Battery metals have been the focus of investor discussions over the last several years in the wake of rising demand for electric vehicles (EV).
Amongst lithium, cobalt, and rare earth elements, an important battery material is graphite. Each EV contains over 200 pounds of coated spherical graphite. In fact, an EV battery requires more graphite than lithium. Depending on the type of battery, graphite usage is 10 to 30 times more than lithium in its composition.
Against this backdrop, the recent offtake agreement Tesla Inc (NASDAQ:TSLA) executed with Syrah Resources Corp for the latter to supply natural graphite Active Anode Material (AAM) from its AAM production facility in Vidalia, USA comes as no surprise.
According to the agreement, Tesla will offtake the majority of the proposed initial expansion of AAM production capacity at a fixed price for an initial term of four years upon the achievement of a commercial production rate, subject to final qualification.
Lack of reliable supply sources
The investment case for graphite assumes prominence due to its lack of reliable supply sources. For instance, some 90 companies in the US consume graphite but there is no domestic production of natural graphite in the country.
With China accounting for over 70% of the world’s natural graphite supply, followed by North Korea (10%), and Brazil (8%), the need for companies that produce graphite, preferably in friendlier jurisdictions, has become a priority.
With more EV makers emerging in the US, Europe and China, other companies with advanced-stage graphite projects are expected to enter into similar agreements to that between Syrah and Tesla.
For instance, Gratomic Inc recently signed a collaboration agreement with Forge Nano, a global leader in surface engineering and precision nano-coating technology, using Atomic Layer Deposition (ALD). Gratomic’s flagship project, the Aukam Graphite Project in Namibia, is progressing rapidly and is expected to reach full operational capabilities in 2022.
Large quantities of its naturally high-quality vein graphite have been shipped for testing to confirm its viability as an anode material. Gratomic has advanced the development efforts on its graphite finalization phase for the micronization, spheronization, and the patented ALD coating of its Aukum vein graphite for use in lithium-ion batteries.
Gratomic has also acquired 100% of the rights and interests in and to the Capim Grosso Property comprising mineral claim 870.180/2012 (426.03 hectares) located in Capim Grosso, Brazil. This acquisition positions the company to better meet growing demand for high-quality graphite and provides a significant competitive advantage by limiting risk through business development in several key mining-friendly jurisdictions.
READ: Gratomic reveals preliminary findings from its diamond drill program at the Capim Grosso graphite project
Rapidly progressing in its development efforts of the Lac Guéret graphite project in northeastern Québec, Canada is Mason Graphite Inc (TSX-V:LLG, OTCQX:MGPHF). The feasibility study for Lac Guéret presented a project life of 25 years using the Mineral Reserves of 4.7 million tonnes. However, the pit optimization study indicates a much longer mine life. The IN-PIT Mineral Resources Beyond Project Life of 25 years of 58.0 million tonnes grading 16.3% could be used for an eventual extension of activity.
Another emerging story is South Star Battery Materials Inc. Its flagship Santa Cruz Graphite Project, located in Southern Bahia, Brazil, is the first of a series of battery metals projects that will be put into production by the company. The project has at-surface mineralization in friable materials.
A completed pilot-plant testing shows that approximately 65% of carbon graphite (Cg) concentrate is 80-plus mesh with good recoveries and 95%-99%. South Star is carrying its development plan towards Phase 1 production projected in Q4 2022.
Currently being developed by Northern Graphite Corp (TSX-V:NGC), the Bissett Creek graphite project in Ontario is an advanced stage project with a completed NI 43-101 bankable final feasibility study together with the mining permit. The latter is hard to come by and bodes well for the company. Northern Graphite plans to develop the project in two phases, starting at 25,000tpy of production and then doubling when market conditions warrant.
In addition to these companies, several other graphite firms such as Graphite One, SRG Mining, Lomiko Metals (TSX-V:LMR), and NextSource Materials also have interesting projects.
At this stage, they all look promising and, in general, graphite companies are poised to see higher valuations on the back of the rising demand for EVs.