AE may not be targetting the nuclear industry, but that is not to say the nuclear industry is not targeting Zenyata's graphite.

"Graphite demand from pebble bed reactors alone could be greater than current annual production by the end of this decade.

Electric batteries and pebble-bed nuclear reactors are two current technologies driving demand. In my view, these two applications alone are enough to justify a bullish long-term outlook. But “high tech” commodities are rapidly evolving. And more markets (with more demand for flake graphite) are already developing.

The Future of Graphite – Fuel Cells and ‘Graphene’

But the real future of graphite may lie in fuel cells.

According to the United States Geological Survey, fuel cells could create more demand for flake graphite than all other applications combined.

A fuel cell is like a large battery that produces power through chemical processes. You need to ‘refuel’ it from time to time. This fuel contains graphite.

This is not science-fiction. Fuel cells are already used to power phones, vehicles, and provide back-up power for buildings such as hospitals. Toyota plans full-scale commercial production of fuel cells within three years.

If fuel cells are the next source of demand for graphite, then graphene is the ‘blue sky’ for demand.

Graphene is a one-molecule-thick sheet of graphite.

The carbon molecules line up in hexagons. Close up it would look like chicken wire. It is stronger than diamond, is more elastic than silk, and conforms to any shape. It conducts electricity at the speed of light, and can transmit 1000 times the electric current than copper. This amazing material is quite new to science, and we are still working out its potential applications.

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IBM has already used graphene to produce the fastest computer chip in history. The US Air force and Navy are funding research to investigate its potential. Graphene chips may displace silicon chips in computers. If this happens, then graphite demand would go through the roof.

IBM are not the only ones researching it. Intel, the world’s biggest microchip manufacturer, is also investigating its potential uses, along with at least 200 other industrial companies.

Graphene production doesn’t generate any real graphite demand yet. This is still at the research and development stage. It’s worth mentioning here, because if scientists are even half-right, graphene could change the world we know it, and the price of graphite will soar.

Where’s the graphite going to come from?

The graphite price looks good to keep rising. Demand continues to rise, and there is very little flake graphite production coming on line.

The only new project of any size that could be in production soon is the Almenara graphite project run by Magnesita (unlisted) in Brazil. This could produce 40,000 tonnes of graphite a year, increasing global production by just 10%. Production is still at least a couple of years away.

With so little new production queued up, and new projects taking around five years to bring to production, it is hard to see how demand will be met. Analysts at a Canadian investment bank, Canaccord, reckon that demand for flake graphite will increase six-fold by the end of this decade. This paints a very bullish picture for flake graphite prices. A six-fold increase to demand without any significant increase in supply should send prices one way: UP.

Analyst predictions aren’t any kind of guarantee this will actually happen, of course. I think what is probably more important is just how strategically important graphite is: particularly graphite deposits based outside of China.

Whether it is used for batteries, nuclear reactors, fuel cells, or even graphene – the point is that graphite is essential for a group of new and developing technologies.

This makes it a commodity that important groups will want to control… and that makes it a great investment opportunity.

This story has just started on the Australian market. It has the same hallmarks that the rare earths stock boom had back in 2009. Investors that got into that at the start made spectacular returns.

The time to look at graphite is now."

Dr. Alex Cowie
Editor, Diggers & Drillers

http://www.moneymorning.com.au/20120427/why-graphite-is-the-high-tech-commodity-of-the-future.html