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In 2011,Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior analyst to help increase awareness of a number of natural resource companies in which he's invested in. PLEASE FOLLOW ME ON TWITTER: @peterepstein2 Mr. Epstein formed MockingJay, Inc., a consultancy for companies in... More
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  • Graphite Sector Looks Promising After Recent Developments

    Like most natural resource sectors, graphite has been hot at times… and not so hot. Back in 2011, when there was extreme excitement about coal, potash, iron ore and precious metals, graphite stocks experienced a day in the sun. However, when gold, silver, coking coal and iron ore prices crashed in 2012-13, so did graphite pricing.

    Too Much Graphite Supply?

    Tech-savvy investors and industry pundits have long believed that the demand for graphite, used in a wide range of consumer electronics and notably in lithium-Ion batteries, is poised to explode. Higher demand is great, but doubters of the graphite story noted that expected supply additions would overwhelm increased consumption, thereby constraining graphite pricing. While a lower graphite price is good for consumers, it's not good for emerging graphite players.

    For example, Australian-listed Syrah Resources (ASX:SYR) has a proposed graphite project in Mozambique that could be in production of 200,000 metric tonnes of graphite a year by the end of the decade. That's a heck of a lot of graphite for an overall annual market of just about 1.2 million tonnes. Therefore, a knock on graphite was that Syrah's project alone could flood the market. Another concern was that a key area of graphite demand that drew breathless attention in 2010-11, might not live up to the hype, i.e. battery demand for electric vehicles.

    Supply / Demand Fundamentals Moving in the Right Direction!

    In the past few weeks there's been some highly significant news on both the demand and supply front that's bullish for graphite juniors. On February 18th, Tesla Motors (NASDAQ:TSLA) announced that it proposed to build a giga-factory to supply car batteries for its wildly popular electric vehicles. It appears that the EV market is more than just hype as Tesla has almost single-handedly revitalized that market.

    Tesla a Game Changer in Electric Vehicle Battery Demand

    It has been reported that the proposed giga-factory might require the opening of six new graphite mines. While six mines might not seem like a lot, there's less than 10 prospective mines of considered likely to reach meaningful production levels by the end of the decade. Companies in that group include Syrah Resources, Focus Graphite (FMS.TO / FCSMF),Northern Graphite Corp (NGC.v / NGPHF), Graphite One (GPH.V / GPHOF), Zenyatta(ZEN.V / ZENYF), Flinders Resources (FDR.V / FLNXF) Big North Graphite (NRT.V / BNCIF) and Mason Graphite (LLG.V / MGPHF).

    In searching through company filings and corporate websites, it quickly becomes apparent that even the more advanced and/or larger graphite projects proposed by the above listed companies would not flood the market. For example, Northern Graphite's proposed project could be in production by next year, with upfront capital needs of about $100 million. This project is forecast to generate 21k tonnes of graphite per year. Focus Graphite's mine plan calls for 46.6k tonnes per year. These are not big mines.

    Syrah Resources & Chinalco Sign Blockbuster Off-take Agreement

    The 800 pound gorilla is Syrah Resources' Mozambique project, expected to start production in late 2015 or early 2016. Upwards of 200,000 metric tonnes of graphite per year is forecasted. However, half of that amount appears to be headed to China. Chinalco, the world's 4th largest producer of aluminum, signed an agreement with Syrah for 80,000-100,000 tonnes. In addition to the Tesla news, this off-take agreement between Chinalco and Syrah is the second piece of bullish news for graphite juniors.

    Chinalco is not only soaking up loose graphite supply, it's also using Syrah's flake graphite as a substitute for petroleum coke and anthracite in its aluminum production. This is a really important development because this end use was largely not factored into graphite industry growth models. Further, this new segment (anodes in aluminum smelting) is a 14 million tonne per year market. That's 10 times the size of the flake graphite market.

    Chinese Exports of Graphite in Decline

    Importantly, annual graphite supply is not static, it declines naturally as existing mines are depleted. Roughly 70% of graphite production is in China. The mines there are small, inefficient and polluting. Therefore, China is cutting back on production and exports above and beyond natural mine depletion. Some market pundits believe that China could become a net importer of graphite by the end of the decade.

    Companies to Watch This Year….

