Seeking Alpha
Contrarian, macro, gold & precious metals
Profile| Send Message|
( followers)  

"Soon, even the developed world will be an emerging market hungry for a bigger, better, faster, lighter and more flexible future". -Biz Bluetree

For fabricators of planes, trains and automobiles, of skyscrapers, schools and hospitals - infrastructure, household-appliances and computers - the materials steel, aluminum, plastics and copper, and eventually silicon owned the 20th century.

These materials built nations, enabled populations, birthed economies and for some created fortunes. They are the materials that propelled civilization and helped sustain life as we know it.

But, that was then. This is now. Now there's a new kid moving into the neighborhood and he's playing for all the marbles.

Graphene is the name, a processed derivative of graphite. It's going to make smart investors rich, and some fearless ones even richer. Graphene is stronger than steel, more highly conductive than copper, and lighter than a feather. And graphene is truly the first two-dimensional material in the world.

Since its discovery in 2004 by scientists Andre Geim and Konstantin Novoselov in a Manchester University laboratory - using Scotch tape and graphite from a pencil - institutional and commercial research on graphene has exploded making the disruptive material subject of over 100,000 academic papers.

Geim and Novoselov were awarded the Nobel Prize for their find, and later, in 2008 wrote in the journal; Science, that they had carved tiny electronic circuits out of graphene, where each transistor was barely larger than a single molecule.

Keynote speaker at the International Solid State Circuit Conference, ISSCC, James Meindl - professor of microelectronics at the Georgia Institute of Technology, while making precise predictions about the future of silicon electronics in 2010 - described what is most likely to come next.

"Beyond silicon microchip technology, he said, revolutionary developments in nanoelectronics, perhaps centering on graphene, may evolve.''

That was 3 and 5 years ago. A lot has been realized since then.

As of September 2012, more than 2000 graphene and graphene related patents have been applied for or awarded. IBM (NYSE:IBM) has already developed a 100Ghz graphene transistor and Nokia (NYSE:NOK) is on its way to break-through products continuing the current graphene research it started in 2006.

Perhaps you'll realize graphene exposure with IBM (IBM) or Nokia (NOK).

Graphene takes the form of a two-dimensional honeycomb lattice of carbon atoms - one atom thick. Think about that. And at 200 times the strength of structural steel, graphene is unlike any other material ever measured.

Nanotubes photo (and paragraph below) courtesy graphenomenon.com

"Rolled sheets of graphene form hyper-conductive carbon nanotubes. These nanotubes work around the primary limiting factor in microchip processing speed by taking chip architecture into the third dimension. There is a lower limit on the size of the essentially flat transistors that make up silicon-based microchips - the devices that allow information processing in everything from phones to computers. Graphene, carbon nanotubes can effectively stack transistors on top of one another on microchips, allowing for exponentially more transistors on a chip without increasing the size. More transistors means more operations per second, which means more processing power and faster processing speeds."

And, too, it won't be long before we hear about flexible electronics and begin using them in our everyday lives. Imagine being able to download high definition media to your smart phone in mere nanoseconds, then rolling up your phone and sticking it behind your ear like a pencil.

Graphene will make both the fast and the flexible possible.

Can you imagine rolling up your giant flat screen TV to bring with you on a picnic? Or watching NASA launch a satellite into space the size of a battleship that weighs less than the kitchen sink? This writer's personal interests are those possibilities realized when 3D printing is combined with 2D graphene.

With the unstoppable march of progress, and this field being less than 10 years old, interestingly enough swift advances are just around the corner. Soon, even the developed world will be an emerging market - hungry for a bigger, better, faster, lighter and more flexible future.

The basic route of graphene from mine to product is shown in the diagram below, along with some of the players that may be worthy of your investment dollars, courtesy of graphenetracker.com.


(Click to enlarge)

It's also important to realize, each of graphene's eventual applications can potentially become a life changing break-through in its own right, as uses for the super substance will prove limitless as will investment opportunities. The impact graphene will have on how we humans function day to day will continue to change and advance how humans function day to day.

Now that a case has been made for this material of the future, our article will continue by looking at facilitators, explorers and miners who unearth the raw material graphite by which graphene is produced. And those companies involved in manufacturing graphene applications and products. We'll look at where one might invest in the future and also what might be best to avoid.

And here's the rub.

1) According to the U.S. geological survey of 2012, [pdf] more than half of the world's graphite reserves lie in China, while significant resources are found in India, Brazil, Canada and Romania.

2) Both the European Union and the United States have already declared graphite a supply critical mineral.

Although natural graphite was not produced [pdf] in the United States in 2011, approximately 90 U.S. firms, primarily in the Northeastern and Great Lakes regions, used it for a wide variety of applications. The major uses of natural graphite in 2011 were estimated to be refractory applications and crucibles combined, 33%; foundry operations and steelmaking combined, 26%; brake linings, 7%; batteries and lubricants combined, 5%; and other applications, 29%.

But this is about to change.

The increasing demand for lithium ion batteries alone could make a case for increased graphite production and supply. But there are even more modern uses for graphite not discussed in the 2011 figures above.

