Graphite may have been lumped in the so-called “battery metals” basket, but it’s the varied uses in other applications that has experts predicting demand for the commodity will soar.

In this guide, Stockhead explains the factors that have been driving ASX graphite stocks, and what will spur demand — and stock prices — into the future.

Graphite is a naturally-occurring form of crystalline carbon. It is a mineral with extreme properties and many uses.

Traditionally, the graphite industry’s bread and butter has been its use in refractory (or “heat-resistant”) bricks, which line the inside of blast furnaces to protect them from the heat generated in steelmaking.

How did graphite come about?

Graphite was first used in the 4th millennium BC in ceramic paint for decorating pottery.

In the 1500s, the commodity was found to be useful for marking sheep after local farmers found a massive deposit of graphite in England.

This led to the creation of the world’s first modern pencil by French inventor Nicholas Jacques Conté. He was responsible for creating the different hardness of pencils by mixing powdered graphite with clay into rods and firing them in a kiln.

Numerous other uses for graphite were discovered around the same time, including as a refractory material to line moulds for cannonballs.

This produced rounder and smoother balls that could be fired further, greatly benefiting the English Navy.

What is driving demand?

Today demand for graphite is primarily driven by the steel market, but the rapid rate of growth in the lithium-ion battery industry is driving demand for both natural flake graphite and synthetic graphite.

Each lithium-ion battery requires 60kg of graphite – more than twice the amount of lithium needed.

Market forecaster Roskill predicts graphite demand from battery makers will grow by 23-27 per cent each year through to 2028.

But major battery makers such as BYD and Panasonic have very specific quality requirements for their batteries, and industry watchers see that market as hard to break into, given China is the main producer of spherical graphite.

Spherical graphite, processed from natural or fine flake graphite, is used in the anodes of lithium-ion batteries.

Meanwhile, graphite’s unique ability to withstand extreme heat and prevent fire from spreading is opening up many new market opportunities — with demand growing much more quickly than expected.

A great fire retardant

When treated with acid and heat, graphite flakes split apart and increase in volume by up to 300 times.

This “expandable graphite” can be pressed into sheets and used for heat and fire protection in applications ranging from building materials to consumer electronics and fuel cells.

Fire safety is rapidly becoming a global issue in commercial and residential construction, driven by disasters such as the London Grenfell Tower tragedy and an explosion at China’s Tianjin Port in December 2015.

The cladding on the Grenfell Tower is believed to have contributed to the rapid spread of the fire that killed 71 people and gutted the 24-storey building in west London.

Similar fires have occurred in Australia and the United Arab Emirates.

New legislation in China, the European Union, Japan and Korea has either required flame retardants in building codes and/or banned brominated and asbestos-based flame retardants.

Australia is also placing restrictions on the use of non-flame retardant materials in aluminium cladding on buildings.

Annually, China needs 40 million tonnes of flame-retardant building materials that will contain 5 per cent expandable graphite.

That’s 2 million tonnes of expandable graphite required each year just by China’s construction industry.

“To put this level of graphite demand in perspective, it is more than 10 times greater than existing natural graphite demand from the lithium-ion battery industry,” says Graphex Mining (ASX:GPX) managing director Phil Hoskins.

“Most commodity analysts aren’t predicting battery graphite demand to reach this level until 2025-2030.”

Lucrative graphene market

Graphite can also be turned into graphene — an atom thin sheet of carbon, noted for its incredible strength and conductivity.

Two professors at the University of Manchester discovered the material in 2004 during a “Friday night experiment” session when they used sticky tape to separate graphite fragments and created graphene flakes one atom thick.

They were later awarded the 2010 Nobel Prize in physics.

Graphene is 1 million times smaller than the diameter of a single hair, yet it is 200 times stronger than steel and still lightweight and flexible.

The material is now used in electronics, sensors, aircraft, green tech solutions, industrial robotics and sporting equipment – possibly even wallpaper that can generate electricity.

