FASHION can be a cruel master — particularly on the share market.
One minute you are in a hot sector, with the share prices of all players rising fast and the next nobody wants to return your calls.
Uranex chief executive Rod Chittenden has seen his share of that, with the company’s eponymous search for uranium being forced on to the back burner after the Fukushima tsunami and nuclear disaster in 2011 caused a slump in spot uranium prices that has endured until this day.
While Uranex has held on to its main uranium ground and Rod is convinced the uranium market will turn one day, the process of culling its tenements in Tanzania turned up some fortuitous results.
Its Nachu province turned up some excellent graphite results which have since been explored more thoroughly to reveal what is increasingly looking like one of the world’s great deposits with a potential mine life of more than 100 years.
So far drilling has shown good graphite grades in all of the exploration blocks down from the surface to as far as 64 metres deep.
More importantly, conventional metallurgical flotation tests on some of the core samples have produced test results of 94.4 per cent graphite with very low levels of impurities.
Stepping up to production doesn’t seem to be too demanding given that a few open pits and a small crushing and flotation plant could churn out an acceptable graphite concentrate — assuming further drilling firms up the preliminary indications.
Importantly, up to 45 per cent of the graphite flakes are in the large to jumbo category, which means the graphite is ideal for use in electric car batteries.
Flake graphite commands a price premium to other forms such as amorphous and vein graphite and if the electric car revolution kicks off in earnest, will be in significant demand.
Around 40 kilograms of graphite goes into the average lithium ion car battery, so the demand increase for graphite is actually greater than for lithium.
High technology developments such as the super-conductive and strong graphite product graphene also have the potential to boost graphite demand, together with more conventional uses such as carbon brushes, steel, brakes and the humble pencil.
Graphite prices have softened in recent years but there is no real benchmark price due to the wide variation in graphite types and purity and the fact that much of it is sold through direct offtake agreements and processed by third parties.
China dominates graphite production but is hitting some limits as existing mines get deeper and require more acid leaching for production at a time when pollution controls are ramping up.
So there are plenty of risks and rewards but so far Uranex’s share price doesn’t seem to fully reflect the potential of the Nachu graphite project, given that many other graphite hopefuls are trading with market capitalisations that are many times that of Uranex.
A speculative buy, with the proviso that there will need to be some capital raised to get this explorer into production and an offtake agreement.
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