SMALL CAP MOVERS: Who will benefit from soaring graphite demand?

What is the graphite price?

A recently released update to a feasibility study conducted by Focus Graphite on its Lac Knife project in Quebec gives some indication of how difficult it is actually to answer this question.

As a starting point, the updated Lac Knife feasibility study says that it used an average graphite concentrate sales price of US$1,679 per tonne of concentrate.

Well and good, although note that we are talking about concentrate here, and not the commodity pure.

Then, however, the study moves on to a more detailed analysis of how this price was arrived at.

By weight, graphite accounts for more than 28 per cent of an electric vehicle battery, ahead of aluminium, next, with just under 19 per cent, and then nickel

Focus Graphite used as a basis the Benchmark Mineral Intelligence Flake Graphite Price Index, an independent compiler of global graphite prices which takes into account variations in graphite flake size and concentrate purities.

The assumptions are based on the mesh size required to catch a flake of graphite and run from US$2,040 per tonne for a +48 mesh product down to US$1,579 per tonne for the smallest economic product.

Since flake size is variable within any given deposit, the graphite price obtained is likely to be an aggregate and that’s even before the market brings in its own supply-demand pricing pressures.

Larger flakes, as is well known, are generally more desirable and command the highest price, although intriguingly not all graphite company chief executives agree about why this is.

The standard version is that the conductivity of the larger flake is greater and this in turn goes to the heart of why graphite has been much in the news in recent years.

Graphite, so the thinking goes, is likely to play a central role in the greening of the global economy.

That’s because graphite is a key constituent of all next generation batteries.

A frequently cited statistic issued by the World Bank last year estimates that more than 50 per cent of the demand created for new batteries is or will be for graphite. Lithium, the headline-grabber, accounts for a much more modest 4 per cent.

By weight, graphite accounts for more than 28 per cent of an electric vehicle battery, ahead of aluminium, next, with just under 19 per cent, and then nickel.

It’s this dynamic that underpins a statistic highlighted by Blencowe Resources, a UK-listed graphite company.

Demand for flake graphite, Blencowe claims, is likely to grow by nearly three times over the next few years, from the 1.5million tonnes per year it registered in 2020 up to 4.3million tonnes per year in 2030.

Not surprisingly, then, there has been a renewed interest in graphite mining, and even a recent graphite boom in Australia.

But in mining, slow and steady usually wins the race, and it won’t be the bandwagoners who stay the course and eventually end up reaping the sizeable benefits that look to be on offer.

Rather, the ones to watch will be those with longer-term game plans and with a specific expertise and knowledge of graphite like Blencowe (current share price 4p) and Tirupati Graphite (33p).

Tirupati has been something of a trailblazer as far as the London market is concerned, with significant and growing production from its Madagascar projects, and plenty of value-add upstream in India on offer too.

Tirupati knows not only how to mine graphite effectively – and with social licence – but also how to move it up the value chain and turn it into a finished product.

That makes it fairly unique in the graphite mining industry and, as such, marks it out as one of a handful of go-to graphite companies in the world.

Blencowe is a different animal, a single project company focussed on the development of the Orom-Cross graphite project in Uganda.

Uganda isn’t a major destination for the world’s mining industry, but Orom-Cross has high quality graphite in terms both of grade and flake size, a pre-feasibility study demonstrating the viability of a 21-year operation and a full-scale feasibility study in the works.

Power Metal Resources (0.93p) is different again – a multi-asset, multi-jurisdictional company with exposure to gold, nickel, lithium and a host of other commodities.

Its Doerksen Bay graphite project in Canada was acquired in January of this year and forms the centrepiece of a newly established subsidiary company called ION Battery Resources. ION will also hold certain of Power Metal’s lithium projects.

This post first appeared on Dailymail.co.uk