Researchers at the University of Massachusetts have also proven that graphene has eight to 10 times the stopping power of steel and is twice as effective as Kevlar at stopping bullets.

Because graphene is extremely lightweight, researchers are now looking into creating fabrics from woven carbon nanotubes (essentially a tube of graphene) for military grade and high-performance combat and sports clothing.

Chinese researchers have even found a use for graphene in protecting ancient wall paintings.

The graphene industry rocketed from $US85m in 2017 to $US200m in 2018 — marking a 135 per cent increase.

Market researchers predict it will surpass $US1 billion by 2023 thanks to its many uses.

ASX stocks in graphene

While there are nearly 50 ASX-listed graphite players, not all of them are aiming to be graphene producers.

There are just six companies that want to tap the lucrative graphene market.

Here’s a list of stocks with exposure to graphite/graphene, courtesy of leading ASX data provider MakCorp:

ASX CodeCompanyProject locationDeveloping grapheneMarket cap ($M) As of Nov 29
AGSAlliance Resources South Australia 12.52
ADNAndromeda Metals South Australia 7.56
ASNAnson ResourcesWestern AustraliaYes39.55
AXEArcher ExplorationSouth Australia Yes13.77
ADVArdiden Ontario, Canada 10.06
ARMAurora Minerals Western Australia2.46
BSMBass Metals Madagascar, Africa43.17
BATBattery Minerals Mozambique, Africa26.73
BKTBlack Rock Mining Tanzania, Africa20.97
BEMBlackEarth Minerals (listed Jan 2018) Western Australia5.23
BUXBuxton Resources Western Australia16.19
CDTCastle MineralsGhana, Africa2.24
CAZCazaly ResourcesWestern Australia4.84
CRLComet Resources Western AustraliaYes6.18
CGMCougar Metals Madagascar, Africa2.86
CGNCrater Gold MiningQueensland, Australia5.31
FGRFirst Graphene Sri Lanka Yes68.65
GBEGlobe Metals & MiningMalawi, Africa 6.52
GPXGraphex MiningTanzania, Africa19.29
HMXHammer Metals Queensland, Australia7.24
HXGHexagon Resources Western AustraliaYes37.93
IDAIndiana Resources Tanzania, Africa5.45
IECIntra Energy Tanzania, Africa5.04
KNLKibaran ResourcesTanzania, Africa35.84
LGRLanka Graphite (suspended)Sri Lanka Getting out of graphite/graphene after the company announced it was acquiring a retail ecommerce business2.28
LMLLincoln MineralsSouth Australia 3.45
LITLithium AustraliaMadagascar; Western Australia; South Australia45
MNSMagnis Resources Tanzania, Africa198.62
MCTMetalicity Western Australia12.65
MLMMetallica Minerals Queensland, Australia10.96
MLSMetals AustraliaCanada 9.37
NXENew Energy Minerals Mozambique, Africa7.12
OAROakdale ResourcesSouth Australia 0.917
PSMPeninsula Mines South Korea 4.31
QGLQuantum Graphite South Australia 15
RNURenascor ResourcesWestern Australia; South Australia 21.92
SYASayona MiningWestern Australia 39.46
SVMSovereign Metals Malawi, Africa 20.49
SRKStrike Resources Queensland, Australia7.99
SYRSyrah Resources Mozambique, Africa539.46
TLGTalga ResourcesSweden Yes97.98
THXThundelarra ExplorationNorthern Territory, Australia 8.89
TONTriton Minerals Mozambique, Africa39.87
VRCVolt Resources Tanzania, Africa32.02
WKTWalkabout ResourcesTanzania, Africa27.99

Archer Exploration (ASX:AXE) is working on disease-detecting graphene biosensors after partnering with an unnamed leading German biotech company.

The global biosensor market is expected to grow to $US27 billion by 2021.

Archer is also investigating the potential to use its graphene in ink that can be used to “draw” computer circuits on flexible surfaces.

