Tilray, Graphano Energy, Arafura Rare Earths – Battle for raw materials intensifies

Graphano Energy – Profiting from the trade war

The growing trade conflict with China threatens to severely impact the supply of critical raw materials such as graphite. With Beijing controlling over 75% of global production and tightening export controls, Western industry is facing a shortage of batteries and high-tech components. This benefits alternative producers outside China, such as Canada's Graphano Energy, which is gaining strategic importance with its projects in North America.

The Company, valued at just CAD 3.64 million, recently announced excellent drilling results from its 100% owned Black Pearl graphite project in Quebec. The drilling encountered thick graphite zones near surface, indicating a geologically promising environment comparable to the large deposits in the Lac-des-Îles region.

One drill hole returned 8.61 m with 11.33% of the usable, naturally occurring graphite in the rock (Cg), supplemented by strong surface samples with up to 17.9% Cg over 9 m and 15.1% Cg over 14 m. A total of 42 channel samples within a 1,200 sqm mining area yielded an average grade of 13.2% Cg, which is an exceptionally high value for an initial drilling program.

The Black Pearl project comprises 84 claims covering 4,149 hectares and is located east of Graphano's advanced Standard Mine project. CEO Luisa Moreno emphasized: "These results confirm our model and the potential to make Black Pearl a significant addition to our graphite portfolio."

Graphano is now planning geophysical airborne surveys to identify additional target zones and extensions of the discovery, positioning itself as one of North America's most promising new graphite developers.

In addition to the Standard Mine project, Graphano Energy has another gem in its portfolio with the Lac Aux Bouleaux project. The property is located near Canada's only graphite mine, Lac des Îles, which is operated by Northern Graphite. The advantage is that the processing plant located there is not operating at full capacity, which enabled Graphano Energy to enter into a joint use agreement with the operator.

Tilray – Positive turnaround

Another commodity not related to defense or renewable energy is cannabis. After a breathtaking rally at the end of the last decade, disillusionment set in, and former stock market stars such as Aurora Cannabis, Canopy Growth, and Tilray lost over 99% of their market value over the past years. In recent weeks, however, there have been signs of a long-term bottoming out in the broader market. Tilray's share price rose over 560% to USD 2.32 from its yearly low in mid-June to last Thursday, before a post by the US president abruptly interrupted the rally, causing a correction of around 20% to USD 1.72.

This could present a long-term buying opportunity, as the US company achieved a first with its quarterly figures published last week. With a net profit of USD 1.5 million after a loss of USD 34.7 million in the previous year, the Company moved into the black for the first time. The other key figures were also impressive.

Revenues reached a record USD 210 million. Adjusted EBITDA climbed 9% to USD 10 million, while operating cash flow improved significantly from USD -35.3 million to USD -1.3 million. Even more impressive is the fact that net debt has been virtually eliminated, standing at just USD 4 million.

CEO Irwin Simon believes Tilray is clearly on track. Given the possible reclassification of cannabis in the US and growth in the European market, the Company could be facing a revaluation.

Arafura Rare Earths – Beneficiary of the trade war

The recent tensions between the US and China have triggered a veritable price frenzy among Western producers. US President Donald Trump responded to Beijing's tightened export controls by threatening new tariffs on Chinese goods.

Shares in Arafura Rare Earths, operator of the promising Nolans project in the Northern Territory, shot up 27% at times on Monday, reaching their highest level in over two years. The Company is considered one of the most promising hopes for an independent supply of neodymium and praseodymium to the West, metals that are essential for wind turbines and electric vehicles.

An internal government report, as reported by The Age, is providing additional momentum. The editorial team refers to an internal government briefing according to which Australia is planning to build up a strategic mineral reserve worth AUD 1.2 billion, around EUR 718 million, as part of a bilateral agreement with Washington.

While China tightens its control, Australia is positioning itself as a reliable partner in the raw materials war. Arafura Rare Earths is arguably the most compelling pure play in the sector and could benefit from the geopolitical upheaval over the long term.

Even if Trump scales back the escalation of a trade war with China, there is no end in sight. Western commodity producers such as Graphano Energy and Arafura Rare Earths are likely to benefit in the long term. The cannabis industry may also have formed a long-term bottom.