Northern Graphite: Betting on car demand, and a new refining process
Electric car fever has led to sharp increases in lithium and cobalt, on an expected explosion in new demand for these materials. The same trend should boost the graphite market, says Greg Bowes, CEO and Director of Northern Graphite Corp. (TSXV: NGC | OTCQX: NGPHF).
Graphite is found in the anodes of lithium-ion batteries. While 0.8 kilograms of lithium carbonate is used in a li-ion battery, 1.6 kilograms of graphite is needed in the anode component of the battery. And for every 1 million electrical vehicles (EVs) produced a year, an additional 100,000 tpy of graphite flake capacity is needed, Bowes said. The industry globally produces 650,000 tpy of graphite flake currently.
With a 40% price increase in 2017, the graphite market may be starting to turn from a multi-year lull as EV production lines click into production, said Bowes. A host of carmakers plan to introduce EVs this year, from Nissan introducing its middle-of-the-road EV Leaf model to an upgraded version of the Chevrolet Bolt. Even Toyota Motor Corp., after a lengthy study to develop hydrogen fuel cells, announced its intention to introduce EV car models in December.
“It’s been known for 4 to 5 years,” Bowes said of the eventual demand coming from EVs. In the case of lithium, “the big companies didn’t do anything until there have been shortages and they had a gun to their head.”
None of the automakers, or specialized anode makers such as Hitachi or Samsung have yet to sign an off-take agreement with a graphite supplier, Bowes said. That is probably about to change, he said.
Northern Graphite owns the Bissett Creek concession in Ontario province located 15 kilometers away from the Trans-Canada Highway. The deposit has the potential to produce 20,800 tpy of high purity flake, Bowes said. Northern Graphite, like developers of other projects in North America, hopes to clinch an off-take deal with a player in the li-ion battery market.
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Graphite prices have traditionally followed the vagaries of the Chinese steel industry. Used as the inner brickwork in steel furnaces because of graphite’s tolerance to heat, prices shot up to $3,000 a ton in 2012 when China’s steelmaking capacity exceeded 1 million tons and have slumped to $750/t in 2016. A 40% increase in 2017, from rock bottom levels, gives the industry hope of a turnaround. Bissett Creek can produce at cash costs of $600/t to produce concentrate, after an US$84 million start-up investment. The project has an internal rate of return (IRR) of about 20%, Bowes said.
One of the most valuable assets within Northern Graphite’s list of assets might be the patented refining process that the company developed with mining engineering firm Hatch, Bowes said.
Chinese graphite producers, home to three-quarters of supply, use hydrofluoric acid to treat graphite, or as Bowes puts it: “one of the nastiest substances known to man”. Northern Graphite and Hatch’s process avoids the use of hydrofluoric acid and could be of interest to other producers that plan new mines in countries with more stringent regulations than China, he said.
A Louisiana town recently rejected the development of a refining plant to make battery anode material, known as BAM, by Australian-traded Syrah Resources because of the use of hydrochloric acid. Syrah Resources is developing potentially the world’s largest graphite mine in Mozambique.
Northern Graphite is open to licensing its cleaner technology to other producers and may even start up an anode materials plant, processing material from third parties, ahead of developing Bissett Creek, Bowes said.
Matt Craze has covered commodity markets for more than 20 years, working as a research at CRU International, and for over 10 years as a ... <Read more about Matt Craze>