Who Will Supply Graphite To The Fast-Growing Battery Industry?
The growth forecast of the lithium ion battery market is very different. For this article, I chose a forecast from the middle of the package, as well as a company closest to correctly predicting the growth of electric vehicle sales over the past five years. The picture below is from a speech by AVICENNE Energy at the Monterey meeting on September 2015. Total battery output in megawatt Hours (MwH) is expected to increase from about 60,000 MwH in 2015 to between 160,000 and 195,000 MwH by 2025. All of this growth will appear in the field of lithium-ion batteries, which are now the dominant battery technology in a wide range of applications. An increase in battery production will require an increase in the supply of raw materials for manufacturing batteries. This article explores the potential impact on the world graphite market and the possible growth in supply. The effect of LIB growth on the demand for natural thin sheet graphite batteries in automobiles and other applications usually contains about 1 kg of graphite per kilowatt hour battery capacity. Battery pack for Tesla (nasnasdaq: TSLA) S- For example, class contains about 85 kg of graphite. Graphite can be derived from natural sheet graphite or from synthetic graphite, which is usually made from petroleum coke. In the past, battery manufacturers Due to the change in quality and the limitation on the supply of natural graphite, the final automotive application tends to use synthetic graphite, most of which is made up of small- China\'s mining scale. However, the trend is to use lower-priced natural graphite, which now accounts for 65% of the battery Graphite Market. The world\'s natural graphite production is about 1. 1 million tons, of which about 40% are crystalline flake graphite, and the rest are amorphous graphite, plus a small amount of block/pulse graphite mined in Sri Lanka. Flake graphite is the preferred type of lithium ion battery. The following figure shows the forecast of sheet graphite demand as of 2025. The chart was compiled using data from the US Geological Survey as of 2014. Yes. The use of batteries is based on the growth rate of 1. £ 7% per year (inferred from data for the period 2000 to 2014 ). Battery prediction The grade graphite demand is based on the predicted increase in battery demand, assuming that the output of 65% of natural products and 35% of synthetic products is 0. 4 tons of battery- Flake graphite grade graphite per ton. In the decade between 2015 and 2025, demand is expected to grow by about 250,000 tons per year, of which 180,000 tons will be used for the production of lithium-ion batteries. The upgrade of flake graphite for lithium ion battery graphite mine usually produces flake graphite flotation concentrate with purity from 90% to about 98%. To produce batteries- Grade Graphite from thin graphite concentrate, graphite must be purified to about 99. 95%, the shape of graphite particles must become \"potato\" The so-called spherical graphite. There are two common purification methods, although there are many differences in each method, and in some cases both can be used to obtain the final purity. Chemical purification usually involves baking graphite in hot caustic soda solution and then washing (leaching) in acid ). Depending on the impurities that must be removed, sulfuric acid, hydrochloric acid or hf are used during leaching. Many small Chinese coal mines use chemical purification and are criticized for failing to adequately handle waste acid in a safe and socially acceptable manner, especially where hf is used during purification. The second method that is usually more expensive than chemical treatment is heat purification. In this process, graphite is heated to high temperature and treated with halogen gas to dissolve impurities. Watch out for headlines reading \"test results show that our graphite can be upgraded to battery level without chemical purification\" Read it carefully and you will find that they are using heat purification. Again, if the title says \"test results show that our graphite can be upgraded to the battery level without expensive thermal purification\", it just means that the company has chosen a chemical purification route. In order to improve the stacking density of natural graphite, the shape of the particles has been modified, usually called ball. The ball process is usually only 30- 70% of initial feed, waste for sale at a low price Value amorphous graphite. After globalisation, the coating is applied to reduce the reactivity of the particles and make it easy for the particles to mix with water. Flake graphite is sold in various flake sizes and purity. Non- Battery applications are mainly used in refractory materials in the steel industry, using flaky graphite concentrates ranging in purity from 90% to 97%. Concentrate with high purity has high value, but the sheet size is the main driving force of value, the sheet size is large and the price is high. If the market for selling graphite does not require high purity, there is no benefit to having a higher purity. The battery is ground with flaky graphite to a size of 10 to 50 microns, but the battery manufacturer- Grade Graphite prefers to start with a sheet size of more than 100 microns, because very fine sizes are more difficult to purify, and the yield of the ball process is usually lower. Most of the world\'s battery graphite comes from China. Normally, China\'s mines sell sheet concentrate to a third. Party processor for purification and ball. The final coating is usually done by Chinese, Japanese and Korean anode material manufacturers who sell finished coated spherical graphite to battery companies. Potential supplier of sheet graphite the following mining companies are one of the companies that successfully produce and test batteries Graphite grade in standard coin battery test. Each company has demonstrated that their natural graphite can be upgraded for lithium ion batteries with a performance equal to or superior to the synthetic equivalent and superior to the natural graphite from existing suppliers in China: ASX- Company based in TSX HQ Companies: Here is a summary of the status of graphite projects