Lithium stole the spotlight last year as demand for electric vehicles ballooned, yet a critical component of lithium-ion batteries, graphite, has been mostly overlooked. Without graphite a lithium battery simply won’t work and there is no real substitute. With a graphite supply and demand squeeze now on the horizon, graphite players such as ASX-listed Mineral Commodities’ and others are in the box seat.
In fact this year marks the beginning of an expected supply deficit in graphite that some are tipping to last until 2040.
Mineral Commodities is one of the few companies outside China that is actually mining high grade flake graphite. Notably it is also working towards developing its own battery anodes made from its own product via the purest form of downstream processing.
Like most batteries, lithium batteries have both a negative and a positive terminal. The positive terminal is linked to the cathode that is jam packed with lucrative battery metals such as lithium, nickel, manganese and cobalt and in recent years the market has become insatiable for all of them.
However, what of the anode that is attached to the negative terminal? It is pretty much made up exclusively of graphite and almost inexplicably, the market appears to be gloriously oblivious to the opportunity around graphite right now as it remains blinded by the big name battery metals like lithium and nickel.
Graphite is a soft, silvery-black element found in many household goods. Traditional uses for it include fire retardants, brake linings, lubricants and clutch materials to name just a few.
Yet the global push to move consumers to electric vehicles which use lithium batteries – and a whole lot of graphite - has seen graphite demand growing at 20 per cent per annum for the past few years. The demand for lithium batteries is also tipped to significantly increase in the coming years as many governments have now legislated in favour of electric vehicles.
Take for example the United States. By 2030, half of all new cars sold must be electric vehicles. In China, that figure is 40 per cent over the same period. The European Union is anticipating 30 million zero emission vehicles will be on the road in just seven years.
The International Energy Association Global Electric Vehicle Outlook now says demand for overall battery storage will increase 30 times by 2040 in order to meet a variety of global zero emission targets.
The unprecedented increase in lithium batteries will place extraordinary pressure on their components, of which graphite is key.
Tesla’s Elon Musk highlighted in 2016 that markets were focused on the wrong components, underscoring the importance of graphite, saying:“Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide.”
Scientists are toying with the chemical cousin’s salt and sodium to remove lithium. Manganese is becoming increasingly popular to replace cobalt, but nothing can replace graphite and lithium batteries don’t work without it.
Graphite is chemically inert, generally unreactive, resists breaking down under heat stress, is a good electrical conductor and for a lack of a better phrase, it’s “slippery”, making it a good lubricator.
Demand for flake graphite is tipped to blow out to 3 million tonnes by 2030. Leaving graphite miners scrambling to somehow increase mining capacity 7.5 times over to meet predicted demand.
One company doing its bit to meet that demand is Perth headquartered ASX-listed Mineral Commodities which has two key graphite projects – The producing Skaland graphite mine in Norway and the Munglinup project near Esperance in WA.
Whilst Skarland is pretty much washing its face economically right now, Mineral Commodities has a plan to significantly ramp up production by 2024 ahead of commissioning a planned commercial scale battery anode plant in that same year.
Skarland currently boasts a 1.84mt mineral resource going a whopping 23.6 per cent TGC for 430,000 tonnes of contained graphite.
Munglinup is even bigger at 7.99mt grading 12.2 per cent TGC – a grade that would usually turn heads but it still pales against Skarland’s 23.6 per cent.
The company has doubled production at Skarland in two short years and increased total graphite recovered per tonne. A recent research report from MST Access highlights this progress, saying:
“The Trælen underground mine produced 18.1kt ore in 2020, 30.0kt in 2021 and will mine ~39.0kt in 2022 (Exhibit 6) – representing a ~100% increase in production. The produced concentrate increased from 5.5kt in 2020 to 6.3kt in 2021, representing almost a 20% increase. The project is expected to produce ~10.0kt of graphite concentrate in 2022, representing a further 59% increase.”
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“The quality of Skaland concentrate has substantially improved post acquisition from below 90% TGC to daily averages of up to 96%.”
In addition to increasing the graphite production and recovery grades, under Mineral Commodities stewardship the unit costs have reduced by a third.
The Skaland mine is the fourth largest graphite mine outside China, contributing around two per cent of the world’s annual graphite production. Mineral Commodities is reviewing boosting current nameplate capacity of 16,000 metric tonnes and targeting a potential 25,000 tonnes annually.
Perhaps the most important part of the story is not that Mineral Commodities has access to an element critical to net zero targets, but rather that it is committed to developing the downstream process to refine its current high grade flake graphite into the spherical graphite the market needs. The company is currently pilot testing its processing to produce battery grade graphite on site in Norway and is looking to scale up the test.
Currently the EU imports 98 per cent of all battery-grade graphite for EVs.
As the EU has the fastest growing electric vehicle market, coupled with its push to buy components from local suppliers instead of imports, Skaland’s location in Norway and its high-grade flake graphite make the operation a tantalising proposition for most Europe’s electric vehicle makers.
With scale generally comes increased profitability and Mineral Commodities’ plan to scale up at Skarland might just be exquisitely timed as the battery metals punters start to look for better priced market opportunities than lithium companies that some might say have run hard in the last two years.
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