Graphene: From Nobel Prize to investment opportunity

247Bull.com Editor – 28 Dec 2012: Graphene is back in the news thanks to a £21.5 million cash injection aimed at helping Britain’s universities develop commercial applications for the material. The most promising graphene-related research projects within British universities have been identified by the Engineering and Physical Sciences Research Council (EPSRC). According to the BBC, the University of Cambridge has been awarded more than £12 million “for research into graphene flexible electronics and opto-electronics, which could include things like touch-screens and other display devices”. While Imperial College London will receive over £4.5 million, “to investigate aerospace applications” for graphene. Other projects that will receive state funding are based at Durham University, the University of Manchester, the University of Exeter and Royal Holloway.

Graphene is a revolutionary new material that has the potential to change almost every aspect of our lives. This article examines what graphene is, how it’s likely to impact our lives, and how to profit from it.

What is graphene?

Graphene was discovered in 2004 by Dr Kostya Novoselov and Andre Geim who used sticky tape to peel away individual layers of graphite. What the two British scientists discovered was graphene, the world’s first two-dimensional material and also the thinnest structure ever obtained. This discovery at the University of Manchester won them the 2010 Nobel Prize in Physics.

The honeycomb structure of grapheneThe honeycomb structure of graphene

Source: Wikipedia. Graphene is a carbon film that is only a few atoms thick and possesses unparalleled electrical and mechanical properties as well as supreme stability and durability.

At a molecular level graphene resembles a honeycomb lattice made of carbon atoms which give it unique and quite incredible physical properties.

How could graphene change our lives?

Graphene has been hyped as the “miracle material” of the 21st Century. Not only is graphene incredibly thin and incredibly light, it is also the world’s strongest material. It’s harder than diamond and about three hundred times stronger than steel. Graphene is also a much better electrical conductor than copper. It is also both transparent and flexible, meaning that it can be moulded into any shape.

The discovery of graphene has given birth to a new class of crystals such as boron nitride, fluror graphene and grapnane which are also just one atom think. These new crystals can be combined to form new materials. In fact, graphene is in the process of spawning an entire new generation of supermaterials which thus far has been confined to science fiction.

If might look like plastic wrap or cling film, but as The New York Times reported, “A sheet of it (graphene) stretched over a coffee cup could support the weight of a truck bearing down on a pencil point.”

The potential applications for graphene are almost limitless and today there are hundreds of laboratories all over the world researching the capabilities of graphene and developing new materials based on it.

Thanks to a unique set of properties, such as a melting point of over 3,000 degrees Celsius, graphene can be added to materials such as metal and plastic during their manufacture. This has given rise to a whole array of new super-strong materials.

Speaking to 247Bull yesterday about the future of graphene, Professor Novoselov, said:

“It certainly has great potential, of course when you talk about implementation, then its not only about the properties of the materials, it’s also about how easy is it to implement, and how easy the existing technology would give way to a new one.

I am certainly positive that graphene will be used in every single area it was promised, from composite raw materials, to electronics to sensors, we just need to wait and see to what degree, whether it will completely replace silicon or we will find another material that will replace silicon but I don’t think there is any doubt that graphene will be used quite widely.”

Scientists at the University of Technology in Sydney have developed graphene paper, a new material that is as thin as paper but is stronger than steel. There are other companies working on graphene-strengthened cloth that could be used to replace heavy conventional body armour.

Graphene has the potential to transform industries such as: aerospace, automotive, electronics, energy storage, communications and defence.

Graphene is likely to have its biggest impact on the electronics industry in devices such as smartphones and laptops. It has the potential to dramatically enhance these devices by replacing silicon chips with smaller faster processors, as well as making them lighter, stronger and enhancing the battery life. Indeed, Intel, IBM and Samsung are already working to create the next generation of super-fast graphene-based processors.

How to profit from the coming graphene revolution

There is no way to trade graphene directly as with a commodity like copper, and there isn’t yet a fund available to those interested in investing in the material. There are however an estimated 200 companies and universities working with graphene to develop new materials and products. The problem is there are very few that are publicly traded, and the large companies such as Samsung, IBM and Intel don’t provide investors with much exposure to graphene.

Below are some of the most interesting companies that do provide exposure to the huge potential of graphene.

Northern Graphite Corp.

