Investing In Graphite Part 2

Originally posted by Graphite ↑

Paul,
Thanks for your comments.
I personally do not agree with Jr. Graphite Mining companies such as Syrah that believe they can supply the volumes they propose and at the FOB prices they propose in their business plans. The carbon trading business as you refer to is a market that new form of carbon become available all the time. Thus the only way to enter this market is by offering lower delivered prices then existing carbons materials currently being used. Thus when Syrah released in their business plan the goal to sell 100,000 to 150,000/mt per year at an average FOB price of USD 1000/mt anyone who has even the least bit understanding of this carbon trading market laughed.
Syrah Resources Signs MOU for an Offtake Agreement with Asmet (UK)
30 Apr 2014 | 10:36:00 | Associate analysts | Increase | Decrease |
Original announcement: MOU for Offtake Agreement Signed with Asmet (UK) Limited
Syrah Resources announced that it has signed a MOU for an off-take agreement with Asmet (UK). Asmet is a global supplier of metallurgical consumables and specialist products to the iron, steel and aluminium industries. Asmet was established over 25 years ago and has more than 500 customers in over 30 countries. Asmet sells a range of carbon products, including foundry coke, petroleum coke and graphite. Under the MOU, Asmet will buy 100,000 to 150,000t of graphite per annum at a price of approximately US$1,000 per tonne over an initial period of 5 years. Under the MOU, the company will provide Asmet with 2 to 3t of samples of graphite products to enable Asmet to undertake testing of the products. Subject to successful completion of this testwork, the company and Asmet will be required to negotiate in good faith a formal off-take agreement for the sale of graphite.
Second the partner company Syrah chose Asmet has zero or very little experience selling recarb. For Syrah to sell any volume of recarb they will have to be willing to sell at close to their projected costs. So why would a graphite mine want to mine an additional 100,000 to 150,000/mt per year and sell at cost?
China
I believe all the Jr. Graphite mining companies and their investors are way over optimistic about the Chinese market and their MOU and offtake agreements. China is still has the world’s lowest cost Natural Graphite mining companies and current has excess graphite mining capacity. So how soon do investors think China will need to import the volumes listed in the MOU or offtake agreements? How soon will Chinese graphite mining costs increase enough to where imported Natural Flake Graphite will be lower cost delivered to China then domestic supply? Chinese are price buyers so low price is what will convince the Chinese to switch to imported graphite form domestic supply.
Is Mega Flake Graphite mines better?
Why are companies like Syrah and others looking to build mega graphite mines because they can’t mine and produce natural Flake graphite at low enough cost to compete in today’s market. So they feel big is better. Thus they need to not only increase their CAPEX costs to cover the added costs to build a mega Graphite mine but more importantly they have added an extreme amount of risks to the investors. In order to be profitable they must sell out close to 100% of the annual capacity and their FOB mine prices have to be high enough so that they not only cover their operating cost but are high enough to justify a return to investors. The graphite market prices are base on supply vs. demand for each different quality (carbon and flake size) and as supply increase what will happen if demand does not keep pace with supply?
The only real growth market volume potential will come from Li-Ion batteries not from any other markets. So the question is how fast will Natural Graphite demand grow for use in Li-Ion batteries? This market and what happen within China to future existing graphite mining companies cost and future Chinese mining supply will determine what will be the future for imported Natural Flake Graphite within China.
GK
GK stopped all or most production of uncoated spherical graphite once they lost their customers many years to much lower cost suppliers out of China. GK factory was located in Germany and their end use customers were located in Japan while their precursor natural Graphite came from China. GK stop production many year ago because they could not compete with the low cost Chinese producers. Today China produces over 98 % of all spherical graphite.

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Thanks 'Graphite'

I have been told that any rapid upturn in Li Ion growth would mean that synthetic Spherical production would have to be ramped up to meet demand because the capacity to produce Natural derived Spherical graphite would be insufficient and leave gaps in supply. Do you agree?

It actually seems quite strange that everyone including myself refer to the gigafactory so frequently when everything currently gets produced in China and we would think that naturally any upswing in world output/consumption would be ramped up out of China first.

I would have thought by now the Japanese may have looked to start a new supply route into Japan, yet they seem notoriously slow in advancing anything.

Could you tell me what people within the Industry may say of the historic 'Kenmare Flake' and its useability/suitability for particular uses? Is it true that it is said to be quite special?

In your processing experience, to achieve 80% in the crusher and literally a few minutes in the flotation tank for 90% + purity to a bulk customer spec, Does this sound like a potential impressive/economic process in theory?
I know it sounds over simplified in my description and in reality I've been told its actually an art.

Thanks

Paul.