Resource World Magazine

10 www.resourceworld.com J U N E / J U L Y 2 0 1 6 N ew developments in the electric vehicle industry are raising hopes for resource juniors who aim to produce graphite, an industrial mineral previously associated with more mundane applications, including steel making and pencil lead. Among them are the rechargeable lith- ium-ion battery mega-factories which are being built by Tesla Motors and others to feed fast growing demand for electric vehi- cles. Mega factories like Tesla's in Nevada are projected to increase global battery capacity by about 150% by 2020. As graphite is one of the key materials in lithium-ion batteries, Dundee Capital Markets has estimated Tesla will need up to 45,000 tonnes of flake graphite annu- ally. Dundee analyst David Talbot said new battery market entrants may want to secure supply by having controlling stakes in mine production, a move that would encourage investment in lithium and graphite companies. Graphite has traditionally been used as a refractory material in steel furnaces which still accounts for about 40% of global demand. But the lithium ion bat- tery industry is growing rapidly and has become the second largest user of graph- ite, said Greg Bowes, CEO of Northern Graphite, which hopes to supply graphite from a mine in Ontario. "We are getting close to the tipping point where [demand from the battery sector] will drive graphite prices higher [in the same way that it has done with lithium],'' he said. Industry officials say investors need to consider some key differences between graphite and other commodities. First, unlike gold or iron, graphite does not trade transparently and there is no ready market for it. Graphite is sold privately, so actual prices can only be estimated. Large flake graphite (+80 mesh) sells for about US $1,000/tonne, down from around US $2,800 in 2012. Large and jumbo flake are preferred by battery manufacturers. Second, every graphite producer's material will have certain unique defining characteristics, which include its purity and the precise profile of contaminants. For some applications, the impurity profile is not of great importance but for others it is critical. "Gold is gold, no matter where it comes from, but the same is not true of graphite,'' said Canada Carbon CEO, Bruce Duncan, in an interview. Investors should also consider the fact that there is little graphite production in North America and none in the US. Because there is no shortage of graphite, securing funding for new mines is a chal- lenge for companies in North America. As a result, mining juniors aiming to gain a foothold in the battery sector have to think more like technology companies by put- ting the focus on the processing needed to micronize and purify flake graphite. Northern Graphite, for example, has teamed up with a group of companies that are jointly acquiring a micronizing and spheronizing mill to produce spherical graphite, a critical step in the production of anode material used in lithium ion batteries. Great Lakes Graphite has taken a similar approach by acquiring a dormant micronizing facility in Matheson, Ontario. Graphite for that operation is being sourced from Brazil, the world's second largest producer. The ultimate goal is to qualify their materials for use by lithium-ion bat- tery companies. "We would like to have Tesla as a customer,'' said Paul Ferguson, Chief Marketing Officer for Great Lakes Graphite. "But we are working with other manufacturers that we think we have a better chance of doing business with.'' Lomiko Metals has taken a different approach. It is betting on the future of gra- phene, a new "wonder material" that is a graphite derivative discovered in 2004 by researchers at Manchester University and could be used to manufacture transparent electronics that are stronger, cheaper and more flexible. Lomiko's wholly-owned affiliate, Lomiko Technologies, owns 4 million shares of Calverton, New York-based Graphene 3D Lab, a provider of graphene materials for research and development. "When you make graphene, it's actually a black powder and it's difficult to work with in this state,'' said Graphene 3D CEO, Elena Polyakova. "The challenge is finding methods of integrating it into other mate- rials so manufacturers can come up with a final product that will benefit from its properties," she told Resource World dur- ing a telephone interview. "So right now we are not limited by the products graphene can improve, but we are limited by how we can integrate it into polymers so that manufacturers are able to use it." Graphite outlook & roundup by Peter Kennedy

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