    Of the above listed companies, two stand out as worthy of further consideration. Graphite One [GPH.v / GPHOF] is a U.S. junior with a massive deposit in Alaska, easily the largest in North America. This deposit is BOTH at surface and high-grade. The size and quality of Graphite One's deposit is comparable, albeit not quite as good as, that of Syrah Resources' deposit in Mozambique. Yet, Graphite One has US$ 20 million valuation and Syrah a US$ 500 million + valuation. Neither company is in production yet. Syrah is probably 2.5 years away and Graphite One, 3.5 years away. Key catalysts for Graphite One are 1) a Preliminary Economic Assessment, "PEA," within 12 months and 2) an off-take agreement within 6-12 months after that. In addition to Syrah's stock price spiking on its recent off-take news, several others have spiked as well. Look no further than Focus Graphite, Buxton Resources and Kibaran… Kibaran is up 500% from it's 52-week low.

    Tiny Big North Graphite [NRT.V / BNCIF] is a Canadian-listed player with a market cap of just US$6 million. Yet of all the companies mentioned in this article, Big North is the ONLY one actually in production today. Make no mistake, revenues are small, but the growth potential at the company is huge. Big North is buying and mining amorphous graphite in Sonora Mexico. It crushes the run-of-mine ore and sells locally. Again, small potatoes so far, but this simple operation could grow towards 1,000 tons per month by year-end. That's my estimate, not guidance from management. Next year, this segment could be generating a run-rate $US 2 million of cash flow annually. The real exciting part of the story though is a flake graphite acquisition the company recently announced. This past-producing operation could be up and running next year. Since most infrastructure is already in place, cap-ex to get into production will be quite manageable. By my rough estimates, this operation could be generating US$ 4 to 6 million or more annually by mid-2015, with ample success based, self-funded upside.

    Conclusion

    Three important developments, all fairly recent, point to a possible strengthening in the supply/demand dynamic of graphite prices. Tesla is single-handedly revitalizing the EV market, Chinalco has effectively taken up to 100,000 tonnes of future graphite supply off the market and China is rapidly cutting exports to the world. These developments are unequivocally good for graphite juniors, especially juniors that could reach production in the next five years. Of the names mentioned, Graphite One and Big North are very interesting investments to consider. Please see click on these links for more information.

    Graphite One:

    Interview of CEO.

    Big North Graphite:

    Corporate Website

    Disclosure: I am long BNCIF, GPHOF.

    Mar 27 11:02 AM | Link | Comment!
  • Interview Of The CEO Of Anfield Resources-- Copper & Uranium Junior On The Move

    There has been a string of important news releases from Anfield Resources [ARY.V] [EXEQF] this year. Perhaps few as important as the March 18th press release. Please click on link. With this announcement, Anfield is taking its uranium strategy to the next level, with the real possibility of actual production as soon as 2h 2015. This is a major step, but is dependent upon further drilling and underlying uranium prices. Yes, this remains a highly speculative stock, investors are urged to do proper due diligence…NOTE: Interviewer and author, Peter Epstein, owns shares of Anfield Resources.

    Anfield is more than just a copper or uranium play, it's both. It has near-term and longer-term prospects in the U.S. and is already in production of copper in Chile. Having just raised about C$700k, the company has approximately 18 million shares outstanding and zero debt. After Tuesday's announcement, I caught up with Corey Dias, CEO of Anfield Resources to learn more about the company.

    Mr. Dias, thank you for your time. Can we start with a high-level overview of Anfield Resources?

    Anfield Resources [ARY.v] / [EXEQF] is a mineral development company with a focus on acquiring strategic resource projects in order to primarily generate near-term cash flow. At the moment, the Company has both copper (Chile & Arizona, U.S.) and uranium assets (Utah & Arizona) in its portfolio. These projects are also at differing stages of development: small-scale copper production in Chile, later-stage uranium asset development (with expected near-term production) in Utah, and development-stage copper and uranium projects in Arizona.

    Great. You mentioned possible near-term production of uranium in Utah, and of course Anfield put out a press release on this score yesterday, March 18th. Please explain.