In August, Talga Resources (ASX:TLG) did a deal with Swedish packaging heavyweight BillerudKorsnäs to explore the possibility of using its graphene in packaging.

Graphene can be used to coat paper and cardboard to stop gas and liquid from escaping and make it stronger. And it has an antibacterial effect, so it can be used in food packaging.

“BillerudKorsnäs are behind a project called the Paper Bottle project, which is a world first attempt to get a paper package that can hold carbonated drinks, which hasn’t been done before,” Talga boss Mark Thompson told Stockhead at the time the deal was announced.

“That obviously needs special aspects of strength and keeping the material inside the paper. So you need very good barrier coatings and graphene can play a role in things like that.”

The global packaging market is worth about $350 billion and growing steadily thanks partly to demand from online retailers.

Talga is also working on making concrete that can conduct electricity so electric cars can charge on the road.

Concrete is the world’s largest construction material by volume and worth roughly $US450 billion annually at the moment.

First Graphene (ASX:FGR) has identified several market opportunities for its PureGRAPH products — the latest of which is improving the protective polymer linings of critical mining equipment.

The company’s graphene has shown it can extend the wear-life of a full-scale mining reclaimer bucket when incorporated into protective polymer linings.

First Graphene recently announced what it believes could the largest single order for the commercial supply of bulk graphene materials to date.

Mining and industry solution provider newGen has ordered 2000kg of the company’s PureGRAPH range of products for delivery during 2019.

First Graphene has also struck up two new relationships which it hopes will lead to ongoing sales.

The first is with FlexeGRAPH, a company using nanotechnology to improve the efficiency of cooling and heat transfer fluids – a $3 billion market in Australia that includes applications such as cooling batteries and high-performance computing and data centres.

The second is with Chemiplas, one of the largest privately owned suppliers of chemicals, raw materials, ingredients and advanced technologies to the Australasian region.

Anson Resources (ASX:ASN) says research work carried out on its Ajana graphite project in Western Australia has shown that it can produce “very high quality” graphene.

However, the company’s key focus is its Paradox lithium project in Utah.

Hexagon Resources (ASX:HXG) and Comet Resources (ASX:COI) have also proven they can produce graphene from their graphite projects in Western Australia.

Graphite price heading north

Graphite pricing is not as transparent or as simple as traditional commodities like nickel, copper and gold.

Since the start of 2018, the price of large flake graphite has climbed more than 17 per cent, according to Benchmark Minerals Intelligence.

China’s coarse flake graphite reserves have largely diminished and supply is also threatened by environmental restrictions forcing mine closures.

Expandable graphite requires coarse flake, and historically China has accounted for about 70 per cent of supply.

Benchmark says that with Chinese production closures imminent and ongoing restrictions on processing in the country’s main areas of production – Shandong and Heilongjiang – any significant uptick in demand threatens to force a response in pricing.

Supplies of large flake graphite are tight and producers of the product are receiving a significant premium compared to those that produce smaller flake graphite.

ASX graphite stocks not feeling the investor love

Unfortunately for ASX-listed graphite players, investors have been making a noticeable retreat from the space with a large chunk of the 46 stocks having lost ground in 2018.

They could get a much-needed filip in 2019 when Chinese exporters get hit with a 25 per cent US tariff.

Graphite was among $US250 billion ($342.3 billion) worth of Chinese products targeted by the US for an initial 10 per cent tax until the end of this year — and could be followed by a further 15 per cent tax.

The US does not produce any graphite and has to import its supplies.

Graphite has been declared a “critical metal” by the US and Europe.

In 2017, about 95 US companies consumed 24,000 tons of natural graphite worth $US43 million, and imports totalled 50,000 tons, according to the US Geological Survey.

China, which produced around 67 per cent of the world’s graphite in 2017, is the biggest supplier to the US, accounting for 35 per cent.

