{"id":4234,"date":"2016-12-20T09:25:56","date_gmt":"2016-12-20T14:25:56","guid":{"rendered":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=4234"},"modified":"2017-11-18T11:20:58","modified_gmt":"2017-11-18T16:20:58","slug":"northern-graphite-battles-low-prices","status":"publish","type":"post","link":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=4234","title":{"rendered":"Northern Graphite battles low prices"},"content":{"rendered":"

There\u2019s no sign of an end to the uncertainty facing Northern Graphite Corp. as the graphite industry continues to struggle with low prices.
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According to its most recent quarterly financial report, which was released on Oct. 31, little has changed for the company over the course of the past year. Northern, an Ottawa company, is still looking for financing to build a mine on its Bissett Creek property in Northern Ontario, near North Bay.
\n<\/span><\/p>\n

Northern\u2019s CEO, Gregory Bowes, say the company hopes construction can begin next year.<\/span><\/p>\n

But, Jon Hykawy, president of Stormcrow Capital, a Canadian firm that analyses niche markets like graphite, says that may be optimistic.
\n<\/span><\/p>\n

\u201cAt present, with natural flake graphite prices at low levels, it would be very, very difficult for any would-be graphite producer to justify building a mine,\u201d Hykawy says. \u201cThe only realistic potential for improvement is either that demand skyrockets, which is unlikely, or that some of the Chinese natural flake graphite production falls out of the market, which is perhaps even less likely.\u201d<\/span><\/p>\n

Chinese dominance<\/h3>\n

China currently dominates the global graphite market, but analysts and Western graphite companies agree that its product can be of inconsistent quality. Northern\u2019s website highlights problems in the Chinese market, and suggests that the country\u00a0will no longer be able to supply enough graphite to dominate the market as it has in the past. That would leave room for companies like Northern to supply graphite to Western companies.<\/span><\/p>\n

Chris Berry, a minerals analyst and president of the American firm House Mountain Partners, says the Chinese market domination isn\u2019t sustainable in the long-term.<\/span><\/p>\n

\u201cReliance on a single origin for a strategic mineral like graphite may lead to long-term problems in global manufacturing supply chains. This explains why you\u2019ve seen so many junior mining companies attempt to advance graphite deposits outside of China in recent years,\u201d Berry says.
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Hykawy says Chinese graphite is also hosted in soft rock or clay. North American graphite is hosted in hard rock, which makes removing it more expensive to extract.<\/span><\/p>\n

China has also dominated the market for so long, because environmental regulations were more lax\u00a0than in Western countries like Canada. Producing graphite was cheaper and Western companies struggled to compete, adds Berry. This is slowly changing, as China strengthens its environmental regulations, and producing graphite becomes more expensive for its companies.<\/span><\/p>\n

Graphite prices peaked in 2012, on the tail end of what Berry describes as the \u201ccommodity super cycle,\u201d a period from around 2000-2014 where most commodity prices hit highs.<\/span><\/p>\n

Sliding prices<\/h3>\n

However, graphite prices have declined since then, and haven\u2019t recovered. The graphite industry is intrinsically tied to the steel industry, as around 70 per cent of graphite goes to the steel industry, and the steel industry is also caught in a downturn.<\/span><\/p>\n

Northern, as an exploratory company that brings in no revenue, is struggling because of this decline. The value of its shares has fallen since peaking at more than $3 in 2012. They now fluctuate between $0.20 and $0.60. <\/span><\/p>\n

Northern\u2019s losses in its third quarter report are consistent with the same quarter in 2015. Last year\u2019s quarter resulted in $118,945 in losses and this year\u2019s losses have gone up a little at $169,549, mostly due to increased spending on share-based payments, and office rental payments.<\/span><\/p>\n

The company is also in the midst of a management shake-up. Its CFO, Stephen Thompson, resigned at the end of October.<\/span><\/p>\n

\u201cWe\u2019ve cut back and minimized expenses while we\u2019re waiting for the graphite price to recover. [Thompson] wanted a full-time job. We had to cut back to part-time, so he went somewhere else to take a full-time job,\u201d Bowes says, who<\/span>\u00a0is now acting as interim CFO.<\/span><\/p>\n

The popularity of graphite<\/h3>\n

Northern\u2019s future is not entirely grim, however. There are many uses for graphite, as it is an important component in many products in high demand.
\n<\/span><\/p>\n

\u201cThere\u2019s a lot of interest and excitement in graphite because it\u2019s used in lithium ion batteries and electric vehicles, and all that good stuff, but that demand is not yet enough to offset the decline in the steel industry,\u201d Bowes says.<\/span><\/p>\n

\u201cNature and synthetic graphite are used in the anode of [lithium ion] batteries. Cell phones, laptops, tablets, power tools . . . are all examples here,\u201d Berry says. <\/span><\/p>\n

Berry added that this potential pales in comparison to that offered by the electric vehicle market.<\/span><\/p>\n

\u201cVarious estimates show that electric vehicle demand is growing at 60 per cent per year with triple digit growth in countries such as China,\u201d he says.<\/span><\/p>\n

Hykawy also noted that many of the uses for natural graphite have nothing to do with batteries.<\/span><\/p>\n

\u201cMostly, natural graphite is used to make boring things. If the markets for certain metals or other products\u2014like certain types of seals\u2014take off, then the market for natural graphite will go with it,\u201d Hykawy says.<\/span><\/p>\n

Grappling with mine plans<\/h3>\n

Even so, Hykawy is still unsure about Northern\u2019s plans to build a mine.<\/span><\/p>\n

\u201cThe project looked a lot more interesting back in 2013 or 2014 when large flake natural graphite concentrate was almost US$1,200 per tonne,\u201d he says, as graphite prices have since declined to under $1,000 per tonne. \u201cI expect in the future they are going to have to make a credible argument regarding the manufacturing of a higher-value downstream product, or there will be little reason to build this mine.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

There\u2019s no sign of an end to the uncertainty facing Northern Graphite Corp. as the graphite industry continues to struggle<\/p>\n","protected":false},"author":134,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[417,1],"tags":[423,421,341,422],"class_list":["post-4234","post","type-post","status-publish","format-standard","hentry","category-corporate-profiles-2016","category-news","tag-gregory-bowes","tag-northern-graphoite","tag-ottawa-insight","tag-sima-shakeri"],"_links":{"self":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/4234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/users\/134"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4234"}],"version-history":[{"count":4,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/4234\/revisions"}],"predecessor-version":[{"id":4304,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/4234\/revisions\/4304"}],"wp:attachment":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4234"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4234"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}