http://investorintel.com/technology-metals-intel/energizer-focus-madagascar-graphite-pays-off/
I was forwarded this link by a friend and while it mainly talks about Energizer Resources i think a lot of it is still applicable to BSM. This paragraph in particular caught my attention:
To satisfy the steel market alone, annual graphite demand is expected to rise 8% CAGR to 2020 from 1.1 million tonnes to 1.5 million tonnes. Batteries and high-tech application needs are projected to be dramatic enough to require a 600% increase in annual flake graphite production. Only flake graphite can be used in the over 200-known applications that require graphite as an additive and is the only natural form of graphite that can be used to make the spherical graphite used in lithium-ion batteries. Thus, purified, spherical graphite currently sells for between $4-6,000/tonne, more than twice the price of high quality flake graphite.
I realise the first goal for BSM is plant upgrades and scaling up production to generate positive cash flows but this has to be something on the boards mind. Can some explain to me how exactly spherical production works and if management has mentioned anything about it? Or is this to far in the future for them to be thinking about?
I guess we are all here waiting for drill results in the short term and the new plant within 2-3 years but what does 5 year down the track look like? I have also heard of graphene mentioned but in a very long term view. Anyone able to explain what that is and how it may affect BSM?
The west bides its time with R&D investments, while China supplies the battery market
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Spherical graphite is the product that most graphite companies are hoping they will be economically able to produce in line with an expected battery demand boom from portable devices and, more importantly, electric vehicles.
The process is well known now, but only China produces spherical graphite in commercial volumes. With major processing companies located in Germany, Switzerland, Brazil and the US, many have questioned why these countries are not leading the push towards the next generation material.
The answer is and has always been economics.
The idea is quite straight forward: turning flat flakes of natural graphite into spherical shapes and purifying it. This increases the surface area and conductivity which creates an enhanced battery anode product.
Making spherical graphite from flake concentrate is however a totally new process that borders on chemical processing. The cost of refining and innovating this process has often been prohibited by low production costs in China.
As a result, production remains far from a fine art. Not only is the skill set different to mining, the process methods in place already result in huge amounts of raw material wastage (anything from 60-70%) and rely intensively upon the use of acid which carries environmental implications that many companies want to minimise.
At present, investments into spherical graphite milling and purification equipment do not justify the returns – the market is too small. In today’s economic climate, where cash flow is king, these barriers are holding back the western majors from entering the space in a big way.
Mining v processing
The spherical graphite concept was created in Germany, but not patented, which left Asian nations free to lead in the commercialisation of the product. Today, China produces the only significant volumes in the world, exporting to partners in Japan and South Korea where the finished coatings are applied.
The production of spherical graphite is split into in two clear phases: mining and processing.
The basic steps are outlined here:
Download here
There is a clear division between the mining side, in which today’s leading graphite companies are well versed, and processing which is very much an evolving technique.
Miners are required to think like chemists in order to produce a consistent, suitable product for the battery industry. These new requirements, which are largely unrefined, have bred a number of problems for consumers of spherical graphite including the consistency of purities, size and shape, as well as varying impurities within each batch.
A lack of investment is doing little to eradicate these issues or improve the quality and efficiency of production. Furthermore the dependence on low cost output is failing to improve common practice, with leading graphite producers having become used to a business based on volume rather than quality.
China has always been most competitive producer of spherical graphite owing to traditionally low labour, power, and raw material costs, but this is changing and costs are rising significantly within the country.
With margins being eroded by the rising basic input costs, developing a high value customer base is of paramount importance and this is something Chinese companies are only just starting to do now.
With buyers of spherical graphite becoming stricter on quality they will also have to become less price sensitive in the future, which will make non-Chinese firms increasingly competitive.
The question remains whether China can play catch up on innovative production methods or whether business will switch towards western companies with the processing know-how.
http://www.indmin.com/Article/3238613/Spherical-graphite-how-is-it-made.html
(20min delay)