For Bob Moriarty of 321 Gold, the boom in demand for lithium ion batteries also means a boom in demand for graphite, and he is placing his bets on a junior he believes has nothing but blue sky ahead.
A lithium ion battery is no more lithium than 6 k gold is really gold. Regulations require gold be the major component of jewelry to be called gold. 6 k gold is really copper and silver, not gold. Same same with batteries, a lithium battery increases the demand for graphite a lot more than it does for lithium. What is called a lithium ion battery contains 10–20 times more graphite than lithium. So a boom in lithium battery requirement is really a boom in graphite demand.
Maybe we should start calling them graphite batteries with a little bit of lithium?
But both the demand and price of graphite have shot up in recent years with the increase in demand for battery storage. A couple of years ago there were probably seventy-five Canadian juniors all claiming to be the next big thing in graphite. Alas, cold hard economics stopped most of them in their tracks. Canada has some great hard rock graphite projects but they all require a lot of money to get into production. With China being the world’s biggest supplier of graphite, they are quite willing to dump graphite at a moment’s notice. Those who fund mining projects want stable prices more than high prices.
Recently I got an interesting email from the president of a budding graphite company. He sent some facts on the company and his presentation. When I opened the file and read it, my eyes bugged out and I swore. It was a weekend; there was nowhere to buy shares and I was forced to wait for markets to open on Monday. I cursed for two days. To say the story was compelling was an understatement. The company is DNI Metals Inc. (DNI:TSX.V; DG7:FSE) and Dan Weir runs it.
Unlike other graphite juniors, DNI is vertically integrated. Dan approached the largest graphite producer in the world outside China and set up an arrangement to sell their graphite. So before they produce a gram of graphite themselves, DNI is wholesaling graphite from the company in Brazil. The Brazilians have no particular interest in expanding their operation so Dan looked around for similar material to mine and sell under similar conditions.
Most graphite deposits in Canada are hard rock mines. The Brazilian mine is in weathered saprolite material. Rather than drilling and blasting, the material can be worked with bulldozers and excavators at the surface. It’s far cheaper to mine and mill than hard rock graphite.
Then Dan and his team searched the world for a similar deposit in terms of geology. What they found in Madagascar was a similar deposit but of even higher quality flake graphite. Their Vohitsara project purchased by DNI in mid-2015 is fully permitted, 62-67% large flake, high-grade 3-30% and only 50 km from a port on paved roads.
It will probably take $10-$15 million to put the project into production and $1.5 million to finish a 43-101 resource and do a PEA. In late March DNI announced a definitive agreement with an Australian company where DNI would option 50% of the Vohitsara project to Cougar Metals NL (CGM:ASX). There are some stiff terms to the DA.
Cougar must complete a 43-101 by June 30, 2017 and a PEA by October 31, 2017 to earn their interest. The agreement requires Cougar to complete at least 60 drill holes to a maximum depth of 50 meters and do 1,000 meters of trenching. That requirement is similar to work Cougar did for another company in Brazil in 2016.
Graphite prices in Madagascar range from $500 a ton for fines to $2,500 a ton for super jumbo 30-mesh material. I would guess production costs to be $300 to $500 a ton leaving some nice margins for the large flake material.
DNI is pretty much a trifecta or perfect storm of a graphite company with a lot of blue sky. The company is developing a customer base now as they wholesale graphite at a profit. They have a strong and experienced partner in Cougar Metals with some tight time lines to move their Madagascar project forward and they have one of the world’s best graphite projects in a mining friendly country.
On April 5, DNI announced a financing of $2.5 million. The price tumbled in response offering investors a short time window to pick up cheap shares. I did and I am. The company will use the money to pick up other similar projects in Madagascar and for corporate purposes. I intend to participate in the PP at $.065 as well.
I love the story. While lithium gets the spotlight, actually graphite offers more profit opportunity as far as I can tell. Most lithium is produced from brine and it’s cheap to produce and permit. Hard rock graphite projects are more expensive and take a lot longer. A window exists today for those who are forward thinking and I include Dan Weir in that category.
DNI is going to be an advertiser on 321gold. I own a bunch of shares now and will be buying more. It’s an interesting story and their website does a good job of telling the tale. Please take some responsibility and do your own due diligence.
DNI-C $.055 (April 13, 2017)
DMNKF-OTCBB 40.5 million shares
DNI Metals website
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
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1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metals. DNI Metals intends to become an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
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