1) We know the use of lithium ion batteries is ever increasing in electronics devices, but with electric cars on the rise even more will be needed. (As an aside: there is many times more graphite in ion batteries than lithium.)

2) While realizing more green cars on the road we must look at Fuel Cell Cars that use significant amounts of graphite (80kg) per car. And the Fuel Cell car is here now as Hyundai (OTC:HYMLF) has just begun production of the first commercial fuel cell vehicles.

3) Increased use of the Vanadium Redox Battery that stores and disperses energy from renewable sources like wind and solar generated power is on the rise.

4) Then there are the smaller, safer, and less costly to build and operate Pebble Bed Nuclear Reactors where uranium fuel is embedded in graphite balls. It takes 3,000t of graphite to start a Pebble Bed Reactor and 600t to 1,000t per year per 1,000MW. China has one such operating prototype reactor and the state owned Huaeng Group is building two more as of this writing, but plans exist for 30 more to be built and in operation by 2020.

Such is the case for critical supply demand for graphite going forward, but these examples don't even figure in the advent of graphene and the additional graphite needed. And graphene will prove the game changer.

No doubt it is the future, but as of today the graphene industry is an infant. There are no pure plays for investing in graphene or the graphite from which it is made. No commodities market. No ETFs. Just individual speculative resource and equity plays. Though this will change as today is today.

So let's take a closer look at what investors seeking exposure to graphene have to work with at present.

Favorite choices here are the future graphite suppliers, those explorers and miners on line to produce great amounts of quality, high-technology-grade graphite but, first on the list is an equipment innovator that provides the equipment and technology to process graphite into graphene. It is largely done by means of a process called chemical vapor deposition CVD, and hence the name of this company.

CVD Equipment Corporation (NASDAQ:CVV) CVD is a 30 year-old U.S. company based in New York. They design, develop, and manufacture custom Chemical Vapor Deposition Systems. To clarify, chemical vapor deposition is the controlled decomposition of gases under specific temperatures and pressures used to deposit a material onto a surface.

CVD has a market cap of $59 million and is currently trading at $10.05 per share, up 0.90% at the time of this writing. The company shows total assets of $43.3 million and a debt of $8.3 million that is associated solely with company owned buildings.

CVD is recognized as a segment leader and having just upgraded their facilities and added staff, are poised for significant growth in the second half of 2013 and beyond.

Aixtron (NASDAQ:AIXG) Among the leaders in the field of nanotechnology, and with 4 research and development facilities on three continents Aixtron with its MOCVD (metal organic chemical vapor deposition) processing equipment is worth closer scrutiny. Aixtron could play an important role in the advancement of graphene.

The Explorers and Miners

There is no shortage of players in the graphite explorer/miner space, but only a hand-full of these hopefuls has filed an NI-43-101. And even less have Preliminary Economic Assessments, PEAs. And only one has a completed Bankable Feasibility Study, BFS.

So when looking for an investment opportunity on this junior circuit the field is thin. Among the choices are:

Focus Graphite (OTCQX:FCSMF) Canadian mining company readying their primary asset, the Lac Knife graphite deposit in northeastern Quebec, Canada, for production in 2014.

Focus Graphite owns 40% interest in another Canadian company, Graphoid, Inc., a processor and research-developer of graphenes for applications in commercial and other products.

Graphoid and CVD Equipment Corporation have just come to terms on a JV partnership agreement that should spell good things for all involved parties.

Northern Graphite (OTCQX:NGPHF) Canadian mining company worthy of consideration. The Bissett Creek project in Ontario, Canada with a projected 70 year mine life is their primary asset.

Northern Graphite is also the only company among graphite juniors to obtain a Bankable Feasibility Study.

China Carbon Graphite Group (OTCQB:CHGI) Is an established Chinese mining company. However, the Chinese government has placed an export tax and instituted a licensing system to restrict exports of graphite in trying to encourage value added processing at home. This company and its government will be upstaged in the long run. Avoid.

There are also several one-year-young graphite mining hopefuls trading on the OTCBB that are, in this opinion not worth your time.

Conclusion: From medicine to military, sports to space, consumers to industrials … Graphene will transform the world in profound ways, and at its best could well own the 21st century by doing everything other materials do and doing them better.

So for this investor's money the smartest way to play the graphite/graphene revolution is at the beginning of the supply and processing chain. These are smaller companies whose primary focus is graphite/graphene.

In this opinion, the small resource or small facilitation companies have the bigger profit margin upside. A larger company whose focuses are broader may only see a less significant bump from their graphene involvement.

But you might want to consider the larger facilitators, or speculate on who it might be that comes up big in the consumer or industrial space with a latest break through application or smart device or other - as increasing dividends may be your interest. Will it be Apple (NASDAQ:AAPL)? Nokia? Samsung? Sony (NYSE:SNE)? BASF (OTCQX:BASFY)? SanDisk (NASDAQ:SNDK)?

We may only need know who makes the best use of graphene.

Source: Disruptive Material: Where You Might Invest In What Will Change The World