Booming Saint Jean Carbon (SJL.V), a self-described carbon science company with resource properties, has released news announcing the company had received its first order from Panasonic to supply graphite anode material to their manufacturing facility.
The company which had rode a steady $0.06 until the news broke, climbed overnight to $0.34 per share – a 466% jump.
That’s a big ass jump. But will it sustain?
We say no. Because maaaaybe the news is bullshit.
Company CEO, Paul Ogilvie, commented, “After more than two years of working on material specifications, sampling and re working, we could not be more pleased than to finally ship finished material to our customer. The order is part of an offtake agreement to supply multiple tonnes of anode material monthly for a number of years. We are hopeful that the electric car business continues to grow at this rate; as that will continue to push our demand and create more and more opportunities for us. We consider today as our greatest accomplishment; to be recognized and awarded with an order to supply one of the world’s best technology companies, is a tremendous accomplishment for the team.”
Sounds great, but try as we might, none of us in the Equity.Guru offices could find details of the deal. No totals of what had been sent, if it had been paid for or what the actual timetable of the off-take agreement was or even an approximate total of what the deal itself might bring.
Usually, when a deal like this is struck, the big player prevents the little guy from using their name, specifically to avoid situations where someone ‘passes off’ on the bigger player to do something like, oh, I don’t know, jack their share price?
I can confirm that a lot of companies have ‘talked’ to Tesla about getting their lithium, cobalt, manganese, copper, unobtainium, and graphite into a Powerwall or a Tesla battery or a SpaceX battlestar, but none have been allowed to name the company in a news release saying so.
If one were jaded, one might interpret this supposed Panasonic deal as being no ‘deal’ at all, or that a minor marketing discussion is being sold to the market as a bigger partnership. That in fact, Saint Jean Carbon is sending a batch or two of samples that, if they pass muster could lead to a deal down the line, but also might not because graphite usually makes good pencils and rarely makes good cellphone batteries.
I’m not saying this couldn’t materialize into an amazing investment opportunity, but word on the street is saying the company isn’t actually producing graphite material at all, and may well be currently using material sourced from outside the company (China perhaps?) as part of what may only be a marketing deal, or a scratch and sniff with a purchasing manager.
I mean, for real, if your company had a for reals deal with Panasonic, enough of a deal to name the company in a news release, wouldn’t you include ALL The details you could in the news?
If the deal is legit and they’re actually sending graphite to Panasonic, and nothing in Saint Jean’s public filings previously would point to them doing so, or having produced material to send, would they be able to handle demand if they did eventually get a significant deal?
Global alternative energy initiatives, the proliferation of personal electronics, and private corporations like Tesla working to put an EV in everybody’s driveway, have put a fire under the anode market. As such, the demand for graphite anode material in lithium ion batteries is expected to double by 2020.
Benchmark Mineral Intelligence also predicts that by 2020, over 360,000 tonnes of medium flake graphite will be required for feedstock in the creation of spherical graphite used in anodes. So graphite is an interesting sector. The world still is your oyster if you can source a good supply, as the market continues to grow and evolve.
As such, investors have been watching the press feeds with hungry eyes hoping to latch onto a bit of news that would make them overnight millionaires. We’re taking the stance, however, that all that glitters in this Saint Jean news is not gold.. uh, graphite.
More juniors than you can shake a stick at are claiming to be the next big thing in graphite but, unfortunately, even if you manage to pull it out of the ground, you can’t just sell it on the open market – you have to find someone to specifically sell it to.
Then there’s the next problem. Just graphite doesn’t do it anymore. If you want decent margins and higher revenues, you need to add value to your product by processing it. Failure to do this properly has led some companies (*cough*Samsung*cough*) to find their products blowing up when used heavily.
So, when a company claims to have put together a deal with a monster like Panasonic, but supplies little or no details beside a blue sky potential in the future, it leads a cynic (read: smart investor) to believe said deal could be complete bullshit.
You can jump all over this one if you like and my hats off to you if you make a killing, but I don’t think we’re getting the whole story and, as such, you may end up holding the bag on a day-trading nightmare.
As we write this, Saint Jean stock is beginning a rapid decline. We think the word is out. Take your chances or keep your dough?
Your choice.
ADDENDUM: Chris Parry here – I’ve dived into Saint Jean’s past announcements and I think I know what’s happening. In November of last year, SJL.V announced a deal in which they ‘and their battery manufacturing partner’ were to build a “high-powered, full scale, lithium-ion battery with recycled/upcycling material.“
It went on to describe the arrangement as the battery manufacturer working with a recycled car battery power pack, “and the upcycled anode material from Saint Jean Carbon.”
To be sure, this is not an ‘off-take’ deal at all, and it’s not a marketing deal. This is a ‘hey, can you send us a crate of graphite because we have some shit to handle” deal. Panasonic will be building TWO batteries, one with new material and one with recycled material, to see whether they can squeeze some juice out of a recycled battery cell.
For Saint Jean to pass this off as an off-take deal is diabolical. It appears they could deliver the ‘off-take deal’ in the back of a taxi.
–Gaalen Engen
http://twitter.com/gaalenengen
FULL DISCLOSURE: Saint Jean Carbon is NOT an EQUITY.GURU client and the author has no connection with the company. Because, fuck those guys.
fuck u asshole. stick to your mj drinks.
Aw, is someone worried they’re gonna get choked at the open?
LOL
The whole graphite exploration business is hot for an off take deal. Hot enough that the mere hint of one will send the shares skyrocketing.
Imagine what would happen if a company actually did have a deal, named the other party, had a quote from the other party and detailed what the order actually was.