by Debra Fiakas CFA
The market for lithium ion batteries is expected to reach $46 billion by 2022. That represents 11% compound annual growth over the next six years. Few other markets if any are growing at such a feverish pace. The adoption of electric cars is the center of the excitement, but the proliferation of smartphones, tablets and other electronic devices also plays a part. Suppliers of critical battery materials such as lithium, cobalt and graphite are salivating over potential sales to battery manufacturers.
Graphite with its strong conductivity and heat-resistant qualities is a perfect material for the anode component of a battery. A large electric vehicle battery can require as much as 55 pounds of graphite, although the typical family car probably requires around 22 pounds to 40 pounds of graphite. Indeed, the typical lithium ion battery destined for electric vehicles requires more graphite than lithium.
According, to Avicenne Energy, a consulting firm focused on supply chain economics, the battery sector – transportation as well as storage batteries – is expected to require as much as 290,000 metric tons of flake graphite by the year 2025. This compares 118,000 metric tons of graphite used in 2014 for batteries. The graphite must be 99.5% pure to qualify for battery use, but graphite developers can charge a higher price to pay for the purification process.
It is no surprise then that graphite miners in particular see a bonanza as Tesla, Ford and Toyota and others roll out one electric car series after another. The market opportunity has inspired several developers back into the field. China controls about 75% of the global graphite production, much of which is synthetic graphite manufactured from petroleum coke. However, there are known reserves of natural graphite in North America, Australia and Europe.
Natural flake graphite in particular is coveted for battery applications. Crystalline flake graphite is composed of flat, plate-like particles with irregular edges. It is found in layers or pockets in metamorphic rocks and sometimes in massive accumulations in veins or lenses. There are other graphite types, such as those called ‘lump’ or ‘amorphous’, that are lower in purity and occur in less commercially useful particle sizes. Graphite of all types is put through some beneficiation process to remove contaminants, improve particle size and enhance purity. Processing costs can have a significant impact on profitability for a graphite mine developer.
The next few posts will take a closer look at several graphite mining companies that have in recent years accelerated development of graphite resources. Besides processing costs we will look at resource quality, extraction and transportation requirements. With demand rapidly expanding we will probably find all the graphite developers are exude confidence in commercial success.
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.