All the excitement surrounding the electric vehicle revolution and, more broadly, a green economy, has mostly focused on lithium, thanks in part to the high-profile nature of Tesla (TSLA) and its chief executive Elon Musk. Indeed, analysts are calling for a supply/demand imbalance for lithium if Tesla meets its production goals. However, there’s another mineral critical to lithium-ion batteries that could experience a supply shortfall as well, graphite.
Li-ion batteries need a lot of graphite compared to lithium; up to 15-times as much and there is no cheaper alternative available, highlighting the importance of graphite to the industry. Moreover, only high crystal purity flake graphite is useful in Li-ion batteries and there is a limited supply of this type. Unlike the lithium market, which is dominated by Albermarle (ALB) and Sociedad Quimica y Minera de Chile (SQM), graphite has only one producer in North America, Imerys (NK:FP). While lithium grabs the headlines, graphite prices are only now on the rise, largely due to the result of similar forces that have been driving lithium prices: mine closures taking capacity out of the market and concerns about a future supply shortfall.
Aiming to capitalize on the opportunity, Lomiko Metals Inc. (LMR:CA)(LMRMF)(FSE:DH8C.F) is developing its La Loutre Flake Graphite Project in Quebec. The company intends to become a leading producer of not only high purity graphite, but also graphene and graphene products, the world’s first 2D material called a “miracle material” by Goldman Sachs due to its uncanny properties of strength, flexibility, electrical conductivity, durability and ridiculous thinness (one million times thinner than a human hair).
To that end, BCC Research forecasts that the global graphite market will experience 7.7% compound annual growth from 2016 to reach $18.2 billion in 2021. Even despite this growth, it is estimated at least 5 new graphite mines will be required by 2025. Lomiko aims for La Loutre to be one of them.
Lomiko’s interest in graphene is exemplified by a 40% ownership in Graphene ESD, a U.S.-based company established in partnership with Graphene Labs and Stony Book University for the purpose of developing patents for graphene-based energy storage devices.
In order to finish 2017 strong and meet its 2018 goals, such as adding to the 100+ holes already drilled, extending a 400-meter strike that remains open in both directions and upgrading the 43-101 Resource filed for La Loutre of 4.1 million tonnes of 6.5% graphite in the Indicated category, Lomiko is seeing investors supporting the development plan via an ongoing private placement.
The key reason for confidence from long-term investors was the results form the last drilling campaign which produced significant intersection of 110 m of 14.56% flake graphite. If Lomiko is able to prove out a resource in this new area, it could be a company comparable to Mason Graphite (LLG:CA) and Zenyatta Resources (ZEN:CA), which are already at the Bankable feasibility stage and trading at $200 million and $60 million market capitalization, respectively.
At the time of the finance closing, shares were trading in the area of $0.19 – $0.20, meaning investors weren’t disinclined to pay a premium price in order to get the warrant. The shares were not immediately available for sale either, each coming with a lock-up period until December 24, 2017.
About a week after closing the second tranche, Lomiko said that it closed $1.13 million in private placements, again via flow-through units and standard units. 1.2 million flow-through units were issued at 26 cents each, comprised of one common share and one warrant exercisable at 29 cents with expiry in 24 months. Another 1.0 million units were issued at a price of 20 cents, with the same terms as the prior offering. This barely increased the company’s market cap, which is at only $4.0 million Cdn.
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