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Graphite Energy Corp (OTCMKTS:GRXXF) Bear Run Calls For A Pause On Investments

Graphite Energy Corp (OTCMKTS:GRXXF) Bear Run Calls For A Pause On Investments
Written by
Jim Bloom
Published on
March 15, 2018
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Graphite Energy Corp (OTCMKTS:GRXXF) is getting crushed in what appears to be a pump and dump play. The stock has lost more than 80% of market value, after initially rallying to record highs of $1.55. Things are not looking good for the graphite exploration company as short sellers remain in full control.The crush comes as a surprise given that Graphite Energy has just commenced drilling activity at one of its most important properties in Canada. The plunge is already arousing suggestions that there might have been some form of investor awareness behind a momentum that had pushed the stock to record highs. GRXXF Daily ChartGiven that short sellers are in control, it could be a matter of time before they push the stock even lower. Any movements to the upside, for now, may be limited to the $0.60 handle, which appears to be the immediate resistance level.What Does Graphite Energy Do?Graphite Energy bills itself as a mining company focused on the exploration and development of graphite resources. The company is currently exploring mineral properties in Canada. It holds rights to acquire 100% interest in the Lac Aux Bouleaux Graphite Property.The property consists of 14 claims, covering an area of 738.12 hectares. Graphite Energy current objective is to explore and if approved develop the property.Recent DevelopmentsIn January, Graphite Energy Corp posted positive assay results from exploration works at its Lac Aux Bouleaux Graphite Property. The results showed 10 mineralized samples that indicated graphite carbon in the range of 2.20% to 22.30%, with an average of 10.5% Cg.According to the mining company, the results underscore potential high-grade flake graphite on the property that warrants drilling.George Estate Drilling Ltd is the company’s contractor tasked with the responsibility of drilling a total of 300 meters of core drilling at the Bouleaux property. Drilling activities are to be focused around the old graphite pit area that was the subject of exploration in the late 1950’s and 1960’s.It comes as a surprise that investors did not react positively to the fact that the company is in the process of mining one of the most sought-after metal. Demand for graphite has spiked in the recent past as prominent and cutting industries race against time to adopt green and sustainable technologies. Graphite is being sought for use in solar and lithium batteries used in electric cars and robotics.The plunge essentially points to other underlying factors that could have triggered investors’ concerns fuelling the selloff. One of the factors could have to do with the fact that Graphite Energy is still far off, from bringing the metal to production, given that it is just starting the drilling process.Management ChangesManagement changes could also have had a role in the stock performance in recent weeks. The resignation of Chief Financial Officer, Sheri Rempel, came at a pivotal point as the company moves into one of the most important phases.Graphite Energy has since appointed Teresa Cherry as the new Chief Financial Officer. She joins the company with over 11 years of corporate and accounting experience.

“Teresa’s extensive experience in strategic planning, business development, corporate financing and strong financial oversight make her a welcome member of the executive team, as we move forward with the Company’s global initiatives. We are very thankful to Sheri Rempel, who served the Company since inception and was instrumental in taking the Company public. We wish her good luck in her future endeavors," said Afzaal Pirzada, Chief Executive Officer of the Company.

Graphite Energy 2018 OutlookA plunge of more than 80% at the back of no negative news should be a point of concern to any investor looking to invest in Graphite Energy. There is no denying that the company has a valuable asset on its hands with huge potential in terms of revenue generation.However, given that it is far from bringing it to market, means it could take quite some time and capital before it is able to generate significant shareholder value from the asset. Mining is a capital-intensive activity, which could significantly drain the company’s finances prompting it to pursue debt, just to stay afloat.A steep decline in share price from record highs, suggests there is an unnatural force that was propelling the stock higher during the uptrend. It is highly unlikely that the stock will resurrect anytime soon after the recent sell-off.It will take a major development for Graphite Energy to bounce back given that it appears to be well priced at current levels. While the stock has a track record of bouncing back, it might be wise to take a back seat and wait for things to cool down before considering it as a long-term play.Disclosure: We have no position in GRXXF and have not been compensated for this article.Image courtesy of Leena J via Flickr

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