proposed by each of these companies: Battery- Grade Graphite does not require graphite with \"unique\" properties. It can be produced from almost any sheet graphite concentrate of good quality. The selected purification process and the cost of purification and globalization will vary depending on the sheet concentrate raw material, but there is no magic bullet that limits the supply of the battery Some selected producers rated graphite. From suitable sheet size and high Purity enrichment is an obvious advantage, but it does not necessarily prevent others from entering the market. The list of potential suppliers is by no means limited to the companies I have listed here. In fact, more than 200 primary mining companies are actively engaged in graphite projects around the world. Therefore, projects in the advanced stage seem to be easy to meet the projected demand growth, and even if the demand is significantly higher than the forecast, there will be no imminent shortage of supply. In fact, there are too many companies chasing a market that is too small, and only a very small number of companies are likely to enter production. As the first major supplier of the battery, the possible winnersSyrah resource is an obvious choice The graphite grade outside China, for the simple reason, is by far the only mining company that has managed to raise funds for construction projects. Syrah\'s Balama graphite project in Mozambique has been fully funded, licensed and constructed. The results of the Syrah feasibility study are summarized as follows: Syrah\'s early investors did a very good job. Even those who invested in financing projects in August 2015 have almost doubled their investment. However, I think this has already made money and the rise is limited. Syrah has a market capitalization of about $ aus1. 6 billion, equivalent to US $1. 2 billion. After deducting the value of cash and the value of the work done so far on the Balama project, the company\'s business value is about $ US800 million. At the current price, I think these stocks are of sufficient value, and any bad news will put downward pressure on stocks. Possible catalysts for downward movement include: Later-than-expected start-up - Syrah told us that this project has already started. Put into production in 2017 and put into commercial production. However, photographs of the site on June 2016 show progress in earthwork works and foundations, and structural works or equipment installations have not yet been completed. Based on my own experience with mining projects, I estimate that the goal of mechanical completion at the end of 2017 is more realistic, and then three to six months of commissioning before commercial production. Projects beyond budget It was not announced that the project was out of budget, but Syrah recently raised an additional $0. 194 billion through stock issuance, indicating that the company may be planning this unexpected situation. Start- Quality problem- It is unusual to start a new factory. Proceed exactly as planned. There is always some hiccups along the way, and I don\'t think there will be any difference in the Balama project, especially given the lack of experience in graphite processing outside of China. Another disadvantage of the Syrah project is the poor quality of graphite, which contains a large amount of low content graphite Pay attention to fine materials and very little high Thin sheet size of great value. Syrah wants to sell this low price. Re-evaluation of graphite The steel industry uses carbon-increasing agents to replace oil burning. It will take time to develop this market, and Syrah will most likely find that in the years following its start, its sales are not close to the target 355,000 tpaup. In order to sell all their planned production, it is possible for the company to have to dump a large number of lower products The price of high-quality graphite on the market is low. I used to own Syrah\'s stock, but now I have sold it because I believe the potential risk is more than any return from further appreciation of the stock price. Magnis Resources is developing the Nachu graphite project in Tanzania. Last year, Magnes\'s expectations were frustrated when it promised to raise funds from off-site in China. Partners failed to achieve. In order to get the project back on track, Magnes approached POSCO, a South Korean steel and industry group. However, more exploration drilling and further engineering work is needed for Posco to enable the feasibility study to meet bankable standards. A new research report was released earlier this year with the main results as follows: funding for the project has not yet been announced, but is expected to come at least in part from South Korean partners. The terms of the funds may have an impact on the stock price. The undiluted market value of Magnes is a million Australian dollar, or a million Australian dollar. However, in a fire sale in 2013, there were some warrants \"in the money\" that had not yet expired. Magnis used to be Uranex, a uranium exploration company that was on the verge of bankruptcy in 2013 and survived because of the sale, for every dollar sold, of the more than 0. 2 billion warrants, the exercise price was 10 cents, the due date is March 2017. The buyers of these warrants have made profits, which will make any investor drool Read this article from Australia. Magnes\'s share price has risen more than 300% this year, so investors may think it\'s forgiven to make money easily. However, the company\'s corporate value reached about $ 22% after considering dilution from the \"currency\" warrants, accounting for about 73% of the estimated project\'s net present value, compared to Syrah\'s. This fact shows that there are still some gains in Magnes\'s share price. The main reason for liking Magnes is that the quality of graphite is very high. The deposit contains a large proportion of large flakes that can be purified to> 99% of total graphite carbon using only flotation (without chemical or heat treatment. The company has been able to produce 99. 