North American graphite plays have been making a nice move to end 2013 and ring-in 2014. A driver was a halt on graphite production put into effect in December in Pingdu, Shandong, China after dozens of mining companies failed to meet standards for environmental protection. China is responsible for about 75 percent of global graphite production, with roughly 10 percent of the world’s production coming from the region, according to Simon Moores of Industrial Minerals. As such, the news immediately sparked future supply concerns and speculation about if and when the miners would be allowed to resume production.
The impact of the shutdown won’t make itself clear for another few weeks as Chinese graphite miners traditionally shutter their door for a winter break (November to February) at this time anyway. However, as Moores noted, a similar shutdown in Mongolia in 2008 that choked global supplies by about 5 percent caused a short-term spike in graphite prices. Miners in Pingdu have pledged to clean up their act, but the halt is anticipated to keep many mines closed until at least June.
The incidence really just highlights the need for more graphite production outside of China in the first place. The country has made regulatory changes to hoard greater amounts of its graphite for domestic use as global demand increases, in part because of increased manufacturing and production for batteries used in electric vehicles. China’s out of luck on that front because most of its graphite is low-grade and not suitable for these applications, meaning that as they try and stockpile their own; they will likely have to import high-grade flake graphite.
Some popular smaller companies, such as Focus Graphite (OTCQX:FCSMF) and Finders Resources (OTCPK:FLNXF) have seen a nice bounce since December lows, but a company hanging around the same levels that is quietly setting itself up for the future and slipping under the radar is Joshua Gold Resources (OTCPK:JSHG). As the name implies, the company has a promising gold property in the Swayze Greenstone Belt of northern Ontario that may be considered their flagship gold project, but the company has a big chunk of highly desirable land for graphite production in Canada as well.
Joshua’s Brougham Property in Mining District 90 of Southern Ontario was about 400 acres until it essentially tripled its holdings by adding 800 acres through five claims, as announced on January 8. A bit of perspective is necessary to understand how prolific this area is historically for graphite. The property is adjacent to the past producing Black Donald Graphite Mine that was one of the richest graphite deposits in North America, producing 94 percent of Ontario’s graphite. Historic ore grades up to 80 percent carbon graphite were reported during the last ten years of mine life (production stopped in 1954), with average grades up to 25-30 percent carbon graphite.
The company also has the Bigwood Property in its portfolio, comprised of six claims totaling more than 1,300 acres in the Sudbury Mining District in the Province of Ontario. A prospective target, exploration work has unearthed graphite flakes up to three inches in diameter.
Shares of Joshua Gold keep holding in the area of 20 cents, aside from a brief move up or down for the past three months. Given the overall graphite climate in China and shares of other graphite miners seeing a boon in value on exploration and industry news as the world looks for new sources, investors will be attune to upcoming sampling work slated to be conducted by Joshua in the coming months on the Brougham property. Results could be the catalyst to take shares back to levels in excess of 30 cents, where they stood for most of 2013.
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