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Graphite Jr. Resumes Search For Critical Mineral in Quebec

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Graphano Energy Ltd (GEL:TSXV; GELEF:OTCMKTS) announced it has started its spring and summer exploration program at its 100%-owned graphite properties in Quebec. One analyst says its favorable point to buy the stock.

Graphano Energy Ltd (GEL:TSXV;GELEF:OTCMKTS) announced it has started its spring and summer exploration program at its 100%-owned graphite properties in Quebec.

The program commenced in mid-April and targets newly staked claims east of the Standard mine covering 3,923 hectares. Government reconnaissance in 1997 discovered four outcrops with visible graphite in this area, offering promising starting points for exploration.

"We are excited to begin our spring/summer 2024 exploration program," said Graphano Chief Executive Officer Luisa Moreno. "In the upcoming four weeks, we will concentrate on prospecting followed by trenching and stripping of areas with graphite outcrops to uncover new potential drilling targets."

The exploration work will focus on the new claims and the Lac Aux Bouleaux zones that have not been previously explored, she explained. "This prospecting effort is crucial for our ongoing exploration strategy," Moreno said.

The new claims cover highly prospective geology located between Graphano's Standard mine project and the Mousseau graphite deposit to the east. Additionally, Graphano will explore some of the remaining Lac Aux Bouleaux property zones, specifically zones 5, 2, and 6, which have not been extensively examined.

Production of the element is needed for batteries in electric vehicles (EVs). Last fall, China imposed export controls on the substance. Recently, the battle escalated as Biden signed an executive order establishing a 25% tariff on Chinese imports, including natural graphite.

Graphano has four properties, including three graphite properties close to each other in Quebec: its flagship Lac Aux Bouleaux, the Standard Mine, and the Dudley and Lac Vert-Bouthillier graphite projects.

Technical Analyst Clive Maund noted that the tariff is "going to make the product of North American producers a lot more competitive and attractive."

"We are now believed to be at a favorable point to buy Graphano Energy stock as it is in a position to break out of a large base pattern," Maund wrote.

The Catalyst: Domestic Graphite Sources Vital to Energy Transition

The U.S. Geological Survey's list of 35 critical minerals for the new electric economy includes both graphite and another vital battery metal, lithium. It's vital that the West find domestic sources.

"China has a stranglehold on both metals, meaning it can use them as a cudgel in trade talks with the United States, or it could freeze shipments of them during a war," noted Rick Mills, author of the newsletter Ahead of the Herd. "Indeed, when it comes to raw materials for the electric vehicle industry, China is undisputedly the most dominant force on the planet. Almost every metal used in EV batteries today likely comes from there, either mined or processed."

The Biden administration has also clarified that mining projects focused on critical minerals like graphite are eligible for federal loan guarantees worth US$72 billion.

The Biden administration has also clarified that mining projects focused on critical minerals like graphite are eligible for federal loan guarantees worth US$72 billion.

While made of the same element as diamonds, carbon, graphite is very soft, relatively nonreactive, and has high electrical and thermal conductivity properties.

It's made of stacked sheets of carbon atoms and occurs naturally in igneous and metamorphic rocks.

It has a greasy feel because its flexible flakes easily slide over one another, making it a good "dry" lubricant.

It's also used when a material is needed that will not melt or disintegrate — it's used to make the crucibles for the steel industry and in some nuclear reactors to slow down fast-moving electrons. In addition to batteries, it's also used for pencil lead and in brake linings for heavy vehicles.

Investment Needed to Meet Demand

According to a report by Fortune Business Insights, the global market size for graphite is projected to grow from US$14.83 billion in 2021 to US$25.7 billion in 2028 at a compound annual growth rate (CAGR) of 8.2%.

"It looks ready to break out very soon now, so this is viewed as an excellent point at which to buy the stock," Technical Analyst Clive Maund wrote.

"We maintain the view that natural graphite prices will be rising sharply in the coming years reflecting surging demand from the EV sector, as well as rising power costs and increasingly stringent ESG (Environmental-Social-Governance) regulations," Fastmarkets noted. "This will push the market into a significant deficit without required investment in the graphite space."

Fastmarkets analysts noted that they "expect to see premium pricing structures emerge in ex-China markets to reflect higher costs associated with ESG friendly supply, but also to encourage the much-needed investment in the sector to prompt the development of localized and diversified supply. Without additional investment, the market will fall into a significant deficit beyond 2030."

According to Mordor Intelligence, "the increasing application of graphite in green technologies is likely to create lucrative growth opportunities for the global market soon."

A 'Highly Prospective Trend'

In May, Graphano released final assay results from 2023/2024 winter drilling at Lac Aux Bouleaux, which the company noted is situated adjacent to Canada's only producing graphite mine, Northern Graphite's Lac des Iles Mine.

The company said it found a "highly prospective trend with multiple graphite horizons, locally folded and structurally thickened, which can enhance the economic extraction potential."

Mineralization at the project is now defined over an about 500-meter strike length and remains open for further enlargement, Graphano said.

Some highlights of the drilling included drill hole LAB24-65, which intersected 7.91% graphitic carbon (Cg) over 15.65 meters starting at 40.76 meters drilled depth, and drill hole LAB24-66, which intersected 5.28% Cg over 3.04 meters starting at 20.32 meters drilled depth.

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Graphano Energy Ltd (GEL:TSXV;GELEF:OTCMKTS)

*Share Structure as of 6/4/2024

Maund rated the stock an Immediate Strong Buy, saying a "breakout into a new bull market (is) looking imminent." He noted future catalysts could include more geopolitical macro factors, the upcoming exploration, metallurgical results, and the prospect of a new drilling campaign towards the end of the year.

"It looks ready to break out very soon now, so this is viewed as an excellent point at which to buy the stock," Maund wrote.

Ownership and Share Structure

According to the company, about 15% is owned by insiders and management, 3.5% is owned by institutions, and the rest is retail.

According to Reuters, Michael Bauer owns 10.05% or 1.72 million shares, Director Nathan Rothstein owns 6.94% or 1.19 million shares, Chief Financial Officer James A. Richardson owns 0.46% or 0.08 million shares, Director Roger Dahn owns 0.20% or 0.03 million shares, and Moreno owns 0.20% or 0.03 million shares.

The company has 17.09 million shares outstanding, including 14.03 million free float traded shares. It has a market cap of CA$1.71 million and trades in a 52-week range of CA$0.25 and CA$0.09.

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Important Disclosures:

  1. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  2.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Contributing Author Disclosures

  1. For this article, the Company has paid Street Smart, an affiliate of Streetwise Reports, US$1,500 in addition to the monthly consulting fee. 
  2. Author Certification and Compensation: [Clive Maund of] was retained and compensated as an independent contractor by Street Smart to write this article. Mr. Maund is a technical analyst who analyzes historical trading data and he received his UK Technical Analysts’ Diploma in 1989.  The recommendations and opinions expressed in this content reflect the personal, independent, and objective views of the author regarding any and all of the companies discussed. No part of the compensation received by the author was, is, or will be directly or indirectly tied to the specific recommendations or views expressed. Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be construed as a recommendation or solicitation to buy and sell securities.

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