Discovery of graphite deposit
Some time before 1565 (some sources say as early as 1500), an enormous deposit of graphite was discovered on the approach to Grey Knotts from the hamlet of Seathwaite in Borrowdale parish, Cumbria, England.4567 The locals found that it was very useful for marking sheep. This particular deposit of graphite was extremely pure and solid, and it could easily be sawn into sticks. This remains the only large scale deposit of graphite ever found in this solid form.8 Chemistry was in its infancy and the substance was thought to be a form of lead. Consequently, it was called plumbago (Latin for “lead ore”).910 The black core of pencils is still referred to as lead, even though it never contained the element lead. The words for pencil in German (Bleistift), Irish (Peann Luaidhe), Arabic (قلم رصاص qalam raṣāṣ), and other languages literally mean lead pen.
The value of graphite was soon realised to be enormous, mainly because it could be used to line the moulds for cannonballs, and the mines were taken over by the Crown and guarded. When sufficient stores of graphite had been accumulated, the mines were flooded to prevent theft until more was required. Graphite had to be smuggled out for use in pencils. Because graphite is soft, it requires some form of encasement. Graphite sticks were initially wrapped in string or sheepskin for stability. The news of the usefulness of these early pencils spread far and wide, attracting the attention of artists all over the known world.
England continued to enjoy a monopoly on the production of pencils until a method of reconstituting the graphite powder was found. The distinctively square English pencils continued to be made with sticks cut from natural graphite into the 1860s. The town of Keswick, near the original findings of block graphite, still manufactures pencils, the factory also being the location of the Cumberland pencil museum.11
The first attempt to manufacture graphite sticks from powdered graphite was in Nuremberg, Germany, in 1662. It used a mixture of graphite, sulphur, and antimony.
Residual graphite from a pencil stick is not poisonous, and graphite is harmless if consumed. “Read more”: http://en.wikipedia.org/wiki/Colored_pencils