Friday, May 06, 2016

Mighty Materials

Officials in the United Kingdom are investigating the National Graphene Institute at the University of Manchester.  In 2015, the UK government sunk a reported GPB 61 million into the research group to find commercial uses for graphene, an allotrope or structural modification of carbon.  The allotrope forms a two-dimensional honey-comb lattice at an atomic-scale  -  the thinnest possible layer of pure carbon.  Graphene is has better conductive properties than copper or any other known material.  It is also stronger than both diamonds and the highest quality steel.  The recent discovery of graphene has prompted a flurry of development work on potential uses such as high performance composite materials, electric circuits, electrodes and electric displays, to name just a few applications. 

Unfortunately, the Institute has made no progress in the year since it set up shop, triggering an inquiry by the House of Commons.  The question why anyone would have expected development work on materials at a molecular level to progress so quickly has been sidestepped.  Apparently Team Manchester is held to a higher standard since the University of Manchester is the very seat of the original discovery of graphene by physicists Geim and Novoselov. 

Producing graphene economically is one of the obstacles.  There are several options to synthesize graphene, including mechanical and chemical methods.  Unfortunately, each approach appears to have a mix of advantages and limitations depending upon the end application.  Each process is complex and so far does not produce a graphene material that has widespread marketability across numerous applications.  Consequently, large scale production at low cost still eludes most graphite developers.

Undaunted Elcora Advanced Materials (ERA:  TSX-V or ECORF:  OTC/QB) is taking its shot at graphene production.  Elcora knows carbon.  The company operates the Ragadara graphite mine in Sri Lanka, which produces about 500 tons of high grade graphite per year.  Elcora uses an environmentally friendly refining process of its own development that eliminates the use of toxic acids or alkalines.  Elcore claims its process results in higher quality graphite that yields better thermal performance because it has not been oxidized by chemicals.  Consequently, the company has made in-roads to lithium ion battery market, which favors higher quality graphite. 

Graphene is a logical extension of the product line for a graphite miner. Elcora has its own graphene research and development facility in Canada.  The company is trying to do more than just bring ‘thin’ graphite to the market.  Elcora claims development of a low-cost and scalable production process using natural graphite as feedstock and results in a material with 55% graphene content.  Eventually, Elcora wants to be a vertically integrated graphite and graphene operation that mines graphite and produces graphene.

Elcore is raising capital to fund its development work.  The company is offering 7.5 million units of common stock and 3.75 million warrants to raise as much as $3 million in new capital.  However, it is not the graphene group that is getting the proceeds.  The budget is for more work on graphite for lithium ion battery applications.  Elcore’s investment priorities should be a clear lesson to British government officials  -  go for the lowest hanging fruit.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

No comments: