JOHANNESBURG (miningweekly.com) – It would seem as if there is a new darling in the minerals market, as investor interest in graphite was seen rocketing over the past year.
From a total of about four listed companies making it their business to supply hungry markets with the carbon allotrope in 2011, the number of listed firms had increased to about 30, with most listings taking place since the beginning of the year.
Analyst Jeb Handwerger said that during the year, graphite had performed strongly, outpacing the generally depressed market.
“Graphite stocks have hit new highs and have recently pulled back, while gold and silver miners have hit two-year lows. This demonstrates excellent relative strength in an overall weak natural resource equity environment,” he said.
For example, AngloGold Ashanti, Africa’s biggest gold producer, fell 4.2% to R269.50 a share in April, the weakest in more than two years, while Gold Fields, the world’s fourth-biggest gold producer, dropped 5% to R100.73 a share during the same period. On Friday, silver miner Minera Atacocha, the Lima-based zinc and silver mining company, fell by 5.4%.
He expected global demand for graphite to increase exponentiallyover the next few years from the current production of about 1.1-million tons, possibly reaching 1.6-million tons in five years on the back of the rapid adoption of smart phones, laptops and hybrid-electric cars – all using lithium-ion batteries.
Lomiko Metals CEO Paul Gill also recently said demand for graphite was expected to rise as electric vehicles and lithium battery technology became more widespread and commonplace. Demand for graphite would also increase as new-generation nuclear reactors were being built in China, and if fuel cells and graphene patents became products.
Canadian supplier Northern Graphite CEO Greg Bowes believes people was starting to realize that it takes far more graphite than lithium to make lithium-ion batteries and that graphite is, in fact, the supply critical material.
“However, graphite comprises a far larger market than lithium and it has a number of growing uses and new uses. It is not just dependent on the growth of electric vehicles to be successful,” he said.
However, Bowes believes that the story is not as rosy as some would have it.
He told Mining Weekly Online that although prices for the commodity have increased on the back of rising industrial demand, owing to the growth of developing economies and a tight supply from the world’s largest graphite supplier, China, prices for the commodity remained largely flat.
“Owing to the economic slowdown in the US, Europe and China, prices have not seen significant increases in the past months. However, it has not declined and with renewed economic growth, will likely continue on an upward trend,” he said.
There is a phenomenal amount of renewed interest in graphite mining in Canada, after the industry had seen little activity for years, with numerous companies racing to be first in line to produce the sought-after flake graphite, prized for its extreme resistance to heat and high conductivity.
However, there are not many new serious development-phase projects coming on-stream soon, with the last significant graphite mine built 30 year ago.
“There are not many graphite mines outside of China. Large economic deposits are rare and right now most operating mines in North America are small. We could see the need for 30 to 40 new graphite mines over the next decade,” Handwerger said.
Northern Graphite found itself among a handful of miners developing a high-quality graphite project, scheduled for production within the next year or so. The miner planned to open its Bissett Creek project, one of the first new graphite mines to open outside China since the 1990s by the end of 2013. A bankable feasibility study for the project, including a mine closeout plan was expected by June.
Ontario Graphite was also developing a graphite mine at its Kearney deposit, located in the same region as Northern Graphite’s Bisset Creek.
Another project - the only notable new project of any size, according to graphite analyst and blogger Dr Alex Cowie – that could be in production soon was the Almenara graphite project being undertaken by Magnesita, an unlisted company in Brazil.
“This could produce 40 000 t of graphite a year, increasing global production by 10%,” he said on Agoracom’s graphite blog.
Bowes pointed out that the new entrants to the market hold earlier-stage exploration projects and it would take many years to determine if they have anything, let alone get permits in place and build the mines – processes that could take years to complete.
However, he expected graphite prices to resume its rising trend when global economic recovery is achieved, leading to renewed demand for the commodity.