Graphite prices are down around 30% in 2023, yet underlying market fundamentals continue to signal a positive outlook.
Traditional applications of graphite in key industrial sectors like steel production still represent about 75% of total natural graphite demand, but graphite demand is widely expected to rise alongside the rise in electric vehicles (EVs).
Behind the positive long-term outlook is anticipated robust graphite demand for its use in lithium-ion batteries.
Graphite is the most used raw material in an electric vehicle battery by weight. It comprises more than half of every battery and in excess of 95% of a battery’s anode and there are no viable graphite substitutes on the horizon.
This is especially true in North America and Europe, where natural graphite is preferred over synthetic alternatives predominant in China.
Synthetic graphite still dominates market share of battery anodes and is currently used in more than half of the battery anode market. Yet it comes with considerable drawbacks, including high production costs, substantial energy requirements and negative environmental impacts.
The integration of silicon in small quantities — of less than 10% — in the graphite anodes of batteries by several manufacturers is a noteworthy development as it aims to enhance energy density. However, it is unlikely to replace graphite entirely and graphite remains an indispensable component in lithium-ion batteries.
“Exponential growth” forecast
According to Fastmarkets, the total market for electric vehicles and non-EV battery graphite is set for exponential growth.
Projections indicate a rise from approximately 1 million tonnes in 2022 to about 6.5 million tonnes by 2033. To accommodate this surge, graphite prices are expected to increase, stimulating the necessary investments in the sector.
Fastmarkets forecast a sharp increase in graphite prices between 2024 and 2026, driven by a demand that outstrips supply. The delay in new natural graphite projects and extended lead times for qualifying new materials are contributing factors.
While the supply crunch is expected to ease towards the end of the decade, the rapid growth in demand could lead to a market deficit without further investment in graphite supplies.
An important development in late October 2023 was China's decision to impose strict export constraints on graphite concentrates, further increasing the fragility of the battery minerals supply chain.
The new export restrictions on certain graphite products, effective December 1, 2023, come in response to expanded US controls, and cover natural graphite and its products like uncoated and coated spherical graphite, and expandable graphite.
These restrictions, anticipated to boost the localisation of the EV battery supply chain, could significantly benefit flake graphite producers and natural graphite anode developers.
Although current price trends show a decline, the long-term outlook for the graphite market remains strong, underpinned by the growing demand in the EV and battery sectors. The International Energy Agency expects graphite demand to increase by 8-25 fold by the year 2040.
The recent regulatory changes in China further enhance the market's potential, indicating a bright future for graphite producers and investors alike.
Graphite on the ASX
Sarytogan Graphite
The highlight of the September quarter for Sarytogan Graphite Ltd (ASX:SGA) was achieving 99.99% graphite purity — far exceeding the grade specification for battery anodes.
Sarytogan, which has the highest grade graphite and second largest contained graphite resource of any ASX-listed graphite company at its graphite project in Kazakhstan, achieved the high-grade result via thermal purification at its German partner lab.
The 99.99% grade achieved far exceeds the typical battery anode specification of 99.95% and may also be suitable for other high-value high-purity markets that achieve even higher prices.
A pre-feasibility study (PFS), which will consider two main flowsheet options — chemical and thermal — is now being advanced and should be completed by “no later than” the third quarter of 2024.
At this stage, the thermal purification flowsheet looks suitable for an affordable, modular approach to development as it has comfortably exceeded the 99.95% TGC grade for Uncoated Spherical Purified Graphite.
The September quarter also saw the completion of exploration drilling at the Kenesar graphite exploration project complete, from which assays are pending.
As at quarter end, Sarytogan held $6.6 million in cash.
Since the quarter's end, Saytogan’s American laboratory partner has produced 1-kilogram of agglomerates from Sarytogan graphite flotation concentrates — an important step for the scale-up of the thermal purification flowsheet option.
Sovereign Metals
Completion of the pre-feasibility study (PFS) for Sovereign Metals Limited (ASX:SVM, OTC:SVMLF, AIM:SVML)’s Kasiya rutile-graphite project in Malawi has confirmed the project’s market-leading position in two critical raw materials — natural rutile and natural graphite.
The project is the world’s second-largest flake graphite deposit, with Sovereign positioned to potentially be one of the world’s largest natural graphite producers outside of China at 244,000 tonnes per annum. That is particularly significant given China’s recently announced graphite export restrictions.
