Massive Graphite Shortage Looms Over Electric Car Future
Safehaven.com News Commentary
Oct 23, 2017, 09:00 ET
LONDON, October 23, 2017 /PRNewswire/ --
Our rapidly evolving energy future - packed with electric vehicles, massive energy storage solutions and nanotechnology requires more tech-grade graphite than it does lithium and cobalt.
If shortages for lithium and cobalt are looming large, shortages of graphite are even scarier. The United States is the biggest consumer, and it doesn't even produce any tech-grade graphite. Companies in focus include: Cameco Corp. (NYSE: CCJ), Pretium Resources, Inc. (NYSE: PVG), Turquoise Hill Resources Ltd. (NYSE: TRQ), Hydrogenics Corp (NASDAQ: HYGS), Ballard Power Systems, Inc. (NASDAQ: BLDP).
With demand for tech-grade graphite expected to increase 200 percent in less than three years, and 300 percent by 2025, North America will have to go from graphite zero to hero - fast.
In North America, there's no better place to be than in the backyard of Tesla's Nevada battery gigafactory, and one little-known company is right there-sitting on what could prove to be a rare working tech-grade graphite mine in the U.S.
Global Li-Ion Graphite Corporation (LION; GBBGF) now has an option on the only graphite exploration property within 50 miles of Tesla's gigafactory.
Demand for graphite for lithium-ion batteries will explode over 200 percent in the next four years driven by the EV surge and energy storage alone.
The timing couldn't be better. Prices are soaring, with spot prices for graphite electrodes hitting $35,000 as Chinese exports dry up.
So this is the next wave of graphite that early-in investors will be trying to ride, if they're savvy, and LION wants to be the first to take advantage of a clear supply gap right in Tesla's back yard.
And this wave is just about graphite. The next wave will be about graphene-the layers that make up graphite. This wonder metal is poised to be a game-changer even bigger than the leap from transistors to microchips. It's the strongest material on the planet, and right now we're in a global race to the finish line.
Here are 5 reasons to keep a close eye on Global Li-Ion Graphite Corporation (LION; GBBGF) on the tip of this next wave.
#1 Potentially Bigger and Better than Lithium or Cobalt
This isn't just about pencils. Graphite is one of the two mineral forms of carbon. The other is diamonds. It has tons of industrial uses, all of them about to be starved for supply, based on analysts' predictions.
So while it may be famous for its use in pencils, it's also one of the keys to our EV future: Lithium-ion batteries have a lithium cathode and a graphite anode. Tesla would probably agree that securing supplies of graphite for its gigafactory is even more critical than securing supplies of lithium and cobalt.
And it's not just about the batteries-graphite is used in other car parts, including brake linings.
Graphite is also used to manufacture steel and glass, and to process iron because it's a common refractory material that withstands high temperatures without changing chemically.
Graphite is a lubricant - And an important super-strength material used in sports equipment.
In short, it's a wonder metal that behaves like a metal and conducts electricity, but also acts as a nonmetal and resists high temperatures.
It's pretty much everywhere. Power tools, vacuums, bikes, solar power-even the military uses it.
Even more fascinating applications come from the breakdown into graphene-the strongest metal in the world. Graphene is at the center of a major global race to commercialization because its uses will define technological advancement for decades to come.
Graphene sheets, which comprise the layers of graphite, are 10 times lighter and 200 times stronger than steel. It's the strongest material in the world, and it's the backbone of nanotechnology. Isolated only in 2004, graphene is the world's first 2D material.
As LION president Jason Walsh notes, "Graphene could be the biggest game-changer of our lifetime. Its applications are immense."
Graphene is expected to be a key material for the medical world, making new artificial hearts and retinas possible, as well as flexible electronic devices and even aircraft parts.
It could mean clean drinking water for millions of people as graphene membranes aid purification technology and desalination. For energy storage, it means yet another revolution. It is expected to be the basis for electric sports cars.
And lightweight planes.
LION is positioning itself in front of soaring demand with the intention to supply all of these markets.
#2 Massive Demand Growth for Tech-grade Graphite
Global demand for high-grade graphite is ready to skyrocket. Not least because lithium-ion batteries require 10 to 20 times more graphite than they do lithium. With 1.26 million EVs already sold in 2015, 2 million sold in 2016, and sales for this year up 86 percent in the third quarter, demand is going in only one direction: up.
When it comes to the EV chain, graphite is where the money is. Take it from Elon Musk himself, who has said:
"Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide, [there's] a little bit of lithium in there, but it's like the salt on the salad."
Tesla is planning to pump out some 500,000 EVs a year. Tesla's powerwall-a revolutionary way to store and distribute energy efficiently at home at lower costs-will also suck up tons of graphite-and they're already being installed across the U.S., Europe and Australia.
And that's just Tesla: There are over a half-dozen battery gigafactories being considered in the U.S., and just as many more in Europe.
