• Peter Gadsdon

Graphite Outlook with Benchmark Mineral Intelligence

Mining Network: George, it's a bit of an odd market graphite. There's no spot price to this, it's all done based on contracts similar to the potash market. And to make things a bit more confusing we also have various different flake sizes, which sell at different premiums, which obviously investors need to keep on top of. With there not being a spot price that can be difficult. So can we start things off with actually what's the current analysis on pricing throughout the different or the various flake sizes coming out of Benchmark Mineral Intelligence at the moment?”

Benchmark: “Flake graphite concentrate really ranges significantly in price, from what we call lower quality kind of ‘commodity grades’, used in refractory and industrial applications. Which cost between three hundred dollars per ton and five hundred dollars per ton. All the way up to larger jumbo flake and specialty products and these can range between one thousand dollars and two thousand dollars per ton at current. In the flake graphite market, there was a price cycle between mid-2017 and early 2020 and prices settled back close to 2016 levels throughout 2020. But we've seen some nascent improvements in the prices recently. As demand from the lithium-ion battery industry picks up. Unlike other critical mineral markets however there is currently ample supply for flake graphite, which may start to not be the case in the midterm, so we've only seen prices improved by about five to ten percent since the start of this year or in some cases less.”

Mining Network: “Obviously there is quite a mind-boggling amount of graphite in a battery and it's bizarre that it's not always the most talked about commodity. Or even talked out about as much as some other metals that are found in a battery, ‘in electric vehicles’, such as lithium, cobalt, nickel for example. Could you maybe just explain how much graphite is used within batteries? How you see that panning out in future and potentially what the demand for the metal might be over the next five years or so? “

Benchmark: “In each electric vehicle battery pack there's around 40 to 60 kilograms of flake graphite included within the anode, sometimes more. It's the largest mineral component of the battery by volume, making up the vast majority of the anode chemistry within the cell. When you consider that 200 to 300 000 electric vehicles are being manufactured per month within China alone. The volume of flake graphite that will be required to satisfy the appetite of the lithium-ion growth story is really monumental. In 2020 we estimated flake graphite demand at approximately 850 000 tons. By 2025 this is set to grow to nearly 2 million tons. By 2030, 4 million tons.”

Mining Network: “Blimey, okay so quite a part of quite a big growth story there. With the other side to this, in terms of the supply, how are you expecting that to change over the next few years? Is there enough graphite out there to keep up?”

Benchmark: “Currently China is the stronghold of graphite supply. The Chinese central government denoted graphite as a strategic mineral, maybe one to two years ago, I forget exactly when. Since then Chinese graphite producers and really all along the anode value chain, China has been very aggressive in expanding production capacity. Still despite this, it does take a while to bring graphite mines online. And the rate at which we're seeing demand increase may begin to outpace; certainly, the type of graphite which we like to use in anodes; which is typically finer material. E.g., minus 100 mesh flake. So, it could begin to outsize that particular market and structurally affect others. Which would have a negative overall impact on the industry really.”

Mining Network: “That's something else I wanted to talk to you about because it's not just natural graphite that's used in these batteries. We have seen quite a big uptick in synthetic graphite. Could you potentially just run us through; what exactly is synthetic graphite? How much do you anticipate that product to increase in demand and potentially replace the natural graphite? How's the market looking regarding that?”

Benchmark: “Yeah sure, I mean you know we've seen a lot more market interest in synthetic graphite as of late, you know, as an annual material feedstock. As such, at Benchmark we're working on a synthetic graphite price assessment to complement our existing market forecasts. So that's one to watch out for from us. Synthetic graphite is produced from low sulphur, anode grade, cokes. Whether petroleum cokes or pitch cokes. These are carbon rich materials derived from oil refining and coal tar production. This is then graphitized and purified, which is essentially you know heated for a long time, sometimes several days, at very high temperatures to make an anode feedstock. It is in fact the dominant anode feedstock within China. Which as I mentioned earlier, is really kind of the centre of the world's lithium-ion anode production. So, we estimate that synthetic graphite anodes currently hold the lead in market share (in the anode market), at about 57% of the market in 2021 compared to natural graphite anodes 40% share. It's important to clarify that the best balance of performance and cost in anode production, is really achieved by blending both natural and synthetic graphite feedstock. So here, as opposed to talking about one and purely being the other. We're really talking about synthetic or natural graphite dominant anodes, as opposed to that being the sole feedstock. Going forward, as cell manufacturers aim to place downward pressure on costs per kilowatt hour. We anticipate natural graphite feedstock to capture more market share through time, as it is lower cost and has the edge in being more environmentally friendly to produce. So, we might see the market shares reach close to 50/50 near 2025, is what our forecast projects. As each material has its own performance benefits there's ultimately a place for both feedstock materials in the anode market.”

