On a Friday afternoon in the physics labs of Manchester University, Andre Geim and Kostya Novoselov were playing around with a lump of graphite. They’d heard how their colleagues down the hall used Sellotape to clean graphite before putting it under the microscope, so they decided to use some to peel a layer from the surface. A thin graphite flake stuck to the tape, so they kept repeating the process on that small sample. The flake became thinner and thinner.
They stuck with ‘the Sellotape method’ – formally known as micromechanical cleavage – and eventually got to a layer of carbon a single atom thick. It won a Nobel Prize for the two Russians. They had invented graphene.
Graphene has many special qualities – it’s been called a ‘wonder material’. It’s the world’s thinnest material, so it’s very light – but also extremely strong. And it’s an excellent conductor of electricity and heat. For example, its superconductivity could lead to ultra-fast graphene-based computer chips. Graphene is almost two-dimensional, which gives it a very large surface area. That adds to its potential uses too. So who is going to make money from it?
Britain invents, the world profits
History is littered with great British inventions and discoveries that became commercial successes abroad. Remember, the first modern computer was developed at Manchester University in the early 1950s. So to make sure we capitalise on the discovery of graphene, a £61m National Graphene Institute is being established in Manchester.
But there is serious global competition. The world recognises graphene’s potential. The EU has a billion euros of funding earmarked over the next ten years. And Korea will also spend heavily. But it is China that has published most research papers, and is also taking a lead in production.
Back in November we saw the IPO of Applied Graphene Materials (AGM). I wrote about it at the time. AGM is a spin out from Durham University, and aims to be a leading manufacturer of high purity, top quality graphene. It is potentially a UK graphene champion. The stock market is certainly excited: AGM is up 172% since launch. But is manufacturing the raw material, graphene itself, the best way to profit from it? After all, if graphene is going to be used widely its price can’t be too high and volumes have to be plentiful.
A new company on Aim called Cientifica (CTFA) believes that the real value in graphene is likely to be found in the companies that use it, rather than those who make it. CEO Tim Harper has recently returned from visiting a number of Chinese companies who have capacity in the hundreds of millions of tonnes. This puts AGM’s eight-million-tonne capacity plant in perspective.
What is more worrying is that Harper sees strong downward pressure on prices. Chinese manufacturers talk of prices that are “an order of magnitude” lower than you hear about in the West. Also, there are many different production methods, and at this early stage of the industry new processes will continue being devised. A further risk for the manufacturer is that the type of graphene it produces isn’t the type that ends up being in demand for a particular application.
Cientifica plans to invest in early stage graphene users rather than in graphene manufacturers. It has identified several markets where graphene could prove to be a game changer.
The first is energy storage. Graphene could significantly improve the performance of supercapacitors – devices which store power like a battery, but can be charged in milliseconds. Cientifica has an agreement with private company, London Graphene, which is developing applications in this field. At the moment they are jointly developing a business plan which might lead to Cientifica taking a stake in the business.
This is Cientifica’s only formal relationship so far, but there are plenty of opportunities for it to look at. Filtration is another market Harper is focusing on. Graphene filtration membranes are a hundred times more efficient than current technology. The end uses for filtration technology would be clean water, oil separation, chemical and food manufacturing.
Graphene has a big surface area and conducts heat well, so it’s perfect for infrared heating. Heating is another market where graphene has scope to make an impact.
Harper is also going to focus on the “personal wellness” market. What is that? Well, graphene based sensors can obtain biochemical information to monitor professional sportsmen.
In fact, there’s no shortage of interesting projects – far more than Cientifica has the scope to invest in at the moment.
Cientifica doesn’t have a huge war chest ready to deploy; investments will have to be financed on a deal by deal basis. This means Cientifica’s only asset is Tim Harper’s expertise as a science-based entrepreneur who is focused exclusively on graphene. It will be interesting to see what he comes up with.
Information in The Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. The Penny Sleuth is an unregulated product published by Fleet Street Publications Ltd. Fleet Street Publications Ltd is authorised and regulated by the Financial Conduct Authority. FCA No 115234. http://www.fsa.gov.uk/register/home.do
New to MoneyWeek?
Here at MoneyWeek, our aim is simple. To give you intelligent and enjoyable commentary on the most important financial stories of the week, and tell you how to profit from them.
If you've enjoyed what you've read so far, I've got something you'll definitely be interested in.
Twice a week I send out an exciting small cap email, 'The Penny Sleuth'. The simple, plain talking insights and to-the-point small cap commentary – delivered straight to your inbox - will help you master the world of penny share investment.
With your permission, I'd like to send you the Penny Sleuth for FREE.
We hope you enjoy your stay on the site. Good luck with your investments!
Editor, The Penny Sleuth