14th April 2015 Global Graphite Demand Needs High-Quality Supply in the West ShareTweet+ 1Mail Supply is Coming – from the U.S.
As much as 70% of the world’s graphite comes from just one country and supply there is shaky.
It’s not the U.S. Despite the near-term arrival of Tesla’s now famous “gigafactory”, global supply, particularly in the U.S. is not yet secured. Add to that the exploding demand for graphite’s other uses; in smartphones, tablets, fuel cells, energy storage and it’s clear that supply is not going to meet demand in at some point very soon.
The majority of supply, coming from China, is of a lower quality type of graphite, amorphous, and the government has shut down several mines in the past couple of years for various reasons – all interrupting global supply.
Now, Australia has decided to open its first graphite mine in 25 years – and more are coming. Trust the mining-driven government Down Under to spot a resource opportunity.
North America needs reliable supply. Where can it come from?
Global Graphite Demand
The full list of the uses of graphite and its derivatives is breath-taking, particularly when looking at the high-demand uses from mobile devices to lithium-ion batteries. For mobile devices, the Western markets were just the beginning, the Eastern markets, China and India alone are triggering Phase 2 of growth. The next billion smartphones will be sold in Asia.
For lithium-ion batteries, Simon Moores, Managing Director of Benchmark Mineral Intelligence says that the ‘tipping point for graphite is in 2 years’.
Even Australia is cashing in on the opportunity. A slump in Chinese production means business for others, especially with rising graphite prices. Lincoln Minerals reopened the first graphite mine in 25 years with 2 more to follow. Lincoln Minerals MD Dr John Parker spoke about the sudden moves:
The price for graphite spiked significantly about four years ago, jumping from A$700/t to A$3 000/t,” he notes, adding that the price has now settled at around A$1 250/t, which has made mining graphite financially attractive and viable again.
Official – Graphite is a Critical Material
Demand isn’t just tight, it’s critical. The US State Department, the British Geological Survey and the European Commission have now labelled the mineral as a critical mineral. In fact, The U.S. Department of Homeland Security have said that America ‘could be hurt if terrorists were to disable graphite mines in China’. Besides consumer product growth and the incalculable benefit in business and economic terms of “gigafactories”, now the political class are adding national security to the list of reasons why stable graphite supply needs to come to the West, immediately.
Supply Needs an Injection
Here’s what the global production of graphite looks like by country:
“Annual flake graphite production will have to increase by a factor of six by 2020 to meet incremental lithium carbonate requirements for batteries.”
The U.S. alone is importing 100% of its graphite supply. Not all businesses are happy about the overdependence on China. Sudden mine closures in the past few years wiped as much as 5% of global supply offline. Researchby Byron Capital Markets indicated that manufacturers are all too aware of the predicament:
“As battery manufacturers grow with the burgeoning automotive lithium battery industry, these manufacturers will need a stable supply of raw materials. Increasingly, they are looking for graphite outside of China. Today, there is annual demand for roughly 1.1 million tonnes of natural graphite … but 960,000 tonnes of that capacity comes from China. This leaves customers largely dependent on China as a source of supply.”
There are opportunities to rectify this. There are companies exploring for graphite, even in the U.S. who are moving steadily on the path from exploration to production. A promising company to watch out for is Graphite One Resources (GPH:TSX.v, GPHOF: OTCQX). The company just finished updating the market on it’s 2014 winter drill campaign. The latest results show indicated resources of 17.95 million tonnes of 6.3% graphitic carbon and 154.36 Million tonnes of 5.7% Cg. It’s sitting on the largest, high-grade, large flake (highest quality) graphite deposit in the U.S., in Alaska. Its potential size has the chance of supplying the entire next generation of graphite needs, some estimate it could be valued in the US$4 billion range, with perhaps 1 billion tonnes.
The next step for the company is to publish its Preliminary Economic Assessment (PEA), an official and key milestone on the path to production which investors will take note of. The company secured $5 million in finance last year, ample capital to see the company through their PEA.
They stand out as a home-grown solution to the graphite supply problem in North America which is due to get worse as the full benefits of graphite and its derivatives become realized. The very high-quality large flake type of graphite with the potential reserves indicated mean the company will be one to watch in 2015.
