Graphite is late to the electric vehicle party, but now it’s getting its groove on
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Unlike its battery metals peers, graphite has been a little late to start riding the coat tails of the so-called electric vehicle revolution.
Only about 12 of the 40-plus graphite stocks listed on the ASX have gained ground in the past year (see below).
>> Scroll down for a list of ASX stocks with graphite exposure, courtesy of leading ASX data provider MakCorp
But that looks like it could be about to change.
Market forecaster Roskill says graphite demand is about to experience “rapid growth and price escalation”, which is good news for emerging graphite producers.
Rapid growth in demand for graphite in lithium-ion batteries is predicted to underpin graphite demand growth of 5 to 7 per cent annually between 2017 and 2027.
Lithium-ion batteries use about 40 times more graphite – used in the anode – than lithium.
Roskill says that by 2027, graphite use in batteries could be five to 10 times higher than the current level, depending on the uptake of lithium-ion batteries in electric vehicles and other applications.
Demand for graphite is primarily driven by the steel market, but the ever increasing growth in the lithium-ion battery industry is driving demand for both natural flake graphite and synthetic graphite.
After a prolonged period of slowing growth, steel demand is also heading north again.
Graphite is also witnessing rising demand from the building materials market because of its ability to act as a fire retardant.
On top of that graphite has been declared a “critical metal” by the US and the European Union.
Niv Dagan, executive director at Peak Asset Management, says there is a large misconception among the finance community, that graphite is in over-supply and prices will not pick-up in the near-term.
“In essence, graphite has been one of the last minerals to respond to the ‘commodity super cycle’ driven by the electrical car revolution,” he told Stockhead.
“There is still plenty of production in China, which accounts for 75 per cent of the world’s graphite production. But it’s that very monopoly that has governments and investors looking for quality non-Chinese graphite supply.”
At the moment graphite consumption amounts to about 1.1 million tonnes each year and has a market value of roughly $1.1 billion, while the synthetic market is valued at around $13 billion annually.
“In size terms, that’s much smaller than zinc or nickel or aluminium,” Mr Dagan said.
“And in dollar terms, the annual market for cobalt at $3.5 billion is three times larger than for natural graphite.”
Here’s a list of ASX stocks with graphite exposure, courtesy of leading ASX data provider MakCorp:
The price of large flake graphite – which attracts a premium over small and medium flake graphite – has tumbled from the peak of around $US2800 a tonne it was fetching in 2012.
It hit a low of $US750 per tonne last year. However, the tide has turned and the price is on its way back up.
Canadian graphite player Northern Graphite says prices for large flake graphite climbed 30 to 40 per cent in the last six months of 2017.
“While still early, this is the first real sign that battery demand is finally doing for graphite prices what it has already done for lithium and cobalt,” the company said.
Prices for large flake graphite are now up to $US1200 per tonne, according to Northern Graphite.
Africa is the place to be
Roskill says Africa has become the focus of many new graphite mine developments.
Syrah Resources (ASX:SYR) began production from its Balama project in Mozambique in November last year and is currently ramping up to full capacity.
Another 1.1 million tonnes of annual capacity is being developed in Madagascar, Malawi, Mozambique, Namibia and Tanzania.
Kibaran Resources (ASX:KNL) recently signed a letter of intent with GR Engineering Services for the design and construction of the processing plant for its 60,000-tonne-per-annum Epanko graphite project in Tanzania.
However, despite how advanced the company is with its project, its share price has not gained much traction. It is down 3.3 per cent over the past 12 months.
Anson Resources (ASX:ASN) is leading the way with a 723.5 per cent gain – but that is likely because its flagship asset is a lithium project in Utah. The eight-bagger reached 14c yesterday.
The company’s Ajana graphite project is located in Western Australia, where exploration is continuing.
Bass Metals (ASX:BSM) is also a mover and shaker with a 200 per cent jump to 3c.
The company is currently ramping up production at its Graphmada graphite mine in Madagascar to produce 6000 tonnes of premium large flake graphite each year during stage one.
Bass is planning a stage-two expansion to 20,000 tonnes per annum.
Triton Minerals (ASX:TON), which last last month approved the development of its Ancuabe graphite project in the East African country of Mozambique, is up 27 per cent. Construction is expected to start later this year and graphite production is due by late 2019.
Walkabout Resources (ASX:WKT), First Graphene (ASX:FGR), Sayona Mining (ASX:SYA) and Hexagon Resources (ASX:HXG) have also more than doubled their share prices in the past year.
The biggest loss goes to Lanka Graphite (ASX:LGR), which tumbled 67 per cent to 2.5c, followed by South Korea-focused Peninsula Mines (ASX:PSM) – down 59 per cent to 0.9c.
Stockhead is proud to use Mak Corp as a provider of great value, accurate and reliable data on ASX-listed mining stocks. For more information head to Mak Corp’s website.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.