    We announced that we had not only identified a claim group, the Firefly Mine Complex, with significant production potential, but the claim group that will serve as our first initial production target. We had originally only staked eight claims in this area but, after further investigation, decided to expand it to 55 in order to encompass three past-producing uranium mines. We feel that our identification of Firefly as a production target fits our overall strategy whereby we seek out assets with relative near-term production potential. The fact that it is less than 75 miles away from Energy Fuels Inc.'s White Mesa mill also adds to this claim group's appeal.

    As outlined in your February, 2014 Corporate Presentation, Anfield is already in production of copper in Chile. Please describe that operation, is it cash flow positive?

    Our Chilean copper operation, Aura, consists of eight mining concessions totaling approximately 1,140 hectares. We remain at an early stage as we have yet to exploit most of these concessions. In any case, our production of ore is done via the toll-milling, and our reported copper grades have averaged over 2%. We deliver our copper ore to a government-owned agency, Enami, for which we receive a copper price which is at a discount to the copper spot price. Enami's sole mandate is to facilitate the operations of small and medium-sized mining companies in Chile. At the moment, this practice is beneficial to us, especially given both the high cost of energy in Chile and the paucity of water available for mining. Moreover, we have no need to incur the significant upfront cap-ex to build out a full mining operation. While we are currently generating revenue at Aura, it is a break-even business at the moment.

    How much upside is possible from the Chilean copper business? What are the plans to grow this segment and how will growth be funded?

    We believe that there is significant upside to our Chilean operations. Our current agreement with Enami allows us to deliver to it up to 4,000 tons of copper ore per month per concession, or 32,000 tons per month overall. At the moment, we are operating at less than 10% of one concession's capacity. If we were to apply a conservative per-ton price of $75 to our maximized capacity, theoretically we could generate $2.4 million per month in revenue. Of note: if we were able to consistently meet our 4,000 ton per month threshold, we could negotiate a higher monthly capacity tonnage figure with Enami. For example, there are parties which deliver 10,000 tons to Enami on a monthly basis. In any case, our plan is to invest in personnel first, in order to ramp up near-term production (given that much of the work is labor-intensive), then increase our geological work on our concessions, then invest in equipment as we scale up our operations. We will look to fund operations via both internal revenue generation and publicly-raised funds.

    Switching to the U.S., please describe Anfield's Arizona copper assets and the opportunity there…

    We have a development property, located in Arizona's VMS belt, which consists of two past-producing mines, the Binghampton mine and the Copper Queen mine (with the joint property known as BCQ). These two mines are separated by a mile-wide valley, and have never been owned by the same entity. Extensive litigation between previous owners played a role in the closure of both mines in the 1920s, although exploration on both properties continued for many years after that. Past copper production at Binghampton totaled approximately 8 million lbs at an average grade of 3.1%, while Copper Queen produced approximately 90K lbs at an average grade of 9.95%. It is important to note that the largest mine in the Arizona VMS Belt, the United Verde mine near Jerome, produced 2.5 billion lbs at an average copper grade of 4.36%, so the grades at BCQ are not completely far-fetched.

    We feel that there is a significant opportunity to discover a large ore body at BCQ, given past production and the prolific nature of the Arizona VMS Belt. We, therefore, plan to delineate a copper resource estimate at BCQ. To that end, we have signed a Purchase Agreement with a publicly-traded company called Blue Zen Memorial Parks, whose primary shareholder is a Chinese copper manufacturer, which will provide an initial $2M investment for the delineation of a copper resource at BCQ.

    You mentioned a recently signed Purchase Agreement with a Chinese partner to jointly develop Anfield's U.S. copper assets, can you expand upon the importance of this deal?

    This deal is important to Anfield for a number of reasons: first, we would receive funds to delineate a copper resource at BCQ, thereby creating a valuation metric by which this asset can be measured; second, assuming a resource of 2 billion lbs or more, Anfield and its partner will jointly fund the project through to production, thereby reducing Anfield's development costs and risk; and third, our partner has a right of first refusal with regard to the production off-take agreement, and this is crucial as the off-take agreement serves as collateral for loans related to the project cap-ex. Many more advanced resource projects have had difficulty finding off-take partners, so we are in a relatively unique position vis-à-vis our peers.

    Given that Arizona is dominated by mining giants like BHP and Freeport-McMoRan, how is it possible that a junior miner like Anfield controls a (potentially) hugely valuable copper play?