As for natural rutile, which is the highest-grade, purest, natural titanium feedstock, Kasiya is the world’s largest rutile deposit. As such, Sovereign Metals is in a position to become the world’s largest rutile producer at 222,000 tonnes per annum. This comes as natural rutile faces a major global supply deficit over the coming five years.
Over the quarter, Rio Tinto (ASX:RIO) invested $40.6 million in the company to become a 15% strategic investor, with an option to increase its position to 19.99%. Rio will provide technical and marketing assistance using its reach as one of the world’s biggest mining companies.
Africa-based mining executive Frank Eagar was appointed as the new managing director to lead development of the Kasiya project.
The PFS of the Kasiya project shows an NPV8 of US$1.6 billion, average annual EBITDA of US$415 million, and post-tax IRR of 28%. It declared an initial probable ore reserve of 538 million tonnes, which it says only accounts for 30% of the total mineral resource.
Forecast cash costs come in at a low US$404/t and once into production, would make it the lowest-cost producer of both rutile and graphite in the world.
As the PFS modelling was limited to only 25 years, substantial production rate and mine life upside exists.
Evolution Energy Minerals
During the September quarter, Evolution Energy Minerals Ltd (ASX:EV1), which is focused on its development-ready Chilalo Project in southeast Tanzania, executed a strategic investment agreement, a binding offtake agreement and an MOU for downstream collaboration with BTR — the world’s leading battery anode producer.
- Cornerstone investment: BTR to acquire a 9.9% interest in Evolution, subject to due diligence and regulatory approvals.
- MOU for downstream collaboration: BTR and Evolution to collaborate on the manufacture of battery anode materials, with an initial focus on North America.
- Binding offtake agreement: Evolution to supply 100% of Chilalo fine flake graphite to BTR until proposed downstream facility commissioned.
Evolution was also granted a new mining licence by the Government of Tanzania and received the final assay results from its reverse circulation (RC) drilling campaign at Chilalo.
“The agreements with BTR provide further validation of the Chilalo project’s quality, including the significant value-added potential in processing Chilalo fine flake graphite to produce battery anodes. These transactions present an outstanding opportunity to accelerate Evolution’s transformation from graphite mine developer to a vertically integrated graphite company,” said managing director Phil Hoskins.
In addition, Evolution received final assay results from a 5,440-metre, 44-hole reverse circulation drilling campaign. It intersected high-grade mineralisation outside the existing mineral resource, including 18 metres at 7.3% TGC from 18 metres deep, and 12 metres at 7.9% TGC from 46 metres.
The company also confirmed that it is making continued progress with the project financing process, having received initial reports from independent technical consultants for financier due diligence.
As at September 30, 2023, the company had cash of $1.5 million.
Walkabout Resources
Walkabout Resources Ltd (ASX:WKT) continued to make rapid progress in the past quarter towards the development of its Lindi Jumbo Graphite Mine in Tanzania.
By September 30, essential civil works for the entire project were 98% complete — well ahead of the mechanical construction team’s scheduled start — and all major concrete works required to finalise plant construction were in place.
Walkabout CEO and managing director Andrew Cunningham said, “Another solid quarter focused on preparing for commissioning and then plant ramp up and operational readiness for early 2024.
“The restrictive controls announced by China on the export of graphite products this week, make our entry to market extremely timely and will see Lindi Jumbo being the largest alternative producer of large flake graphite for the expandable graphite market.
"As 100% of Lindi Jumbo production is currently unpriced and projected as the second highest margin graphite project globally, Lindi Jumbo stands to benefit greatly from any resulting premiums available for non-Chinese supply.”
He said the project is expected to be “coming online in early 2024 — soon after Chinese export restrictions come into play — will secure Lindi Jumbo’s role as the largest producer of large flake graphite for the expandable graphite market outside China.”
Highlights for the period included tailings storage facility (TSF) works 93% complete at quarter end, with HDPE liner installation progressing well; planned essential civil works 97% complete; the erection of building structures in progress; minimal costs of funding delays; grid power delivered to site, with a strategy to improve risk of redundancy and continuity of supply.
Construction progress continued at a rapid pace since the quarter’s end.
