant portion of the
graphite producers in Heilongjiang province in China may be shut down for a period of time due
to environmental concerns. This may well be the root cause for the shutdown, but we believe
contributing factors to these shutdowns occurring now are likely declining prices and excess
supply, globally. Simon Moores of Industrial Minerals has estimated that these actions in China
could have impact as large as 90,000 tpa. We suspect that the impact will be limited to lesser
levels for the next two years, and no longer, in order to allow consolidated Chinese suppliers to
better compete against new entrants in 2016 and beyond.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Jumbo 0.0 2.7 3.7 2.8 5.9 8.1 9.7 1.0 -2.6 -6.5
Large 0.0 11.9 17.4 13.8 27.8 26.9 47.1 36.9 29.1 20.4
Medium 0.0 20.8 29.4 24.4 43.8 52.3 110.4 116.5 114.0 111.3
Small 0.0 23.3 31.3 27.0 45.1 48.2 119.9 118.0 115.9 113.6
Fine 0.0 32.2 42.6 37.0 54.2 58.1 112.1 109.5 106.7 103.7
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Jumbo 15 17 19 19 24 30 38 38 39 39
Large 81 92 99 99 119 126 156 158 160 162
Medium 127 143 155 155 179 190 248 251 255 258
Small 121 138 149 149 171 179 255 258 261 264
Fine 162 183 198 198 221 231 291 295 299 303
Total 506 573 619 619 714 756 989 1001 1014 1026
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Price Projections
Our modeling is done in a simple-minded way, as data are not readily available to accomplish
anything more. We assume a non-linear price response to supply shortfalls and surpluses, with
an equation of the form:
where A and B are constants, Price is in US$/t and Shortfall is in tpa. Each flake type is
modeled, with known prices from 2011 through 2013 used to generate the model and then
prices projected beyond that using our projected supply and demand levels.
The results are tabulated below:
Exhibit 13 – Price Projections for Flake Graphite Grades
Source: Stormcrow
The data at present show a weak opening to 2014, but with the potential of Chinese mine
shutdowns in Heilongjiang and Shandong, along with the likely supply and demand situation, we
see 2014 graphite prices rebounding, across the range. Unfortunately, we see longer-term
prices for medium, small and very fine flake moving in exactly one direction, down, under the
assumptions that additional supply enters the market. Large flake graphite prices will likely
show significant volatility. Although the market for large flake is sizeable, entry of even one
major producer at a time can significantly move prices. By and large, jumbo flake graphite
prices should move up, and may even reach an economic ceiling by 2020.
What is clear is that low costs are crucial for new mines entering production, much more
important than maintaining recoveries at maximum levels and the like. This will likely put a
premium on projects that have high in situ grades, large flake sizes, simple mining plans and
highly amenable metallurgy. Complex flake graphite projects involving underground mining
likely need not apply, no matter how impressive their other characteristics. The costs of such a
project would likely mean that they are selling their medium and smaller flake at a loss, and this
will likely be a penalty that proves too extreme to overcome.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Jumbo 3365 2135 1577 1726 1884 1676 1555 2596 3573 6175
Large 2514 1595 1178 1192 976 996 684 811 947 1165
Medium 2138 1514 1025 991 959 867 521 500 508 517
Small 1375 1089 855 874 806 784 476 481 487 493
Very Fine 930 689 505 524 509 493 342 347 353 359
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Conclusions
There is strong reason to believe that the graphite market can tolerate the entry of at least
300,000 tonnes of new production by 2020. Even at these production levels, new entrants are
likely to continue to make money, largely because the prices for jumbo and large flake graphite
in our price deck can carry the operation.
We view this price deck as pessimistic, a worst case scenario. Our projected demand
profiles for areas of use such as batteries are less aggressive than others we have seen, but
also fit within the growing capabilities of the global industry and do not require the construction
of any sort of “Gigafactory” or anything similar. Other areas of projected demand simply depend
on the status quo of technology used in those industries, such as steel, and the demand growth
projected by industry participants.
While we may see less capacity enter the space than our supply projections suggest, fewer
entrants would leave prices high enough to incent additional entrants over time. We are
confident in the long-term direction of the price deck we have outlined, less so (as is always true
with any price deck for any critical material) in the annual average prices shown.
The graphite sector can support a number of new entrants. We will continue to examine the
space to identify the 4-8 projects that can generate earnings in the available pricing
environment.
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Keywords
Industry Graphite, mining, critical materials, batteries, battery technology, technology metals
Relevant
Companies
SYRAH RESOURCES — ASX:SYR
NORTHERN GRAPHITE — TSXV:NGC
ZENYATTA RESOURCES — TSXV:ZEN
FOCUS GRAPHITE — TSXV:FMS
FLINDERS RESOURCES — TSXV:FDR
ENERGIZER RESOURCES — TSXV:EGZ
GRAPHITE ONE — TSXV:GPH
STANDARD GRAPHITE — TSXV:SGH
ONTARIO GRAPHITE— TSXV:OGC
MASON GRAPHITE — TSXV:LLG
VALENCE INDUSTRIES — ASX:VXL
ST. JEAN CARBON — TSXV:SJL
LOMIKO METALS — TSXV:LMR
SOVEREIGN METALS— ASX:SVM
EAGLE GRAPHITE— PRIVATE
Why do we use
keywords?
We feel people who could stand to benefit from the contents of this report, are not solely ones
who already follow the specific company or sector discussed herein. As such, we hope to
provide this free service to as wide an audience as possible—and keywords help to this end.
Important Disclosures
Stormcrow Capital Ltd. (“Stormcrow”) is a financial and technical/scientific consulting firm that provides its
clients with some or all of the following services: (i) an assessment of the client’s industry, business plans and
operations, market positioning, economic situation and prospects; (ii) certain technical and scientific
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Stormcrow does not offer personalized or tailored investment advice to anyone and its research reports should
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Investment Rating Criteria
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the current price over the next 12-18 month time horizon.
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SPECULATIVE BUY—The security is considered a BUY but in the analyst’s opinion possesses certain operational
and/or financial risks that may be higher than average.
HOLD—The security represents fair value and no material appreciation is expected over the next 12-18 month time
horizon.
SELL—The security represents poor value and is expected to depreciate over the next 12-18 month time horizon.