By Andrew Shaw
NetworkNewsWire Editorial Coverage: The market continues its reaction to China’s COVID-19 outbreak as Electric Vehicle (EV) and Consumer Electronic stocks suffer supply chain impacts.
According to industry research, China is currently the only commercial-scale producer of spherical graphite, producing in excess of 100kt per year almost exclusively for use in lithium-ion battery anode material. Demand for spherical is expected to top 1.6 million tonnes per year by 2025.
With 100% of the battery-grade spherical graphite currently coming from China, anyone capable of producing, or near production outside of China considering COVID-19, could have a distinct short-term growth advantage. Not withstanding the fact that China is rapidly consuming their own domestic production, leaving little for the west. It is highly possible that China will consume all the spherical graphite they produce in their own battery factories in China.
Automotive Industry Shifting Fully to EVs
General Motors (NYSE:GM) recently announced the Detroit-Hamtramck assembly plant will be 100% devoted to EV production, and Volkswagen (OTC: VWAGY) unveiled its first all-electric SUV and said that it will be launched in the United States, China, and Europe later this year.
When industry luminaries like Wolfgang Porsche and Hans-Michel Piech, members of the family which control Volkswagen (VOWG_p.DE), and Chief Company Executive Herbert Diess are publicly advocating full support for a shift towards nothing but EVs, its time to sit-up and take-notice.
Elon Musk of Tesla Inc (NASDAQ: TSLA) is on record having said, “Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide… [there’s] a little bit of lithium in there, but it’s like the salt on the salad.” A single electric model from Tesla, for example, requires around 70 kilograms (150 pounds) of graphite.
American Tech Giants Moving Away from China
Amidst the COVID-19 outbreak and in addition to domestic politics tech giants such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL) are all looking to move production away from China.
It’s worth noting all their mobile devices run on lithium-ion batteries.
With COVID-19 shaking confidence in China’s supply chain, and 100% of purified graphite coming from China, who are the alternate graphite players?
Although they were among the two best performing stocks in India recently, Graphite India Ltd. (NSE: GRAPHITE) and HEG Ltd. (NSE: HEG) graphite is not suitable for lithium-ion battery applications, with their primary market is graphite electrodes for steel making.
So, as these juggernauts won’t be participating in the high-tech EV and battery storage boom, look to companies such as graphite producers – Ceylon Graphite (TSX-V: CYL) (OTC: CYLYF) (FSE: CCY) and Syrah Resources Limited (ASX: SYR), both of which are both well positioned and already mining ore.
Mason Graphite is a Canadian mining and mineral processing company focused on the development of what management believes to be one of the highest-grade graphite deposits known in the world. The 100% owned Lac Guéret graphite project is located in northeastern Québec, Canada. Mason Graphite is now focused on obtaining all remaining required financing with the aim of achieving production in 2020.
Canada Carbon Inc., a graphite junior, recently climbed 33% in share value after receiving an initial order for 50,000 grams of purified graphite, which equates to 50 kilos.
Putting that into some context for comparison, Ceylon Graphite pulled 2 metric tons, equivalent to 2,000,000 grams of natural vein graphite from the earth on its first day of mining, which commenced just this past December 13, 2019, achieving 99.9997% graphite purity lab results, exceeding all lithium-ion battery requirements.
Syrah Resources Ltd. is Australian-based and owns and the Balama Graphite Project in Mozambique. Balama is a high-grade, long-life asset and is the largest natural graphite mine globally. Operations at Balama commenced at the start of 2018. Syrah produced over 100,000 tonnes of graphite in the first full year of operations to become the largest producer globally. Their production facility has capacity to produce 350,000 tonnes of graphite per year. Syrah is also planning to provide the first ex-Asia anode material from a new processing facility it has recently built in Louisiana, USA.