Tom Revy, the boss of graphite explorer BlackEarth Minerals (ASX:BEM), says the US levy on graphite is likely to make dominant Chinese suppliers, who are already suffering the pressures of increasing costs and environmental concerns, even less competitive.

“The US has historically been a big consumer of Chinese graphite and value-added graphite products, so both countries are likely to be looking elsewhere for raw material supply – a great position for the next generation of graphite producers like BlackEarth,” he told Stockhead.

BlackEarth is exploring for graphite at its Maniry project in southern Madagascar, where it recently reported high grades of up to 48 per cent graphite from rock samples.

The company is on track to release a scoping study before the end of 2018.

Graphite-rich Africa a hot spot

Africa has become the focus of many new graphite mine developments because it is known for its large, high quality graphite deposits.

Syrah Resources (ASX:SYR) began production from its Balama project in Mozambique in November 2017.

Another 1.1 million tonnes of annual capacity is being developed in Madagascar, Malawi, Mozambique, Namibia and Tanzania.

About 14 of the projects that are closest to starting production are in those countries.

Kibaran Resources (ASX:KNL) is working to finalise funding so it can start construction of the 60,000-tonne-per-annum Epanko graphite mine in Tanzania in 2019.

An optimisation study using the company’s proprietary purification process called “EcoGraf” supports the development of a stage one plant producing 3000 tonnes each year of battery (spherical) graphite and fines.

Triton Minerals (ASX:TON) is advancing its Ancuabe graphite project in the East African country of Mozambique.

It has signed an MoU with China’s largest building materials group for potential debt funding and technical services.

Triton expects to start producing graphite in the first half of 2020.

Walkabout Resources (ASX:WKT) has secured a mining licence for its Lindi Jumbo graphite project in Tanzania.

The company recently revealed that its project has the “highest grade reported graphite mineralisation” in the country.

Drilling delivered grades of up 39.5 per cent. Typical graphite grades average around 10-15 per cent.

Graphex, meanwhile, is working on increasing the reserve and extending the life of its Chilalo project in Tanzania.

It also recently struck a financing deal with a private US investment firm that if completed will see the project funded through to production.

Black Rock Mining (ASX:BKT) owns the Mahenge graphite project in Tanzania, which is on track to deliver first product in 2020.

The company recently inked a major supply deal with cornerstone customer Heilongjiang Bohao Graphite Company, one of China’s biggest vertically integrated graphite processors.

The three-year deal covers the supply of 30,000 tonnes of blended graphite concentrate in the first year, 50,000 tonnes in the second year and up to 90,000 tonnes in the final year.

ASX graphite stocks to watch

In November, Hexagon formalised a joint venture deal with larger miner Mineral Resources (ASX:MIN) which will see its McIntosh graphite project in Western Australia funded through to production.

Hexagon now gets a free ride through to stage one production at McIntosh, with Mineral Resources paying for everything to earn a 51 per cent interest in the large project.

Mineral Resources will also operate the 100,000-tonne-per-annum graphite project once it is up and running, which could happen in about two and a half years.

Test work conducted by the US Department of Energy’s Argonne National Laboratory earlier this year showed graphite from the McIntosh project to be “HOPG-like”, which Hexagon said is extremely rare in the graphite space.

HOPG is an acronym for “highly oriented pyrolytic” graphite — a very high value synthetic graphite product selling for about $US30,000 per tonne with 30,000 to 40,000 tonnes traded each year.

Bass Metals (ASX:BSM) recently reached full production at its Graphmada graphite mine in Madagascar, which will produce 6000 tonnes of premium large flake graphite each year during stage one.

The company is planning a stage-two expansion to 20,000 tonnes per annum.

While the steel and battery markets will continue to be the dominant drivers of demand for graphite, there are several new high value markets emerging.

This will provide a raft of opportunities for ASX stocks active in the lucrative graphite sector.

 At Stockhead, we tell it like it is. While Black Rock Mining and First Graphene are Stockhead advertisers, they did not sponsor this article. 
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