It is much harder for investors to evaluate how good a battery metals project is compared to more “conventional” minerals such as gold, coal or iron ore.

And exploration companies aren’t making it any easier.

Some use misleading ways to report exploration results, says Dr Andrew Scogings of minerals consultancy KlipStone.

“Competition for scarce investment dollars has inspired innovative exploration approaches, as well as ‘creative’ ways to tell the story of exploration success,” he told delegates at the Paydirt 2019 Battery Minerals conference.

“It should be quite clear by now to investors evaluating the merits of graphite or lithium pegmatite projects that ‘looks can be deceiving’ when it comes to these commodities and that the investor should be aware of potential pitfalls.”

Unlike gold for example, punters shouldn’t rely solely on graphite or lithium grades, Dr Scogings says.

“Graphite and lithium projects are a more opaque and not as easy to evaluate based solely on the reported tonnage and grade,” he says.

And there’s no such thing as a general market price for graphite, lithium minerals or chemicals.

“Different products within this group of metals command a range of different prices that are based on the product specifications with variations in tonnage, grade and mineralogy causing extra difficulty with ranking of published a battery project’s mineral resources.”

“These price variations affect project economics, unlike much simpler choices such as gold.”

Graphite and lithium projects: what to look for

When evaluating these projects, info on the size and purity of the extracted products and specific market-related testing and logistics are required – at a minimum.

Any mineral resource estimate for flake graphite or lithium pegmatites must include information about the expected end products, he says.

“This could only be informed by extractive metallurgical and process test work as ‘not all graphite deposits or lithium pegmatites are created equal’.”

READ: Graphite stocks guide — here’s everything you need to know

When publicly reporting graphite mineral resource, it is potentially misleading for a company to simply report size and grade.

Investors should be looking for the size distribution and purity of graphite flakes that can be mined – because they all attract different prices and end users, Dr Scogings says.

For example, larger flakes typically command higher prices than small flakes – but market demand for larger flakes is currently lower than for medium and smaller flakes.

This may change in the future, but all these things impact on project economics, he says.

It is also misleading to report in-ground flake size, which may not reflect the final product after processing.

READ: Lithium stocks guide – here’s everything you need to know

Dr Scogings cautioned that it was  potentially misleading, to simply report a lithium resource as tonnage and  grade.

For example, a pegmatite resource (the primary source of lithium) reported as 100 million tonnes at 1.5 per cent Li2O only informs investors that that the resource contains 1.5 Mt of Li2O in the ground.

It tells investors nothing about impurities, how the lithium can be recovered, or “whether acceptably pure lithium carbonate or other compounds can be extracted from the lithium minerals” at all, he says.