Well there are a few things not mentioned so far ...
So If/when the price drops who will survive ? it will be those that can ship lowest cost Graphite for each of the many market segments ... Initially before the mega projects come on stream the smaller operates will go all out to lock in long term offtakes of 5yrs+ in duration.. Why because this affords them a guaranteed life for the duration of the offtake.. But after that they will wither under the weight of there own cost of production and overheads .
1. In minerals grade is king, and in the Graphite space is Grade, Flake size/purity (Assuming we are talking about flakers and not veiners) ...
2. Cost of Production: There are a number of factors
a) Is it high grade (How much dirt do I have to shift through through the mill and flotation to get a ton of 94-98% Graphite) In this case a high grade is good % Graphite content is good.
b) IS it opencut or Underground ... All Underground mines for flake will not be starters why? costs to high. Open cut only. Usually 150-200m depth max for open cut unless on a hill in which case 150-200m Plus height of the hill.
c) Economies of Scale - How big do I need to get before I can undercut the competition through economies of scale The bigger operations will have a distinct advantage being able to produce large tonnage at low cost for prolonged periods of time
d) Labour costs - how cheap are my labour costs ? deposits in !st World Countries will operate at a significant disadvantage with high over head costs
e) Infrastructure required - IS there Roads, Rail, Electricity, Water, Port, Towns nearby
f) Govt friendly jurisdiction red tape Royalties
g) Distance to market how far is it to ship concentrate to market... Africa is closer to Europe, Australia is closer to China for instance, Canada is closer to California.
So Lets talk about a few of the companies
LMB - Close to Chinese market but High Cost of labour/materials in Australia , no economies of scale
KNL - Small deposit 14.5mt (So far) but some decent high % High grade flake... Low labour cost can they achieve economies of scale ?
VXL - Tiny Jorc 6mt @ 7% Small Low grade ore... In Australia high cost of production, no economies of scale.
TLG - Small/Med Jorc in Sweden high grade but high overheads costs of labour close to European markets no econs of scale
AXE - Small /Med in Australia High labour Costs no Econs of Scale, exchange rates unfavourable
BUX - Small Medium High/Med grade ..Problem is in Australia and high prod costs / exchange rates can they achieve econs of scale .. exchange rates unfavourable.
SYR (&Ton) - Massive 1 Bill+ Tonne, resource at surface open cut, High Grade, all flake sizes, extremely low labour costs, economies of scale and Low cost to Port .. a little further away from China by ship but give the extremely low production cost will still undercut the competition. SYR have openly stated they already offer their graphite to some markets at $500 cheaper than existing price to force market share. Also factor in the SYR will mass produce vanadium as by product from Graphite tailings and so lower the production costs even further
Ultimately I think one company will end up owning own both SYR are Ton as the synergies are to great together they will control upto 80% of know graphite resources of all types of flake ...
I see some narrow inside the box thinking around the graphite market size... The narrow thinkers here will be saying market is only around 1m t/year
And here is the clincher.... Graphene.... the super material of the 21st century .. Uses of Graphene are expected to explode... anything that that needs super strength, super lightweight, super flexibilty and electrical conductivity... So now think masses of Graphene required to strengthen Concrete in buildings, in Car Bodies and Chassis, even vehicle Tyres... And today I read a report of small amounts of Graphene (3%) mixed in with aluminium will increase its strength by 60%. Almost ever day a new use for graphene is discovered.
There is a tsunami of graphite demand on the way.... in fact the 1st small wave will be graphite for Batteries (Lithium Ion) etc the 2nd mega wave will be Graphene as explained above and who do you think is going to be big enough to service that massive new demand ???
SYR and TON will be able to do it cheaper than anyone else and will ultimately own many/most segments of the market..
