Hexagon Resources Ltd. is on the brink of confirming a downstream opportunity in another key energy mineral in what Managing Director Mike Rosenstreich hopes will be part of a "new start" for the junior as it battles shareholder misconceptions in a crippling graphite market.
The company's ASX share price sank 20% on Sept. 18 after a same-day "upstream market assessment" that was less a compelling disclosure than an honest attempt to "clear the air" and detail "the fact that you don't need an upstream mine to have a really successful and exciting graphite-based business," Rosenstreich said in an interview.
Far from Hexagon's meteoric rise in 2014 when it breached 80 Australian cents per share during its prior iteration as graphite-focused Lamboo Resources, it fell to a 52-week low of 5.5 cents on Sept. 18 on its frank admission about depressed pricing and significant oversupply in the graphite concentrate market.

Speaking to S&P Global Market Intelligence from New York on Sept. 18, Rosenstreich said he believes a turnaround is imminent for Hexagon, starting with an announcement of a new downstream investment in another battery-related mineral due in the week of Sept. 23.
While Hexagon has struggled with the speculative market, he believes the company "has never been in a better position" in terms of its prospects, particularly those downstream in the U.S.
The looming announcement on another downstream opportunity continues the direction it has focused on for two years now, having recently completed a scoping study for a graphite purification and processing plant which will likely be in Chelan County, Washington.
The company believes there is a "clear and highly value accretive" path to develop such a graphite business underpinned by the West Australian McIntosh joint venture funded by Mineral Resources Ltd. for the past 12 months and possibly the recently acquired early-stage Ceylon project in Alabama. Hexagon owns Ceylon through the 80% of Charge Minerals LLC that it acquired in March.
Hexagon's Sept. 18 statement said the disconnect between upstream and downstream has widened to the point where downstream processors "see no threats to securing low-cost, high-quality graphite concentrate in the near to medium term."
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| Mike Rosenstreich. |
Yet Rosenstreich said for some investors who have been with the company a long time, it's all about upstream mining, and that misunderstandings from shareholders is "becoming a drag on our much more value accretive downstream graphite businesses" which is where the junior is focusing its dollars.
Rosenstreich has spent much of his time in recent months educating shareholders about the value of downstream at a time when graphite concentrate production is not expected to be in balance from the current oversupply situation until about 2023 to 2024.
The global market's current inability to absorb substantial amounts of additional supply has "caused the world’s largest graphite concentrate producer to be reportedly selling material for more than US$100 per tonne below its cost to produce," said Hexagon.
It was referring to Syrah Resources Ltd., whose share price also fell to its lowest ebb since early 2012 when it announced plans on Sept. 10 to drastically reduce graphite production in the fourth quarter due to a downturn in natural flake graphite spot prices in China.
Syrah said the weighted average price of its product in the third quarter of 2019 "unexpectedly" dropped to about US$400/t from US$457/t in the prior quarter due to a Chinese customer-driven price adjustment for tonnage shipped in the latter part of the third quarter in response to "foreign exchange impact and market balance."
Shanghai-based Rachel Liu, research analyst at graphite market specialist ICCSINO, said in a Sept. 18 LinkedIn post that overall demand for Chinese domestic flake graphite has declined in 2019 partly due to most small and medium-sized refractories facing closure amid strengthened environmental protection "supervision."
She said graphite demand in China's lithium-ion battery market was also weakened in the third quarter of 2019, as was anode materials exported to Japan and South Korea.

