From a University of Waterloo General Engineering GE 170 Engineering Graphics first day hand-out:
Pencil lead is the heartwood or core of the pencillius delecticus plant, a rapidly growing shrub found in the middle altitudes of South American mountain ranges (most notably in Columbia). Recently the plant has been introduced to the Asian continent where it is quickly becoming an important cash crop in areas too dry to support rice.
Pencil lead is unique among heartwoods in that it is readily separated from the encasing branchwood. Until recently this fact had no commercial application, but the development of the Mechanical Pencil has created a demand for pure pencil lead. Up to the Second World War, pencil lead, which is commonly used to mark paper, was sold encased in pencil wood, the wood usually machined and painted, and often topped with a natural or synthetic rubber. The rubber tip was found to be effective in smearing the pencil lead mark over the surface of the paper in a manner that obliterated any errors made in making the original mark.
Pencil lead has several unique properties. Depending on the area of origin, the pencil lead may vary in colour, but is most often found in the darker, almost black, shades common to the popular Paraguan variety. All varieties may be found in a variety of hardness, ranging from Rockwell C-0.001 to Rockwell B-.83. The constituent materials in the pencil heartwood include molybdenum, plumber's dope (prevalent in the Columbian variety), sea water, and tiny parasites of the Opus Meanderus strain.
Pencil lead has been recognized as a naturally resistive material, with a conductivity value of about .083 - .05 mho/m. This value will of course vary with atmospheric pressure, time of day, and sun spot activity. Surprisingly, pencil lead colour has not been considered a factor in material resistance, although there is evidence to suggest that red and chartreuse pencil lead is carcinogenic in laboratory elk.
In large quantities, pencil lead is radioactive, and in quantities of more than one tonne should be handled with care. Small quantities of pencil lead are next to useless unless encased in pencil branchwood or Mechanical pencil devices. Pencil lead will not work well in fountain pens.