With Global Demand for Graphite Set to Take Off,
Orocan Resources is a Junior to Take Notice Of
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Written By David Yeager
Right now investors are looking to put a lacklustre 2011 to bed, and point their gaze forward to 2012. One question they must ask themselves is; what sectors are poised for growth in the next couple of years? One to take note of is graphite. The demand for this strategic mineral is forecast to grow substantially in both the short and long term as its applications in sectors like green energy rise.
One junior exploration company that has recognized this opportunity is Orocan Resources (OR � TSX.V). With an experienced management team, a great suite of properties, and a well designed exploration program set for 2012, this company has situated themselves in a great position to grow shareholder value over the next year.
Graphite, Growing in Value
Currently China controls the global supply of graphite, exporting over 70% of the worlds supply. However, in order to protect their domestic interests they have several trade tariffs in place. These include a 20% export duty along with a 17% value added tax. Many industry analysts believe that these export controls will continue to tighten as their domestic industry continues to grow. Of particular importance to Orocan is that China is actually a net importer of large flake graphite which is the most scare and sought after form of the mineral. This is significant because the management and geological team at Orocan plan to focus their exploration efforts primarily on the large flake form.
Globally the demand for graphite is forecast to rise, even in the face of diminishing supply from China. The research I have done sees industry analysts putting short term demand growth rate at 4-5%. Some see that number growing to 12% by 2015 and to as much as 20% by 2020.
The main driver for the growth of large flake graphite comes from new applications for the strategic mineral. In particular the clean energy sector has many new and growing uses. These include the lithium-ion battery market, where there is 20-30 times (by weight) more graphite used than lithium. Other new uses include fuel cells and solar panels, as well as new techniques in developing nuclear power.
With demand set to grow there will no doubt be an influx of new explorers rushing into the sector. Orocan has set itself ahead of the herd here by assembling an amazing management team and an outstanding suite of properties for exploration.
An Experienced Management Team
Of course, the component that most investors look to first when they are investing in junior resource exploration is management. This also happens to be one of the strongest arguments for looking at Orocan. The company has a solid mix of market and scientific professionals, crucial to both company and asset development. On the market side is Chris Bogart, who has extensive experience in the areas of resource finance, business development, strategic planning and corporate restructuring. Joining him is Antoine Fournier as chief geologist.
Mr. Fournier brings a long history of discovery with him. Most notably though is his involvement in the Lac Knife deposit currently under development by Focus Metals Inc. Lac Knife is now one of the more advanced stage graphite development projects in Canada. This high grade (17% cg) large and medium flake crystalline graphite deposit is precisely the type of deposit that Orocan will be focusing on discovering.
As a result of his past success in the identification of high quality graphite targets, Mr. Fournier played a huge role in the acquisition of Orocans suite of properties. He personally studied and analyzed the data of all their Ontario properties before he approved their acquisition. Furthermore, Orocan acquired all of their Quebec properties from a private company controlled by Mr. Fournier. These are projects he has being accumulating for years in the province because of their high potential for a technology grade graphite discovery. Many of these he has worked on in the past, and while overlooked at the time he believes warrant further exploration.
A Great Suite of Properties
In total Orocan has acquired interests in 12 graphite properties from two separate transactions. Three of these are located in Ontario and nine are in Quebec. All of the acquisitions are located in historical graphite mining districts that have the necessary infrastructure to make mining economic. These areas where also chosen because they have they geology proven to be capable of hosting large flake graphite deposits. This is something that Mr. Bogart stressed to me, Orocan will only be focused on targets they feel have the potential for large flake discoveries.
Ontario Properties
The focus for exploration on the Ontario claims will be the Black Donald claim and the Little Brian claim. The Black Donald Claim is over 9000 hectares surrounding the historic Black Donald Graphite Mine. This mine was one of North Americas largest and richest graphite deposits with over 94% of Ontarios total graphite production by value being extracted from it. Management feels that there is "potential to find another high grade Black Donald deposit in marbles with airborne EM (electro magnetic) under shallow overburden cover in this general area." The Little Bryan claim is a 3250 hectare package that has shown significant showings of graphite from previous exploration. Grab samples there have returned grades of up to 10.94%.
Quebec Properties
Under the guidance of Mr. Fournier, Orocan has secured land packages in all three major graphite mining districts in the province; these are the Wakefield district, North Shore district, and the New Quebec district. The nine properties have known marble/gneiss lithologies that are considered essential to host graphite deposits. Management feels that all properties have also been sufficiently metamorphosed to high enough grades to potentially produce the larger graphite flakes Orocan is targeting. No modern exploration methods have been used on these projects leaving them wide open for discovery. Because of the sheer number of properties currently in Orocans portfolio, an exploration plan has been formulated by their geological team that will allow them to systematically delineate their highest quality targets in a rapid fashion and focus their exploration budget accordingly.
2012: A Busy Year for Exploration
One of the attractive things about investing in a graphite play is that the time between discovery and resource calculation can very short, given a concise and detailed exploration plan. Orocan will begin this process by flying a 5000 line km airborne electro-magnetic survey over 9 of their highest priority properties, with the expectation that the last three will be done sometime in the near future.
From the data collected targets will be prioritized by the geological team. The top 8-12 targets on all the properties (some properties may have more than one target) will receive follow-up ground geophysical work. This will include detailed ground electro-magnetics , mapping, sampling, and initial metallurgical testing.
After this preliminary work is completed all relevant data will be evaluated and processed. From here the team will delineate and prioritize targets for drilling. The company plans to drill the best 8-10 targets in a 5000m diamond drill program. Management says they are planning to have the airborne survey underway by the end of the month. If exploration goes smoothly they will be able to start drilling in the summer of 2012. This short time frame makes Orocan an extremely attractive prospect, especially at current price levels
New Year, New Company, New Properties, New Opportunity
In addition to having some of the most prospective properties in Canada, in a sector poised for serious growth, with a management team experienced enough to move things forward, investors in Orocan have the added benefit of being involved with a very well structured company. With just over 15 million shares issued and outstanding right now the company will not have to battle dilution anytime in the near future. As the investing public wakes up to the immergence of graphite as the next commodity that global powers are seeking to secure, readers would be well served to think about the possibilities Orocan will give them in 2012.
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