This North American Miner is Sitting on a 30-Year Supply of a Scarce Metal

Monday, February 11, 2013 - 5:30am

by Admin Admin

Smartphones are exploding in popularity. What was once considered a tool just for the tech-savvy or on-the-go business professionals has become a ubiquitous tool in communication. 

Even the most pessimistic estimates project 400 million units being shipped in 2013. This is up from a little more than 50 million in 2006.
This high demand has launched a marketing war between the various handset makers. Leaders in the space -- Apple (Nasdaq: AAPL), Samsung (OTC: SSNLF) and Nokia (NYSE: NOK) -- spend billions on research and development, and marketing efforts to create and popularize the next hot smartphone.
They know that by gaining the loyalty of customers, it's likely that they will remain customers for life, creating a long-term income stream. 
While people can make money by investing directly into the smartphone makers, savvy investors can step above the market share war and profit handsomely.
The way to do that is by simply asking, "What are the common ingredients used in all smartphones?"
Obviously, every smartphone requires a battery, and not just any battery will do. Because of their long life and ability for multiple recharges without a memory effect, lithium-ion batteries have become the universal choice for smartphones and other handheld electronic devices. 
Global production of lithium-ion batteries for handheld devices has surged past 5 billion units annually, according to Scarcity & Real Wealth's expert Nathan Slaughter. That's a staggering number and will only increase as the smartphone market share war grows. Moreover, the latest developments in research and development for electric vehicles will translate into strong growth for lithium-ion batteries during the remainder of the decade, a recent study by Pike Research says. The overall market for li-ion batteries in light-duty vehicles will grow from $1.6 billion in 2012 to almost $22 billion in 2020.
There's another surprising and important fact about these now-popular batteries. 
Lithium is not the primary ingredient in lithium-ion batteries. Graphite, one of just two natural carbon polymers, is used 10 times more than lithium in the batteries. And it's not just mobile phones that are driving the demand for graphite. Electric and hybrid vehicles, steel production and even automobile brake pads require this natural polymer. 
And the nation that accounts for about 80% of the world's supply is China. Problem is, China keeps 60% of its production and heavily taxes the exported 40%. 
Here in North America, there is only one operating graphite mine, but it's currently nine years past its projected 14-year operating lifespan. 
Fortunately, there is a Canadian junior miner poised to help meet the demand. Northern Graphite (OTC: NGPHF) has not begun production, but the company is valued with a $66 million market cap based on its potential.
The value and excitement surrounding this company comes from its Bissett Creek Mine. This mine is located near Canada's capital city of Ottawa and is close to major transportation hubs and routes. 
The mine is projected to hold a reserve base of 19 million tons of graphite containing ore with a potential for another 55 million tons. The company is planning on an 18-month and $102 million construction period prior to going into production. Once production is started, it's projected to yield 20,000 tons of graphite annually with a lifespan of 20-to-30 years. 
Most interestingly, the graphite is found on the surface, meaning that only very limited digging will be required to extract it, resulting in lower costs and higher profits for Northern Graphite. Simply stated, it's likely to cost about $825 on average to extract 1 ton of graphite. This means that profits of about $1,000 per ton, at today's prices, are expected. 
That's an impressive margin in anyone's book. Another huge positive about the mine is that the graphite contained is of the large flake variety. This is the purest graphite available and the only kind that can be used for lithium-ion batteries. 
When these factors are combined with an experienced management team that owns 10% of the outstanding shares, it builds a compelling case for the stock as an investment.
Risks to Consider: It's critical to keep in mind that this is an over-the-counter (OTC) mining company that does not have any revenue or even actual production yet. The stock price is based upon the potential of its mine and the pedigree of the management team. While everything appears to point toward a bright future, investments in OTC companies are very speculative. Only use money that you can afford to lose when investing in early-stage ventures.
Action to Take --> Northern Graphite has dropped down from the highs to below the 200-day moving average. This creates a perfect daily close breakout trade opportunity. Entering long on a breakout above $1.25 with an 18-month target price of $3 makes solid technical sense.

P.S. -- If you've been looking to add resource stocks to your portfolio, now may be the time. The global trend for commodities is rising demand coupled with shrinking supplies. That's why we've seen soaring prices for years... and it means short-term sell-offs can be rare buying opportunities. To learn more about Scarcity & Real Wealth, which focuses solely on the market's best resource investments, visit this link (without watching any promotional video).

Admin Admin does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.