Ceylon Graphite just flipped the switch from exploration to commercial production at its K1 mine less than 90 days ago with initial capacity of 300-500 tons per month from its first one square kilometer grid licensed for mining, among its overall Sri Lankan land holdings. Ceylon is sitting on a land package constituting of one-hundred and twenty-one kilometer square grids (121 km²) of historic vein graphite deposits, entirely made up of known graphite resource jurisdictions in Sri Lanka. This naturally occurring vein graphite has in-situ grades of over 90% carbon content in contrast with less than 10% for almost any other graphite site in the world.
Ceylon Graphite also recently announced its intention to complete a private placement round of $2.6M to further increase production at its K1 site, and complete work at its M1 site, positioning itself as the only other world supplier ready to bring a fresh supply tons-and-tons of high-purity natural vein graphite to market.
What Makes Battery-Grade Graphite Special?
To produce battery-grade graphite, pure graphite must undergo spheronization, which is a sizing and shaping process that micronizes and rounds the vein graphite particles.
Spheronization is done to optimize the particle surface area to achieve the highest performance in the anode or conductive component.
The Scanning Electron Microscopy (SEM) shows smooth, spherical particles. This is significant as presently all-natural spherical graphite is produced from flake graphite.
Among natural graphite varieties, vein graphite typically possesses very high crystallinity together with high natural purity, which in turn reduces the cost of purification at the beginning of the spheronization process.
A recent study concluded that “highly crystalline developed natural vein graphite can be presented as a readily usable low-cost anode material for Li-ion rechargeable batteries.”
According to Wikipedia, the world export sources of mined graphite are in order of tonnage: China, Mexico, Canada, Brazil, and Madagascar. The principal types of natural graphite, each occurring in different types of ore deposits, are:
- Crystalline small flakes of graphite (or flake graphite) occurs as isolated, flat, plate-like particles with hexagonal edges if unbroken. When broken, the edges can be irregular or angular;
- Amorphous graphite: very fine flake graphite is sometimes called amorphous;
- Lump graphite (or vein graphite) occurs in fissure veins or fractures and appears as massive platy intergrowths of fibrous or acicular crystalline aggregates and is probably hydrothermal in origin.
History of Vein Graphite
Vein graphite is known under various names including crystalline vein, Plumbago, Sri Lankan graphite, and Ceylon graphite. The name “Sri Lankan” and “Ceylon” are commonly used for vein graphite since the island nation of Sri Lanka (formally Ceylon) is the only area to produce this material in commercial quantities.
Serious mining and exportation of Ceylon graphite began about 1824, however the unusual deposits of Ceylon have been known, and apparently used locally, since the middle of the 1600s and previously supplied 50% of the world’s graphite up until World War II.
Not all Graphite is Created Equal
Ceylon graphite is the most-pure, lowest cost graphite currently being produced at less than $200 per ton compared with over $700 per ton by the other public company Syrah Resources.
High-purity graphite for lithium-ion battery applications commands a premium price of approximately $1500 per ton. Other high-tech industrial applications, such as computing components, defence and aerospace materials, can fetch as much as $3,500 per ton.
There is currently a world supply deficit of natural graphite.
Chinese battery makers are using synthetic graphite, which is energy intensive, expensive, not environmentally friendly being acid leached, and is a petroleum by-product. During 2019, 180 kt of graphite was used in anodes of lithium-ion batteries, 65% of that was natural, up from 35% just two years ago.
Between better costing per-ton and cleaner production methods, EV and consumer electronics manufacturers are looking for viable, naturally occurring sources of battery grade graphite for lithium-ion storage, with high-tech industrial, aerospace and defence applications also for consideration.
Short-term growth for natural graphite production stocks could be substantial as lithium-ion battery demand is forecast to skyrocket, and COVID-19 disruptions continue to plague China’s supply dominance.
For more information on Ceylon Graphite Inc. (TSX-V:CYL) (OTC:CYLYF) (FSE:CCY), visit https://ceylongraphite.com. For more information about Syrah Resources Ltd. (ASX code: SYR), visit http://www.syrahresources.com.au. To learn more about graphite uses in industry, visit https://en.wikipedia.org/wiki/Graphite.
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