95% battery- Use the heat treatment applied during the coating process to grade graphite from the flotation concentrate. While the details of the process are proprietary, it seems that Magnis\'s Cost options for producing batteries In particular, considering that the production of the company\'s goal steps is about 70% (Syrah is 40% ). Recently announced that Magnis was able to use the combination of Nachu graphite and 65% silicon in the coin battery test, increasing the battery capacity by 10%, providing further evidence that, it aims to become a technology leader in the industry. Despite an increase of 300% this year, I believe Magnes\'s share price has been suppressed by profits. Take it from a 10-cent warrant holder. Over the past six months, more than 100 million warrants have been exercised, and most of them may have been sold by warrants holders (why is the warrants in addition to making profits,). The downward pressure caused by the exercise of the remaining 0. 117 billion warrants will undoubtedly temporarily bring brakes to the stock price, which may cause great fluctuations. Pay attention to the price trend, buy at a low price, with a target price of $ aus2. 00. Kibaaran resource is another Australia- The company is headquartered in Tanzania to develop the Epanko graphite project. The guaranteed feasibility study by kibaaran produced the following results: The company also has a large part of the high Large sheet size and concentrated purity, easy to meet the specifications sold in refractory materials and steel industry. The output of Jimbaran is 30,000 tons. Agreement with the United Nations Named as a European graphite distributor and working with German steel and industry group thysenk rup. Is expected to pass the German investment bank Kfw- Ipex with government cooperation And the African Development Bank, Nedbank. Independent engineering assessments have been completed as part of the due diligence process, which will allow financing to take place this year. Kibaaran has a market value of about $ 16%, accounting for the net present value of the project. Although 75% of the company\'s production target is the European steel industry, the company\'s remaining time target is the lithium ion battery industry. Recently signed a memorandum of understanding with Japanese trading company Sojitz to sell batteries to the Japanese marketgrade graphite. Kibaran\'s share price has not seen Syrah and Magnis rise this year. However, the project shows a good return on investment and looks likely to receive financing. There was a significant increase. TSX- There are many TSX listed companies- Listed companies have made a positive economic assessment and for the following reasons I do not recommend investing in any of them now: too many companies chase too small markets, too many companies chase too small markets, they are rarely distinguished. Most North American people S. -based graphite companies want a boost in the United States. S. Graphite consumption is also increasing as car battery production increases, but this will certainly not happen. Most of the centers around Teslaproposed giga- The factory in Nevada, but in fact, the first major battery factory in the United States is the LG Chemical factory that produces lithium-ion batteries for Chevrolet Bolt. At some point in the future, LG Chem may expand production from 650 megawatt hours per year to 3 megawatt hours, which will require 30,000 tons of batteriesgrade graphite. As far as I know, LG Chem has no plan to prioritize sourcing this material from North American suppliers. Tesla, on the other hand, says it intends to use North America- Purchase raw materials as much as possible. Some analysts read this as a demand for 50,000 tons of batteries. Grade natural graphite (about 120,000 tons of flaky graphite is required ). However, Tesla also said it used synthetic graphite in Tesla batteries(Ref. : This quote from the Tesla investor call \"the main determinant of battery cost is the price of nickel we need. . . Cost of synthetic graphite with silicon oxide coating- Tesla CEO Elon Musk ). Tesla\'s demand is likely to be zero. Maybe one day a company like Focus, Mason Graphite (OTCQX: MGPHF), north or one of the other companies will sign an agreement to supply natural Graphite to LG Chem or Tesla but now, I think it is impossible; In any case, if this does happen, it is impossible to determine which of the many potential suppliers will be the winner. The project schedule is too long to complete the project from feasibility study to production in North America. Where permitted, environmental research, local issues such as discussion of First Nations, dealing with objections from environmental groups, etc. Causing delays to make a four The annual extension between feasibility and production became normal. Tesla\'s giga- The plant will start production in 2017, but given the length of time required for financing and licensing, no potential North American graphite mine can reasonably expect production by 2020. Therefore, the current award for the supply contract with Tesla is likely to be out of reach, giga\'s graphite The factory battery will either be from- The coast will be synthetic. The three ASX- The listed companies I mentioned in this article are far ahead in project development, in any TSX- It has become very difficult for listed companies to have access to production financing on TSX, despite positive economic forecasts, Focus, north, Energizer and Mason in terms of project development since completing the feasibility study These companies seem to be able to raise a small amount of money to survive and fund further research, but none of them are able to raise money for project development. The simple fact is that the financing process for the TSX Venture Exchange has been interrupted and no potential graphite miners have hoped to raise funds for their projects until the restoration. There is no value without financing. Disclosure: I am/We are long term URNXF. This article was written by myself and expressed my views. I have not received compensation (except for Seeking Alpha ). I have no business relationship with any stock company mentioned in this article. Supplementary disclosure: I am the long MNS and KNL of the Australian exchange. Editor\'s note: This article covers one or more microcap stocks. Please note the risks associated with these stocks.