Evion Group
Evion Group NL (ASX:EVG, OTC:EVIGF)’s highlighted that the construction of the Panthera expandable graphite joint venture (JV) project in India has advanced well and is on track for commissioning.
Extensive infrastructure is in place and the majority of equipment has been ordered and is ready for installation, while all capital expenses have been fully funded. Its approval is key to receiving approval to launch production.
The project’s development will see Evion become a global player in the production of graphite and downstream products for the EV and alternative energy markets.
The JV is on target to achieve first-year sales of US$7 million, with the capacity to increase revenue from years two and three.
During the quarter, Evion submitted the environmental and social impact assessment for the Maniry Graphite Project in Madagascar, which will provide the global environmental permit — a key licence that will pave the way for construction to start.
The company says the Maniry project will produce much-needed graphite for use in lithium batteries, and play an important role in the global transition to clean energy.
Evion held $3.57 million in cash at the quarter end which the company says is sufficient to meet all immediate development and growth plans.
Volt Resources
During the September quarter, Volt Resources Ltd (ASX:VRC, OTC:VLTRF) completed a revised feasibility study for the Bunyu Graphite Project in Tanzania, which delivered “highly favourable” NPV, IRR, and payback period figures, that represent significant improvements to the 2018 feasibility study. This included pre-tax NPV7.5 of US$58.9 million, pre-tax IRR of 31.5% and a payback period of 2.9 years.
The key objectives of Stage 1 development are to establish Bunyu as a world-class supplier of graphite products, grow Volt’s existing natural flake graphite business, provide cashflow and establish infrastructure in support of the development of the significantly larger Stage 2 expansion project.
Stage 1 is based on a mining and processing plant throughput rate of 400,000 tonnes per annum (tpa) of ore to produce on average 24,780 tpa of graphite products, positioning Volt as a dominant participant in the global flake graphite market.
The mine life for Stage 1 increased from 7.1 to 13.7 years, with an average FOB operating cost of US$670 per tonne. Total EBITDA of US$169.6 million over the 13.7-year Stage 1 project period, with an average annual EBITDA of US$12.4 million. Despite cost inflation and rising interest rates, capital and operating costs have been kept under control.
The company continues discussions around financing with multiple partners.
In addition to the feasibility study, a second production campaign was commenced at ZG, producing about 400 tonnes with a goal to produce 1,000 tonnes of graphite.
From January 1 through September 30 2023, ZG grew revenues from the project, generating revenue of €1.17 million, excluding the Horizon grant.
The company noted that China’s recent announcement of export curbs on graphite products reinforced its strategy of becoming an integrated natural graphite anode (specialty chemical) producer for North American and European markets.
International Graphite
International Graphite Ltd (ASX:IG6) continues to rapidly advance as Western Australia’s first fully integrated ‘mine-to-market’ producer of graphite battery anode material for lithium-ion batteries.
The company says that recognition of the Springdale Graphite Project as a deposit of international significance was the highlight of the September 2023 quarter.
During the quarter the company grew its total mineral resource estimate at Springdale from 15.3 million tonnes at 6% total graphitic carbon (TGC) to 49.3 million tonnes at 6.5% TGC. Of this, 11.5 million tonnes at 7.5% TGC is in the indicated category and 37.8 million tonnes at 6.1% TGC is inferred.
With 27% of the resource classified as indicated, this is sufficient for long-term mine planning. Yet still only around 10% of the tenement area has been explored, and about 20% of exploration targets tested to date.
A bulk concentrate testwork program is underway at ALS Metallurgy in Perth and a scoping study is scheduled to be completed at the end of this year.
At its Collie downstream processing facilities, works approval has been received to install 'qualification scale' micronising equipment and installation is underway.
Cash at bank at quarter end was $1.4 million with grant funding due in the December quarter comprising two instalments of $333,000 each from the WA Government Collie Futures Industry Development Fund (the first was received on October 26); and $1.2 million from the Australian government’s Critical Minerals Development Program.
The company is focused on completing a scoping study for Springdale by the end of this calendar year, to match the scoping study released in April for the proposed Collie Graphite BAM Facilities that will process Springdale concentrates.
It is also actively pursuing discussions with interests in Korea, Japan, the US and Europe, who are seeking supply to meet the raw material demands of the global gigafactory build-out.