Graphite Developers Eye Large Growing Market

The post “Integrated Graphene Producers” featured several graphene producers with novel business models that marry captive graphite sources to the technology and knowhow to produce graphene.  These are not the only graphite producers.  Although not as elegant as graphene with its svelte single-atom profile, the market for graphite has its appeal as well.  Graphite has been a staple in steel industry crucibles, foundry molds and automobile brake linings.  These days graphite has moved into another even more important place in cars  -  lithium ion batteries that make electric vehicles viable as replacements for gas guzzling cars and trucks. 

Spherical graphite is especially desirable because the graphite anodes hold up well against the lithium electrolyte in repeated charge and discharge cycles.  Both coated and coated spherical graphite has experienced a surge in demand. 

In 2017, the lithium ion battery market consumed 105,000 metric tons of graphite  -  60,000 natural coated spherical purified graphite and 45,000  synthetic graphite.  Investors can expect these numbers to climb dramatically to keep up with the battery market.  MarketResearch, an industry research firm, estimates the lithium ion battery market will grow by 16.5% annually through 2024.  Those big numbers have quite a few miners reaching for picks and axes.  How many will gain a foothold in this big, fast growing graphite market?

Lithium Ion Battery Diagram

The fifteen natural graphite resource developers listed below all have one thing in common  -  no revenue.  Even with the best of graphite resources under their control, management has considerable work ahead to bring the resource to market.  The reality of mineral resource exploitation is marked by high capital costs and pinched operating margins.  Several of the graphite developers have made plans to integrate forward into the hottest segment of the market  -  battery-grade graphite.  According to Industrial Minerals, spherical graphite suitable for lithium ion battery anodes is priced in a range of $2,700 to $2,800 per metric ton in China where many battery manufacturers are located.  This compares quite well to the range of about $655 to $790 per metric ton for flake graphite concentrate.

Yankee Graphite

The integration strategy has sent the sector into a frenzy of activity to prove their graphite meets expectations of battery manufacturers.  The only graphite deposit in the U.S. mainland is under development by Westwater Resources (WWR:  Nasdaq).  Historically, known as uranium producers, Westwater made a critical decision to diversify into other energy materials with strategic investments in lithium exploration licenses in Utah and Nevada.  Then in April 2018, Westwater acquired Alabama Graphite with graphite development projects in Coosa and Bama Counties in Alabama.  The graphite deposits are well documented and have a history of exploitation when the U.S. was still in graphite game in the 1940s.

Trying to get back in the game with a competitive battery-grade material, Westwater recently released new data from independent tests.   The company puts low volumes of its natural flake graphite through a series of refinement steps  -  purifying, micronizing, shaped into spheres and then coated with carbon powder.  The most recent tests found Westwater’s Coated Spherical Purified Graphite or ULTRA-CSPG held up better than comparable graphite from Chinese sources in long-term cycling tests. 

Although no long-term, high-volume off-take agreement is in place, Westwater has customer interest for one of its basic battery materials  -  Purified Micronized Graphite or PMG.  The company’s PMG has also held up well under independent tests that found exceptional results for performance enhancement in lead acid battery cells.  An undisclosed lead acid battery manufacture has declared interest in commercial volumes beginning in 2021, and continues early testing.

SELECTED GRAPHITE DEVELOPERS
Company Name	SYM	Price	Mkt Cap	Revenue
American Graphite Tech.	AGIN:  Nasdaq	$0.004	$365K	-0-
Eagle Graphite, Inc.	EGA:  TSX-V	$0.067	$2.6M	-0-
Focus Graphite, Inc.	FMS:  TSX-V	$0.26	$9.8M	-0-
Graphite One, Inc.	GPH:  TXS-V	$0.28	$9.4M	-0-
Kibaran Resources Ltd.	KNL:  ASX	$0.09	$25.2M	-0-
Leading Edge Materials Corp.	NGRC:  Nsdq	$0.04	$6.8M	-0-
Lomiko Metals, Inc.	LMR:  TXS-V	$0.041	$3.1M	-0-
Mason Graphite	LLG:  TSX-V	$0.29	$39.8M	-0-
National Graphite Corp.	NGRC:  Nsdq	$0.044	$6.8M	-0-
NextSource Materials, Inc.	NEXT:  TSX	$0.075	$38.0M	-0-
Northern Graphite Corp.	NGC:  TSX-V	$0.12	$7.8M	-0-
Nouveau Monde Ltd.	NOU:  TSX-V	$0.18	$31.4M	-0-
NovoCarbon (Great Lakes)	GLK:  TSX-V	$0.025	$3.3M	-0-
Strike Resources Ltd.	SRK:  ASX	$0.061	$8.9M	-0-
Valerra Resource Corp.	VQA:  TSX-V	$0.02	$1.5M	-0-
Westwater Resources, Inc.	WWR:  Nasdaq	$0.18	$13.7M	-0-
US Dollars

Canadian Connection

Like performance test results, customer relationships are critical stepping stones for graphite developers.  In June 2018, Northern Graphite (NGC:  TSX-V) announced a memorandum of understanding with a European trading company to sell 100% of the output from Northern’s Bisset Creek resources in Ontario, Canada.  China-based manufacturers are the intended end-users.  Northern management is using the arrangement as leverage with prospective investors to finance mine infrastructure and processing equipment.  Capital costs are expected to exceed CA$145 million.

Northern claims a proprietary purification technology the company intends to use to upgrade its graphite output.    Its Bissett Creek deposit yields primarily large flake graphite that requires considerable shaping to reach the spherical shape that is best suited for lithium ion batteries.  Northern has so far not been clear on whether the European trading company that has pledged to sell the Bisset Creek production is prepared to sell the high-margin purified material or is aiming for lower end graphite concentrate.

Tanzania

Kibaran Resources (KNL:  ASX) is focused on the Epanko deposit in Tanzania in East Africa.  The company recently raised AU$2.2 million through a AU$1.0 share purchase plan for existing shareholders and a AU$1.2 million private placement.  The capital serves as a strong vote of confidence in the company’s plan to convert the Epanko resource into battery-grade graphite.  Shareholders may have been inspired by recently announced test results from European customers.  

 Kibaran calls its purification process EcoGraf and claims it can produce a range of high-purity graphite material.  The recent customer tests were completed using spherical graphite produced form Kibaran’s Epanko flake graphite.  Kibaran recently commissioned a new batch plant in Germany to facilitate further customer testing.

For those investors who have more of an appetite for revenue and profits, there are a number of graphite producers that have already reached the market.  The next post features these successes and explores valuation for graphite production.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Speculative Buy rating on the shares of Westwater Resources, Inc. (WWR:  Nasdaq) through its CER Reports series.