- Tesla's 35 GwH capacity gigafactory plans to ramp up to 150 GwH
- Northvolt is planning a similar plant in Sweden
- Dyson is building a $1-billion gigafactory
- LG plans to open Europe's largest EV battery factory in Poland next year
- General Motors recently released plans to launch 20 EV models by 2023
- Renault is planning to double its EV offerings in the next five years
- Panasonic just announced the start of automotive lithium-ion battery production at a plant in Himeji, Japan from 2019 (adding to its existing five plans in Japan, which supply Tesla).
And that's only one aspect of the fantastically tight graphite supply equation that ignores all the super metal's other uses.
- Consumer electronics are soaring, and they all need lithium-ion batteries-and graphite, while next gen products will feature graphene, if it can be produced economically in sufficient supply.
- Platts says there's already a graphite electrode shortage that could last at least five years, and investors have, "Underestimated graphite electrodes' role as a reflationary driver of steel prices." The global graphite electrode market is expected to reach $5.68 billion by 2024 driven by increased use for steel production. Graphite electrode prices have risen sharply due to supply side factors.
The bigger picture also includes voracious Chinese demand. Even though the lion's share of graphite supply comes from China, the steady climb in demand coupled with Beijing's crackdown on polluting industries means huge opportunities for new entrants into this supply chain. China's now actually importing tech-grade graphite.
Demand is expected to be nothing short of exponential.
#3 Tech-grade Graphite, Made in America?
Though this special graphite is critical to the U.S. economy and important to the military strategically, the U.S. doesn't mine any of it.
LION (LION; GBBGF) is one of the first U.S. companies to get involved. In other words, it's one of the first companies with hopes to produce graphite 'made in America'.
And if your goal is to be a principal supplier of graphite to the rapidly growing energy storage and lithium-ion battery industries, it doesn't hurt to have a project near Carson City, Nevada, just a short drive from the Tesla gigafactory.
Welcome to the Chedic Graphite mine, just 50 miles from Tesla's gigafactory. Back in the 1920s, this 1,000-acre play was producing graphite for pencils. But it has the potential to contain a very large amount of graphite mineralization; according to past work done-and based on historical records, portions of it reportedly have high carbon content.
Global Li-Ion has an option to acquire this property and has engaged GeoXplor, one of the most prominent operators in Nevada, to secure permits, and conduct confirmation and exploration drilling. Drill hole locations are in place and geophysical surveys are already completed.
Optimism runs high, not only because this is a past-producing mine, but also because Nevada is a mining-friendly state that's been key to harness the energy revolution. Even better-the Chedic Mine, on achievement of drilling and mining success, due to its location and production history, is poised to become a principal source of graphite for lithium-ion batteries produced in Nevada-which is ground zero in the American gigafactory patch.
But LION is targeting China, too.
#4 Tapping into Massive Asian Demand
China is a massive consumer of graphite, but it's also the main producer. That's all worked out fine for supply-until recently.
China's crackdown on polluting industrial plants has taken 30 percent of its graphite electrode production capacity offline. That's 300,000 tonnes of graphite capacity shuttered, leading to soaring prices for the super metal commodity. China has suddenly become an importer of graphite.
In India, shares of graphite electrode manufacturers have doubled in the past three months thanks for a massive 300 percent jump in global electrode prices, and the momentum should remain steady driven by a sudden surge in electrode demand.
These are two markets that Global Li-Ion is positioning itself to tap-from Madagascar.
The Company's past-producing Ambato-Arana Mines in Madagascar are already permitted, with infrastructure in place, and, if the project proceeds as expected, production can go online in the near term. And it's ideally situated to supply the massive demand for graphite coming from both China and India. LION recently signed an MOU to buy the licenses on the property for cash and shares.
The Madagascar licenses total 4,375 hectares, and they are right next to a main highway, and only 200 kilometers from Madagascar's main seaport of Toamasina. They're also only 20 kilometers southwest of Sheritt's Ambatovy nickel and cobalt mine.
LION's Malin, who has extensive mining experience in Madagascar, says that finding graphite with the right kind of quality specifications is challenging-but that's what they've found in Madagascar.
"One of the things that we liked about this graphite is that it is a high-carbon content, high-quality flake graphite, and the flakes are large flakes. This has the advantage of lending itself to favorable processing into forms that can be used for batteries, fuel cells, and even nanotechnology," Malin said.
The company is also considering other acquisitions, and is in the process right now of considering additional Graphite holdings in Madagascar.
You can't get much more strategic than positioning yourself both in Tesla's backyard and within proximity of Chinese and Indian markets when it comes to graphite.
#5 An Untold Story for an Increasingly Valuable Commodity
Demand for graphite for lithium-ion batteries is set to increase by over 200 percent in the next four years, driven by EV demand and energy story. Distributed energy storage revenue alone is forecast to exceed $16.5 billion by 2023 driven by rapid innovation and intense competition, says Navigant Research.