Mining Network: “Okay good, so nothing too much for the graphite miners to be worried about then. They're still they're still going to be used in future. it's good to hear. Let's move on to graphene. Obviously, it's been dubbed ‘the super material’ or ‘wonder material’ I should say, for quite some time now. We haven't really seen much in terms of applications in the real world or at least, I haven't. What's going on in that market, and are we anywhere close to graphene having an impact on graphene demand and price?”

Benchmark: “I mean you know speaking to our expertise, graphene is still a long way off from playing a role in the battery market. You know, with most research and development initiatives still in early stage, even maybe pre-bench scale. Other applications for graphene are more feasible in the short term. I'd agree with you, I haven't seen too many myself, but production capabilities still lag far behind what's been shown at lab scale. So, that's really the difficulty for graphene coming to mass market and not something we see making a huge impact on demand, in the near future.”

Mining Network: “Okay perfect. Something else I really did want to talk about, for those who are interested in looking at graphite miners and developers or producers for example. Is understanding the total graphite content or the carbon content when looking at metallurgy results, production results and final products. So, it's our understanding that most mining deposits in in the graphite space, have around the sort of 5% to 15% mark. With around 6% total graphite content being the average for what's actually in the deposit. But then when we actually look at the metallurgy results and what they're going to be producing, once it's been processed. That range is usually from around 90% to around 97%. We have heard anyway that that there is a premium the higher the percentage, that makes sense, you see that with iron ore as well with a higher percentage. What's the current price differences at the moment, if you do have a much higher quality product within that, or higher carbon content within your produced product?”

Benchmark: “Yeah sure, let me provide a bit of detail. In a concentrate format, the industry standard for flake graphite concentrate is above 90% carbon content. With battery grade demand from flake concentrate with a 94% carbon content or above. This can then be purified into spherical graphite, which would be an anode feedstock with a purity of 99.95% carbon, but that requires additional processing and it's really a different kind of value-added product. Some specialty industrial applications also use flake concentrate with higher carbon percentages. These really go as high as 96% or 97% carbon but this material is less common. Regarding price, yeah definitely, higher purity material is more expensive. The price differences can vary quite significantly but typically the ranges of graphite pricing, in a mesh size, will meet at the lower and upper end of the range as you go up in purity. So, the jump between purity is not that large. To give you an example; our prices for minus 100 mesh flake concentrate with a 90% to 93% carbon content, go up to about 460 dollars per ton. As prices for a minus 100 mesh (so same size) flake concentrate, with 94% to 95% carbon content. Might start at 480 dollars per ton and go up to above 500. So, they kind of back on to each other.”

Mining Network: “Okay perfect, I guess for those in the mining industry there are quite a lot of new graphite deposits out there, waiting to be developed. Where best, might they look for a potential off take because it really is tight. The success of some of these mining companies really is tied around off take, being able to get an MoU and provide confidence to the market that they will be able to sell their own product. So, I'd assume China's probably the main place at the moment but outside of China, who else are taking MoU's and binding agreements?”

Benchmark: “Yeah, the most graphite off takes and Mou’s are still carried out in the traditional anode producing regions of the world. You know to either South Korea, Japan or China as you said. In the future we see much more growth in the end markets for electric vehicles. You know, as automakers look to cut the emissions associated with raw material transport in their supply chains and look to diversify away from their relatively, environmentally damaging supply chains within China. Towards renewable power production closer to end markets. We should see some interesting developments in Australia, Canada, North America and also Scandinavia as well.”

Mining Network: “One final question George. Is there a substitute for graphite within the anode of a battery? I’m not including the synthetic here. I mean any other materials that could be used to substitute graphite and we can demand in future.”

Benchmark: No, so there's no real substitute. Unlike the cathode side of the industry where there's kind of interplay between cobalt, nickel, and manganese. There really isn't any substitute for graphite. It's very overlooked in that manner. We might see silicon be introduced as an additive, you know, kind of between 5% and 10% percent in the volume of the anode material. But really there is no replacement. I think potentially as we get closer to solid state batteries we could see lithium metal anodes, but these are really still so far away from being in commercial production that graphite is vital to the electric vehicle revolution.”