Renascor charging towards battery anode material production at mammoth SA graphite project
Other metals may dominate the headlines in the 2022 battery metal narrative, but South Australia-focused graphite play Renascor Resources has built up a mammoth resource of a material essential to the world’s electric vision.
At its Siviour project north of Port Lincoln, Renascor (ASX:RNU) has defined the second-largest proven graphite reserve in the world, and the largest reserve outside of Africa.
That’s a compelling achievement in its own right – particularly when factoring in South Australia’s status as a top-10 global mining jurisdiction in the 2021 Fraser Institute Annual Survey of Mining Companies – but it only tells part of an electric story set to come to the fore over the next decade.
Siviour’s geology lends itself to the domestic manufacture of the refined product purified spherical graphite (PSG) – a battery anode essential, currently 100% supplied by Chinese refiners – at costs competitive with Chinese production and by more environmentally-friendly means.
According to Benchmark Mineral Intelligence, demand for PSG is expected to increase at a compound average growth rate of +29% through to 2030, projecting demand of almost 3 million tonnes that year up from just over 500,000t in 2022.
Renascor’s numbers suggest that bridging the coming decade’s PSG supply gap would require 90 new projects the size of Siviour, which currently has an ore reserve of 51.5 million tonnes at 7.4% total graphitic carbon for 3.8Mt of graphite.
That reserve would support a 40-year mine life at 150,000t graphite concentrates per annum and seems likely to grow given RNU’s recent moves to expand its project holding at Siviour, but it remains a drop in an ocean unlikely to fully fill as the world’s appetite rises.
Renascor managing director David Christensen said new sources of PSG would be essential to make the anodes required for the EV batteries of the future.
“Traditionally, Chinese battery makers have depended on Chinese sources of graphite,” he said.
“What’s happened is demand for the material has grown larger than China’s supply, and so it has now become a net importer of graphite to make PSG for battery anodes.
“This gives rise to the looming shortfall where in the past, China could supply PSG to anode makers, it doesn’t look like it can fill even its own obligations.
“As a result, we have a climate where we need not just one or two new graphite projects, we need dozens and dozens if we’re going to meet the projected demand going forward, or we’re simply not going to have lithium-ion batteries.”
Renascor has completed a Battery Anode Material (BAM) project study, which looked at PSG output from Siviour. It delivered a net present value of US$499 million based on stage 1 production of 28,000 tonnes per annum of PSG, and the company is currently in the process of undertaking an updated BAM study based on an expanded project.
Renascor is also well placed on the offtake and funding front. It currently has non-binding offtake agreements with leading battery anode manufacturers in South Korea, China and Japan, covering up to 60,000tpa PSG – more than 200% of the prediction rate outlined in the study.
The Siviour BAM project has been granted Major Project Status by the Australian government. The company has received conditional approval for a $185 million federal government loan facility via Export Finance Australia and raised $65 million in April.
Renascor’s market capitalisation sits around $345 million.
Perhaps the biggest selling point of the Renascor narrative is the ease at which it can convert its graphite material to PSG.
The company’s plans to integrate the downstreaming of mined product to PSG make it a particularly compelling proposition and allow it to sell direct to anode manufacturers in China, Japan and South Korea, as well as much publicised emerging battery supply chains across Europe and the US.
Most PSG producers in China purchase graphite concentrate feedstock at market price, meaning the costs passed onto anode manufacturers are influenced by external factors.
By having its own source of graphite feedstock at its disposal Renascor bypasses this costing pressure, allowing it to produce PSG at a competitive price point.
“Our business strategy is really quite simple,” Christensen said.
“We’re leveraging off of what looks like one of maybe a half dozen of the greatest graphite resources in the world, we’re taking advantage of our location to move that one step further downstream and producing an advanced manufactured product that gives us higher margins, higher values, and allows us to sell it directly to the lithium-ion battery sector.”
Renascor is currently in the process of expanding the resource at Siviour as it works towards completing its updated BAM study, and results so far have been exceptional.
The latest near-surface assays from drilling are amongst the thickest and highest-grade graphite intercepts reported at the project to date.
The work is part of a broader three-pillar plan from Renascor to get into production as quickly as possible.
The company is updating a DFS completed in 2019 in line with recent developments in the graphite market and work done at Siviour, looking to secure its final regulatory approvals for mining and downstream processing, and progressing its leads in terms of financing on offtake and the government loan facility.
“Everything we’re doing over the upcoming months really leads us as quickly as we can to a final investment decision,” Christensen said.
“Ideally we want to be constructing mid next year, and we’d like to be producing material by 2024.”
And while markets more broadly have waxed and waned at the behest of global macroeconomic factors, Christensen said RNU was buoyed by the solid and consistent performance of battery minerals in recent times.
“Despite the pressures of COVID, the war in Ukraine and some of the recessionary concerns we’re seeing now, the resilience we’ve seen in the battery space has been quite strong,” he said.
“The future looks particularly good in the space, simply because there’s not enough raw materials around to meet projected demand.”
This article was developed in collaboration with Renascor Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.