Caught short? Miners say graphite is poised to be lithium 2.0

Miners say a global under supply of graphite for EV batteries could make the commodity “Lithium 2.0”
Benchmark Mineral Intelligence says 97 new natural graphite mines needed by 2035
Sorry … did they say 97?

Pilbara Minerals (ASX:PLS) boss Ken Brinsden famously said carmakers were asleep at the wheel when they should have been funding new sources of lithium to avoid a catastrophic shortage of the battery metal.

While prices for lithium have shot to record levels, incentivising finally marginal production that has sat on the sidelines for years, lithium makes up only a small portion of the active materials in a lithium ion battery.

In fact around half of the metal content of an EV battery is in the graphite anode.

And miners say a “Lithium 2.0” scenario is brewing, with subdued prices for battery grade natural graphite leading explorers to warn battery makers and OEMs will be playing catch up when the market surges.

Complicating matters is the long qualification process graphite companies go through to ensure their product stacks up to battery makers’ needs and demands, meaning graphite supply will not just be a plug and play solution.

“The elephant in the room is from our experience it’s taken us five years from start to qualification with one customer,” says John De Vries, MD of Black Rock Mining (ASX:BKT), which owns the Mahenge project in Tanzania.

“You have 94 mines that suddenly need to be discovered and qualified in the next couple of years. It’s just not going to happen.

“We’re heading to lithium 2.0 on steroids in graphite.

“If you buy an EV, pay a couple hundred grand for a Tesla, you actually want that battery warranty to work. You do want that battery to hold 80% charge after 10 years and if it doesn’t the OEM will go broke very quickly.”

97 mines

De Vries was speaking as part of the graphite panel at last week’s Benchmark Mineral Intelligence Battery Gigafactories Asia Pacific Conference.

And when he says 94 new mines are needed, he’s not including those owned by panellists Black Rock, BlackEarth Minerals (ASX:BEM) and Talga Group (ASX:TLG), all of which are advanced but yet to enter production.

BMI senior price analyst Daisy Jennings-Gray said based on expected battery demand by 2035, the need for natural graphite by 2035 would be extreme compared to 2022 levels.

That will be exacerbated by the fact the market also needs a significant uptick in synthetic graphite production.

Given that comes from superheating hydrocarbons like petroleum coke and oil, the chances of that happening in a greening world are very slim.

“It’s a bit of an interesting topic at the moment because we’ve not quite seen the behaviour in graphite prices that we’ve seen in the other critical battery raw materials, but we have seen … minus-100 mesh flake up around 30% in the first half of this year,” Jennings-Gray told delegates.

“Some seasonal suppliers brought that back down in the last couple of months but that’s standard, so the broader picture is definitely one that has been upwards.

“Benchmark did some analysis lately on on how many mines we’re going to need to meet battery demand in 2035, and on the graphite side, the numbers are huge.

“Based on synthetic demand, we would need another 54 coal or oil refineries to be built out. Of course, that’s not looking like an industry that’s accelerating at any rate at the moment.

“So then if you consider the flip side, we’re looking at another 97 graphite mines being built out to 2035 to meet the current pipeline demand. So really, really big moves need to be taken on the anode side of the industry to contribute to the growth story.”

You read that right, 97 new mines.

Not even existing and planned mines are straightforward. Syrah Resources’ (ASX:SYR) Balama mine has been halted in recent days, while Walkabout Resources (ASX:WKT) has run into funding troubles related to issues underwriting a debt facility provided by a Tanzanian bank for its Lindi Jumbo graphite project in the African nation.

Meanwhile synthetic supply, aside from being produced with a substantially higher carbon footprint, is facing production challenges from competing end uses and power shortages in China amid a global energy crisis.

Supply game

BlackEarth Minerals owns the Maniry graphite project in Madagascar, where a BFS is due soon, along with an expandable graphite plant in India, and recently commenced a study on building a downstream anode materials plant.

Its boss Tom Revy says with the challenges to synthetic graphite supply it puts more pressure on natural graphite miners to meet industry specifications to fill the gap.

“There’s a gradual move towards more and more natural graphite going into batteries,” he said.

“What that does is it puts greater pressure on us to ensure that we meet the specifications well and truly.

“You can say that the carbon footprint is probably a quarter or a third, or whatever it is, between natural graphite production and synthetic graphite production. But at the end of the day, what I’m hearing now is, is your product (up to) spec, and how much does it cost?

“The ESG discussion is one that people have in a larger forum, but one to one, it comes down to specifications and price.”

Revy said not just finding graphite mines, but ones with resources suitable for car and lithium ion battery makers would be a challenge.

“You had up there earlier, ’97 mines required’,” he said.

“At BlackEarth, we probably monitor closely about 15 mines around the world, probably another seven on top of that, as outliers.

“I think I’ve got a reasonable understanding of the graphite industry; where the other 80 mines are coming from, I have no idea, no idea whatsoever. So it’s got to be a supply game.

“And don’t forget your 97 mines also have to produce suitable graphite, there’s no guarantee that those 97 mines will produce suitable graphite.”

Substitution, what substitution?

Graphite prices have yet to shoot up the way prices of other commodities linked to electrification like lithium, nickel and cobalt have.

Indeed, higher value coarse flake graphite is produced for other more premium markets right now like expandable graphite, used as a fire retardant, in particular in building cladding.

But it has often been suggested as one of the materials that could be substituted out as battery chemistries change, with a focus on solid state and silicone anode battery types.

Talga’s Mark Thompson says it will not be an overall threat to battery graphite demand.

“In the words of another famous Australian, tell them they’re dreaming,” he said.

Thompson says even established, approved chemical producers working with known anode technology can take two years to qualify their product for a new model.

While silicone is being added to graphite in some cases, it is an expensive material, making it a niche add-on for existing graphite anode chemistries.

“There was a technical conference in Sydney recently and (battery expert) Stanley Whittingham was there who does work on solid state,” Thompson said. “And he said that the battery industry, the research level guys should stop talking about this stuff, that it’s all going into commercial production.

“He says it might take another 20 years and it might take another 20 years after that, we don’t know.

“And we should stop talking about it being like it’s all ready to go.

“It’s definitely bulk graphite anodes for a long, long time, for many, many decades. And even if other things are technically possible, graphite is actually very safe, it’s very doable in different jurisdictions.”