Many may not be aware but the major component of the lithium-ion batteries used in Tesla's (NASDAQ:TSLA) electric cars is actually not lithium, but in fact it's graphite. Strangely enough, all the focus in recent years has been on lithium when it comes to battery materials; one will often read headlines about mining giants Albemarle Corp. (NYSE:ALB), FMC Corp. (NYSE:FMC), and SQM (NYSE:SQM) and their lithium operations. Hardly anything could be "unearthed" in the media related to graphite, especially in North America, but starting this year graphite will be the one grabbing these headlines. This is the next high-growth battery material lithium once was. Currently, there is only one existing graphite mine on the entire continent, owned by European mining giant Imerys (formerly named TIMCAL). Next to it lies Lac Aux Bouleaux graphite project held by Graphite Energy Corp. (OTC: GRXXF)(CSE:GRE).
The Imerys mine is the fifth-largest in the world and was the ONLY producing graphite mine in all of North America, and is located 250 kilometers northwest of Montreal, Quebec. The province of Quebec is often considered a top 10 global mining jurisdiction with strong government support. The approximately 750-hectare Imerys mine has a production capacity of 25,000 tonnes of graphite per year, and being next-door neighbors Graphite Energy's Lac Aux Bouleauxproperty shares many geological and structural conditions with Imery mine. The company has just announced a drilling program scheduled to start next month.
"Our property has a lot of potential because we have historic graphite mineralization, many showings and electromagnetic conductors, which we believe could be extensions of the known mineralization," said Joanne Freeze, Geologist/Technical Advisor of Graphite Energy.
Elon Musk: Our Lithium Ion Batteries Should Be Called Nickel-Graphite...
Tesla CEO Elon Musk once said that the batteries used in his company's vehicles should be called "nickel-graphite" instead. His claim that lithium-ion batteries should be "rebranded" has significant merit: a lithium-ion battery is made up of only 2% lithium in cell mass, while graphite, the anode material, takes up 33%. Hence to make a battery, you need 20 to 30 times more graphite than lithium. This means graphite is an essential part of our lives - all portable devices that we use need to have rechargeable lithium-ion batteries. It'll become even bigger once more electric cars like the Tesla Model 3 hit the road.
The fact that usable graphite is so limited, compounded by literally every carmaker moving into electric big time (Volvo, GM, Ford etc. strive to become all-electric), makes this a material companies are going to fight for to get their hands on. While it's true that graphite can also come "artificially" using synthetic processes (i.e. in China and India), these are harmful to the environment and are being phased out globally toward extinction. There needs to be more graphite produced naturally through mining. It is forecasted that Graphite prices are set to explode in the near future as the electric car becomes the norm for automobile consumers.
Benchmark Mineral Intelligence analyst Andrew Miller said: "For the first time in over five years, we're now seeing consistent increases in pricing due to supply-side pressures. At the same time, you have the emergence of new demand from value-added applications such as expandable graphite and spherical graphite for lithium-ion batteries."
High-Quality Graphite On Its Way
Last month, Graphite Energy received their first batch of surface sampling results from Lac Aux Bouleaux, yielding 2.2% to 22.3% graphitic carbon, half of which was considered high-grade (jumbo or large flake graphite). This result is significant: In this industry, a grade of 5% is already a big breakthrough and viable for applications. But for a material that relies so much on quality, Graphite Energy's results - as confirmed by the company - warrant further exploration.
Indeed, more drilling is just up ahead. The company has planned a drill program in early March to follow up on the recent sampling, as well as to test targets on which historical exploration was conducted in the late 1950s and again in the early 1980s. As more and more graphite drilling results are disseminated in this commodity market, the public will gain a better understanding of the importance of what is already a scarce but indispensable material powering our world.
Furthermore, we will be seeing more of graphite as a key part of batteries in future headlines. Samsung is already experimenting with a unique battery made of graphene - a thin layer of conductive material derived from graphite - that could increase capacity by 45% and boost battery charging speed by 500%.
At the moment, the battery sector has mainly focused on the following big players:
Tesla Inc. (NASDAQ:TSLA)
Tesla and its CEO Elon Musk are looking to revolutionize the entire auto industry and the renewable energy sector, pledging a fully "green ecosystem". The company is known for making the best-selling electric car models in the world, with Model 3 being its latest signature vehicle. This month, Tesla's total vehicle production surpassed the 300,000 mark. Its goal is to raise that to 500,000 by year 2020. For its car batteries, Tesla uses those made up of small lithium-ion cells like the ones found in portable electronics rather than individual large battery cells of other automakers. In terms of milestones in renewable energy, the company built the world's largest lithium battery last year in Australia. The battery, connected to a 325 MW wind farm, could store enough energy to power 30,000 homes in one hour.
Albemarle Corp. (NYSE:ALB)
Albemarle currently has its lithium operations at a number of locations worldwide. In Chile, the company is producing 125,000 tonnes of lithium carbonate per year at the famous Atacama salt flat. Expansion plans are also in place at Atacama, with a new production plant scheduled for construction in the early 2020s. In the U.S., Albemarle is working the Silver Peak lithium brine mine in Nevada, which it purchased through its acquisition of Rockwood Lithium in 2015. It's estimated that over 300 million pounds of lithium carbonate have been produced at this mine since 1966. The company also has a strong presence in Australia, where it plans to follow the lead of its Chinese JV partner Tianqi Lithium and build a lithium hydroxide plant at the Greenbushes mine.
FMC Corp. (NYSE:FMC)
FMC operates its lithium business in Argentina at the Salar del Hombre Muerto. Recently, the company announced that it would invest $300 million to double its production to 40,000 metric tonnes per year at the salar by 2019. Back in 2016, FMC entered an agreement with Canadian company Nemaska Lithium, under which Nemaska would supply FMC with 8,000 metric tonnes of lithium carbonate annually beginning in mid-2018.
SQM (NYSE:SQM)
Chilean mining giant SQM is mainly focused on its operations at the Salar de Atacama, where the company had a long dispute with the government over project royalties until it was resolved in early 2018. In addition to its Chilean operations, SQM also has a joint venture with Lithium Americas develop the Cauchari-Olaroz lithium project in Argentina. First production in Argentina is targeted for 2020.
However, the backbone of these big players is graphite. Without graphite, no lithium-ion battery would be able to function. This is why graphite could grab more headlines as the world shifts to 100% electric vehicles.
Natural Graphite Is The Future
The fact that natural graphite is just so rare and that synthetic graphite (which makes up 60% of global battery anode material) is getting axed for environmental reasons, battery makers like Tesla and Samsung will be lining up the moment natural graphite from Quebec becomes available.
Companies like Graphite Energy now have the responsibility of replacing virtually 60% of our batteries from their mines. Believe it or not, the future of batteries has everything to do with graphite.
So still plenty room for SYA to grow rather than only 12c SP
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