Investments in new lithium ion battery capacity out to 2020 are in excess of $12 billion and rising according to Benchmark data.
That means that high grade graphite prices are soaring. This year alone, shortages in China have driven prices to $16,330 per tonne. That's a ninefold increase. On a global level, spot prices for graphite electrodes have jumped even more-hitting $35,000 per tonne as Chinese exports dried up.
While investor interest has been focused on lithium, that playing field is now crowded, and the real money should be focused on graphite. No one is producing high quality graphite in the U.S., a big chunk of Chinese production has been shut down, and demand is soaring.
Considering this really tight supply equation and demand that is expected to only go in one direction, a small-cap company like Global Li-Ion, targeting both Nevada and an outlet to Asia, appears to have a winning business plan. Take a look at some other publicly traded graphite companies:
LION is a pure-play graphite story, and soon news is expected to start coming in for drill permits at its graphite exploration property in Nevada.
Graphite is already the tightest supply story in the massive EV chain. Its successor, Graphene, is expected to be the game-changer. Graphite is already the number one metal of our future, just waiting to be scaled up.
Even better: With success in Nevada, it'll be made in America.
Other companies to watch closely in the space:
Ballard Power Systems (NASDAQ: BLDP) Ballard develops and produces hydrogen fuel cell products for markets such as heavy-duty motive, portable power, material handling and transportation. Ballard's stock price jumped a whopping 27% in September as the company announced a new way to manufacture fuel cell batteries, reducing the need for platinum in its production process by some 80%.
Ballard expects to start producing the new fuel cells at the end of this year. While Ballard looks at bit expensive compared to its peers, the stock should be on investors' radars as this is one of the most exciting fuel cell stocks.
Cameco Corporation (NYSE: CCJ) Cameco is one of the largest global producers and sellers of uranium and nuclear fuel. Its operating uranium properties include the McArthur River/Key Lake, Cigar Lake, and Rabbit Lake properties located in Saskatchewan, Canada; the Inkai property situated in Kazakhstan; the Smith Ranch-Highland property located in Wyoming, the United States; and the Crow Butte property situated in Nebraska.
While many analysts see low uranium prices as a problem for miners, an OPEC like move from world uranium leader Kazakhstan to bump prices could benefit Cameco and its peers. A strong push towards nuclear power from China, India and the Middle East could create further upside for this promising miner.
Hydrogenics (NASDAQ: HYGS): Hydrogenics Corp is a Canadian firm, which designs and manufactures hydrogen generation products based on water electrolysis technology, and fuel cell products based on proton exchange membrane (PEM) technology. Hydrogenics' stock had quite a spectacular run and peaked in June, analysts now see the stock as fair valued. Elon Musk may disagree, but the future of fuel cell technology remains promising despite current the cost/benefit model.
Pretium Resources (NYSE: PVG): This impressive Canadian company is engaged in the acquisition, exploration and development of precious metal resource properties in the Americas. Pretium has an impressive portfolio and if you can catch the stock while the price is right, there could be huge opportunity for upside. Additionally, construction and engineering activities at its top location continue to advance, and commercial production is targeted for this year.
With Pretium's variety of assets, this mining giant is a key figure in Canada's resource realm. Investors know a good thing when they see it, and have definitely taken note of this company's ambitious and forward-looking drive.
Turquoise Hill Resources (NYSE: TRQ) is a mid-cap Canadian mineral exploration and development company headquartered in Vancouver, British Columbia. Its focus is on the Pacific Rim where it is in the process of developing several large mines. The company mines a diversified set of metals/minerals including Coal, Gold, Copper, Molybdenum, Silver, Rhenium, Uranium, Lead and Zinc. One of the fortes of Turquoise hill is its good relationship with mining giant Rio Tinto.
Going forward, Turquoise's success at the giant Oyu Tolgoi project in Mongolia will be crucial to boost its lagging share price.
By. Ian Jenkins
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that LION will complete its announced transaction to purchase the Nevada carbon exploration property; that graphene will have all applications and will be as much in demand in future as currently expected; that LION can fulfill all its obligations to exercise its Nevada property option; that LION's Nevada property can achieve drilling and mining success for graphite; that LION will close its MOU to buy a Madagascar mining licenses; that production can go online in the near term in Madagascar; that LION will apply for and obtain drilling permits on its Nevada and Madagascar properties; that the graphite in Nevada and Madagascar when produced will be high quality suitable for the tech industry; and that LION will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not agree on the final terms for the Madagascar property, even if it agrees it may not be able to finance its acquisitions of Nevada or Madagascar, it may not get regulatory approval for these acquisitions, aspects or all of the properties' development may not be successful, mining of the graphite may not be cost effective, LION may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further test work may not be viable; additional high value mineral properties may not be available for LION to acquire, or LION may not be able to afford them; competitors may offer better technology than graphite technology for technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the minerals cannot be economically mined on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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