Graphite, the material from which graphene is produced, has become a strategic resource, and today around 70% of the world’s supply of graphite (about 800,000 tons per year) is produced in China. Recently, however, Beijing has become concerned about the supply of this material and has imposed restrictions on the export of graphite.

As new applications are discovered, demand for graphite is expected to grow and with it the need to secure supplies from outside China. Northern Graphite Corp. (CVE: NGC), whose shares are listed on the TSX Venture Exchange, has the potential to meet some of that demand.

Northern Graphite is one of the few companies that provide investors with exposure to the mining of what is known as “large-flake graphite” outside China. The company estimates that it will be able to produce 20,000 tonnes of graphite per year for a projected mine life of 40 years.

The company will mine the material from its Bissett Creek property in Northern Ontario, and recent tests indicate that graphene made from Northern’s “jumbo flake” graphite is superior to graphite sourced from Chinese mines. Northern’s graphite produces higher electrical conductivity, lower resistance and greater transparency.

Earlier this year Northern announced that it has agreed to supply graphite to Grafen Chemical Industries for use in its graphene research. Northern and Grafen have also agreed to enter into a cooperation agreement to develop intellectual property rights. Northern will retain a 50% interest in the North American patent rights to any products and processes developed by Grafen.

A bankable final Feasibility Study has just been completed, and the company expects to complete the environmental and mine permitting process in 3Q 2012. Northern anticipates that it will be in a position to begin construction of the mine in 4Q 2012, subject to the availability of financing.

The company isn’t yet making a profit, however, as of May 2012 it had $12 million in cash and no debt. It also only has a small number of shares outstanding (52 million), around 10% of which are owned by the company’s management team. This is typically a sign of a well run business that is focused on rewarding the owners of the company, i.e. the shareholders. However the number of shares issued is likely to increase when the company raises the money necessary to build their mine.

CVD Equipment Corp.

Another company involved with graphene is CVD Equipment Corp. (Nasdaq: CVV), which builds and sells the equipment required to manufacture graphene. The company’s First Nano division also makes machines that produce graphene Carbon Nanotubes (CNTs).

CVD is partnered with Graphene Laboratories Inc. which is a spinout of Columbia University and a leading centre for Graphene studies. Graphene Labs markets and sells CVD’s graphene based materials and products on a worldwide basis, making them available to both academic and industrial customers.

Although not a pure play on graphene, since it also provides equipment used in the research, design and manufacture of semiconductors, solar cells, and LEDs, CVD is profitable. Net earnings for 2011 were $3.7 million, a 601% increase over 2010. Revenue for 2011 was also up by 91% versus 2010, reaching $30.9 million which was a record for the company.

CVD has a strong balance sheet with $18 million in cash and $3 million in debt (as of 30 September 2011), and it also has very few shares outstanding.

GrafTech International Ltd.

The final company we believe is worthy of investors consideration is GrafTech International Ltd. (NYSE: GTI), one of the world’s leading manufacturers of carbon and graphite products for industrial applications. The company produces graphite electrodes, advanced carbon and graphite materials and flexible graphite, which are sold in 70 countries around the world.

GrafTech has 125 years of experience working in the carbon and graphite industry and its products are used in a variety of industries including steel, energy (solar cells & fuel cells), electronics (laptops, flat screen TVs & mobile phones), chemicals, aerospace and transportation. They too are a company that’s benefiting from the expansion of the graphite industry, and in 2011 their revenues were up 31% to $1,320 million compared to 2010, while net income was $153 million, a 3.4% increase over the previous year. The company has $12.4 million in cash, $419 million in debt (due to capital investments and capital expenditures), and 143 million shares outstanding.

Crucially GrafTech is the twelfth largest patent holder for applications in the field of graphene. The company holds more patents for graphene than companies such as General Electric, Bayer, and Canon. As such it is well positioned to benefit from a potential graphene boom.

The bottom line

I have little doubt that over the next few years graphene will have a dramatic impact on a great many industries, however picking winners in the sector at this early stage is very difficult.

In his conversation with 247Bull Professor Novoselov shares this opinion saying, “It’s quite a vast area and honestly there are quite a few areas where it can have an impact and it’s extremely hard at the moment to estimate where it may have the largest impact.”

Over time it is likely that more of the companies involved in the development of graphene will go public and that eventually an ETF, or similar investment vehicle, will emerge. Until then however, investors are likely to need a mixture of skill, patience and luck.

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