    Our local knowledge allowed us to move quickly with regard to securing these assets. That said, I think the word, "potentially" is key: we still have to prove to the market that the copper resource is there, and that it is of substantial size, before we receive full credit. If that were to occur, a major mining company may show interest.

    Can you give us an overview of Anfield's uranium assets and strategy?

    Anfield currently has 337 uranium mining claims and nine state leases in Utah, along with 24 claims in Arizona. All of these claims and leases lie within a 100-mile radius of the only operating conventional uranium mill in the U.S. - the White Mesa mill - which is based in Utah. This mill is owned by Energy Fuels Inc., a publicly-traded uranium company. Our plan is to essentially replicate our mining practice in Chile, that is, toll mill our ore. Given the proximity to White Mesa, and the low level of capacity utilization at that mill, we believe that there is a real opportunity to generate relatively near-term revenue. To this end, we recently announced that our Firefly Mine Complex in Utah - a claim group which contains three historically-producing uranium mines - will be our initial target to advance into production.

    There has been ongoing chatter about a nuclear renaissance taking uranium prices considerably higher, yet the spot price sits near an 8-yr low. Why is Anfield betting on uranium?

    As mentioned previously, there are some positive signs in the uranium market which lead us to believe that the market is about to turn: 1) Japan's renewed commitment to nuclear power; 2) the expiration of the 20-25Mlb/year HEU between Russia and the U.S., and the subsequent need for the U.S. to now buy uranium on the open market; and 3) the commitments being made to nuclear power by a number of developing countries, including oil-rich countries like Saudi Arabia and Kuwait. Nuclear power, after all, is one of the cheapest and cleanest power sources in the world.

    Why should an investor who is bullish on uranium buy shares of Anfield instead of a pure-play uranium company like Energy Fuels Inc, Uranerz, Uranium Resources Inc. or UR-Energy?

    Our model allows for relatively quick cash flow generation without significant upfront cap-ex, extensive permitting times or follow-on sustaining cap-ex. Moreover, our copper assets serve as a hedge against a potential decline in the uranium price. Finally, it could be argued that our copper and uranium assets are complementary, given that uranium is the source of energy and copper is essential to energy transmission.

    What are some key catalysts for investors to watch for over the remainder of the year?

    There will be news related to each of our assets, whether it's the commencement of drilling at BCQ and subsequent drill results, copper production figures and associated revenue out of Chile and advancement of our uranium properties via drilling and/or geophysics on targeted properties.

    Thank you once again for your time. Would you like to leave readers with any concluding comments?

    We believe that Anfield is a small company with a large opportunity. The fact that we already have copper production and revenue generation out of Chile distinguishes us from many of our peers. Moreover, our prospective JV and off-take agreement with a major Chinese copper manufacturer also makes us unique amongst our peers. Finally, our strategic pursuit of resource assets with relatively near-term revenue-generating potential, such as our uranium assets, will allow us to not only mitigate frequent, and dilutive, external funding but also acquire more attractive assets via internal funding.

    Disclosure: I am long EXEQF.

    Tags: EXEQF, UEC, URZ, copper, uranium
    Mar 19 8:49 AM | Link | Comment!
  • Anfield Resources Expands Uranium Holdings, Production As Soon As 2015

    Anfield Resources Inc. (TSX VENTURE:ARY)(OTC PINK:EXEQF) is pleased to announce that it has expanded its holdings at the Firefly Mine Complex, located in the La Sal Area of the Paradox District in Utah. Anfield acquired the original claims in the area from Yellow Rock Resources in January, 2014. Favorable historic reports prompted Anfield to expand the claim group from the original eight claims to a total of 55 claims. The expansion of the claim group is in anticipation of proposed exploration and project development at the site, with an aim of near-term production. Of note, the Firefly Mine Complex is less than 75 miles away from Energy Fuels Inc's White Mesa mill.

    Following the expansion, the claim group now includes three historically producing mines within the Firefly Mine Complex. These are known as the Firefly, Gray Dawn, and Little Peter mines. Records of production from the Atomic Energy Commission have been located for a period from 1948 to 1958, and are summarized below.

    ++ The Firefly mine produced 22,311 tons of material with an average grade of 0.34% U3O8 and 2.18 V2O5.
    ++ The Gray Dawn mine produced 7,882 tons of material with an average grade of 0.36% U3O8 and 1.62% V2O5.
    ++ The Little Peter produced 974 tons of ore with an average grade of 0.25% U3O8 and 1.21% V2O5.

    The Vanadium Queen mine, located outside of but directly adjacent to Anfield's claim holdings, produced 22,195 tons of material with an average grade of 0.33% U3O8 and 2.63% V2O5.

    The La Sal Area has had significant past production of uranium and vanadium beginning in the early 1900s. Numerous underground mines extracted vanadium and uranium early on, while deeper deposits were discovered in the 1960s and developed for production in the 1970s through vertical shafts and declines. Production through 1990 amounted to about 6,426,000 lbs U3O8 at an average grade of 0.32% U3O8 and nearly 29,000,000 lbs V2O5 at an average grade of 1.46% V2O5. Of note, thirteen historically-producing Uranium-Vanadium mines have been documented in the La Sal Area.

    The La Sal Area is also home to significant recent uranium and vanadium production, as well as projects in the development phase. Energy Fuels Inc.'s (TSX: EFR) Pandora and Beaver Mines together produced approximately 455,000 tons of ore at average grades of 0.22% U3O8 and 1.14% V2O5 from 2007 through 2012. The Energy Queen, an EFR development project, is located at the west end of the La Sal District and has a current NI 43-101-compliant estimated resource of 291,470 tons at 0.30% U3O8 and 1.30% V2O5.

    Of note, all historical production figures shown for the La Sal Area are as reported in Utah Geological and Mineral Survey Open File Report 18, Uranium-Vanadium Occurrences of Utah (1974) and Utah Geological Survey, Utah Mining Circular, 2011. All information regarding Energy Fuels Inc. is found on its website. Anfield has been unable to verify the Energy Queen resource estimate and the resource estimate is not necessarily indicative of mineralization on the Anfield properties in the La Sal District.

    Anfield is developing plans to conduct an initial exploration program on the Firefly Mine Complex in order to determine the viability of the site as a near-term production target. Initial activities will include performing surveys of the underground workings, geologic mapping, sampling, and performing geophysical surveys on the surface, within old drill holes, and within mine workings. If warranted, further exploration, including drilling, would be pursued to develop a mineral resource. If sufficient mineralization is found to be present within the historic workings, and conditions are satisfactory for mining, mineralized material would be removed and shipped to the White Mesa Mill upon obtaining both the appropriate permits and a contract with the mill.

    Corey Dias, CEO of Anfield, stated:

    "The Company is preparing to enter into a new phase with regard to its uranium properties. Up to this point, we have been focused primarily on acquisition of target properties. We are now beginning the process of moving selected acquisitions forward to exploration and near-term production. Based on both our observations and the historic data, the Firefly Mine Complex has the initial characteristics of a key property to lead us to our goal of near-term production and toll milling at the White Mesa Mill."

    About Anfield Resources Inc.

    Anfield is a publicly traded corporation listed on the TSX-Venture Exchange (ARY-V) and is engaged in mineral exploration, development and production in the United States and Chile. Its focus is on acquiring and developing an array of strategic mineral projects which are summarized below:

    Anfield's Uranium assets include mining claims and state leases in southeastern Utah and Arizona totaling 11,000 acres, targeting areas where past uranium mining or prospecting occurred within a potential shipping radius to the White Mesa Mill, the only operating conventional uranium mill in the US. The Binghampton Copper Queen (BCQ) project, located 27 km southeast of Prescott, Arizona, and within the Arizona VMS Belt, consists of 2,032 hectares of both patented and State land, with two past-producing mines on the property.

    The North Star Copper Project, located less than 50 miles northwest of Tucson, consisting of 200 mining claims covering approximately 4,000 acres, targets relatively shallow oxide copper at the historic North Star site in the heart of copper country in southern Arizona.

    The Aura Project, 20 miles east of Copiapo, consisting of eight mining concessions totaling over 2,800 acres, is a nascent copper production operation in Atacama, Chile, one of world's foremost copper producing regions.

    To find out more about Anfield, visit its website at anfieldresources.com.

    Disclosure: I am long UUUU, EXEQF.

    Mar 18 12:35 PM | Link | Comment!
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