AFTER years of China dominating the graphite market, the door is open to new players.
Increased demand partnered with more protectionist policies and declining graphite quality out of China sent prices soaring in recent years, from roughly $US750 per tonne five years ago to more than $3000/t for a high-quality product.
The technology and green energy industries are the main drivers behind the increase in demand. Graphite is used in everything from fuel cells in hybrid cars to lithium-ion batteries in MP3 players and digital cameras. Despite their name, there is actually 20 times more graphite than lithium in li-ion batteries.
The nuclear energy sector is also leading to increased graphite demand. Pebble bed reactors operate with uranium contained within flake graphite balls.
The current graphite market is more than 1 million tonnes per annum, with roughly 600,000t as amorphous graphite powder and an additional 400,000t of various sized crystalline flake graphite.
Flake graphite is derived from pure carbon under similar tectonic conditions to diamonds, but with slightly less pressure. This is the type most sought after for hi-tech products and excites investors.
The uses of and demand for flake graphite are outstripping supply and the trend seems likely to continue.
Archer Exploration, a player in the graphite market this year, has previously said it projects the automotive industry will need 400,000t of flake graphite (100% of the world’s current total production) to manufacture spherical graphite for li-ion batteries and fuel cells by 2025. This is in addition to the graphite they already use for other purposes, including brake linings and clutch materials.
The graphite success story of the year has to be Syrah Resources. It started 2012 with a share price of A17c but ends it closer to $3 with a more than 1500% increase in its market cap.
The meteoric rise began in February when the company announced the acquisition of Nachingwea graphite project in Southern Tanzania, 325km from its existing Balama project in Mozambique.
“Obviously share price wise, this year was fantastic,” Syrah managing director Paul Kehoe told MiningNewsPremium.
“Exploration this year has also been incredible as we are digging up one of the largest graphite deposits in the world.”
According to Kehoe, Syrah was in the right place at the right time to get into the graphite boom.
“We got lucky, I guess,” he said.
“We had an area we were doing due diligence on and we discovered we had a lot of graphite in the ground. We just kind of stumbled on it because we originally secured the land from another company for uranium prospecting.
“There was no uranium out there, but we realised there was a lot of graphite.”
Syrah expects to release an initial JORC compliant resource in the first quarter of 2013.
Given that China historically filled nearly 75% of the world’s graphite demand, the opening is there for new regions and companies to fill the void. The market rewarded those who did, giving a boost to most companies who released information about graphite exploration.
Some companies have already changed their entire reason for being, in an effort to meet the demand for graphite.
Triton Gold and Talga Gold have both turned away from their namesake resource to pursue graphite projects, with Talga managing director Mark Thompson saying in May that a name change was in the cards to reflect the company’s new direction.
In February, Talga announced it had entered into an option agreement to acquire TCL Sweden, a subsidiary of Teck Resources, which contained numerous graphite and other mineral assets in northern Sweden.
Talga announced in June that it had completed the purchase of TCL ahead of deadline, giving it access to 11 exploration permits containing an existing inferred graphite resource of 3.6mt grading 23% carbon.
October drilling results out of the Nunasvaara site in Sweden showed results as high as 31% graphite.
“The results are particularly pleasing for us as they have confirmed what the historical information indicated, and we have even exceeded our expectations in some high-grade zones,” Thompson said at the time.
Talga finished out the year by signing a memorandum of understanding with the port of Lulea, allowing the company to prepare to export 80,000t of graphite concentrate from Sweden once production begins.
Little known Kibaran Nickel saw its shares nearly triple in May on the news it would acquire graphite properties in Tanzania, including Mahenge and Arusha properties. The Ndololo prospect on Mahenge boasts a potential exploration target between 3.5-7mt of graphitic schist grading between 10-15.5% carbon.
While Talga, Syrah and others focused their efforts overseas, some companies began exploration on graphite deposits in Australia. The Eyre Peninsula in South Australia was one popular target.
Archer’s drilling confirmed the presence of an eastern graphite limb at the Sugarloaf deposit on the Eyre Peninsula in March. It led to a higher exploration target of 40-70mt at 10-12% graphite from 24-37mt at 10-12% graphite.
Lincoln Minerals, an emerging iron ore miner with other projects including graphite, nickel and silver, also focused its attention on Cape Eyre. In August Lincoln announced it would turn its attention on the Eyre Peninsula to graphite because it was one of the few locations in Australia with good grade, course flake, shallow graphite deposits.
Buxton Resources acquired 85% of the Yalbra graphite project in the northwest Gascoyne region of Western Australia from Montezuma Mining in June
But this could turn into a case of too many cooks in the kitchen. While graphite demand is high – and expected to rise in coming years thanks to further technological advancements – it will be a question of which companies can get their mines off the ground first.
“The remarkable run up in graphite prices since China placed a 20% export tax on the commodity has prompted a rush of exploration companies to acquire graphite properties or dust off old geology reports,” Patersons Securities analyst Matthew Trivett said in an August report.
Kehoe said Syrah is well positioned for the future.
“We believe we are going to be the lowest cost producer in the world and believe we can compete with existing suppliers of graphite and always undercut other producers,” he said.
According to Kehoe, the Balama resource has positioned the company in a positive way because the scale of the deposit makes it conducive to bulk operations, a high-grade means Syrah will move less rock to get at the deposit and outcropping as a mountain means the stripping ratio is virtually zero.
“Going forward we believe graphite is very positive based on traditional demand in the construction industry and new applications such as lithium-ion batteries, fuel cells and nuclear,” Kehoe said.
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