The undeniable inevitability is that everything is going to be electrified, and batteries are our future, as well as the biggest opportunity for investors in a lifetime. Yet, the lithium space has become crowded and chaotic, while the lesser-known critical battery component—graphite—is an extraordinary $23-billion bounty ripe for picking.
By 2032, it is projected to be worth an estimated $43 billion.
This isn’t about pencils. It’s about the most important element of a multi-trillion-dollar energy transition. It’s about yet another 35% jump in electric vehicle sales expected for 2023, and more explosive growth to follow. It’s about the raw materials that make the batteries to feed this explosive growth.
Graphite makes up 95-99% of the anode (negative electrode) material in lithium-ion batteries, in varying natural and synthetic combinations.
In fact, according to John DeMaio, CEO of Graphex Technologies and President of the Graphene Division of the Graphex Group Ltd (NYSEAMERICAN:GRFX), many don’t realize that graphite is the largest component by volume in an EV battery “because graphite goes about its business, doing its job quietly, like it’s done ever since the seventies”.
Any given lithium-ion battery can contain 15X more graphite than lithium, making up some 25% of a battery’s total volume. It’s also why Elon Musk once opined that lithium-ion batteries should be called “nickel-graphite batteries”.
There is no immediately viable solution to effectively replace the lithium-ion battery. Industry-wide, the consensus is that graphite will remain the primary anode material in the foreseeable future.
And North America has zero commercial production …
Yet, planned North American battery factories represent some 1 million metric tons per year of demand for graphite anode material.
That makes this $23-billion market one of the best to be in.
Even more so for Graphex Group (NYSEAMERICAN:GRFX), which is creating domestic supply chains of graphite, and is strategically positioned in North America to potentially seize significant market share.
Midstream Money: The Most Profitable Area of the Graphite Supply Chain
Outside of China, there are very few graphite mines currently producing significant quantities of the right quality raw material. There are even fewer with the necessary experience of refining that raw material into the finished anode material we need to meet what promises to be raging demand.
The most profitable aspect of the graphite supply chain is refining. Mining itself is wrought with exorbitant costs, regulatory burdens, and challenging operations.
Not only is it the most profitable, but it’s also where we see the highest barrier to entry. This is a highly specialized field and battery makers need experienced refiners who can demonstrate scale. In North America, that means Graphex, which has the expertise and technology, and holds patents for everything from products and production methods to machinery design and environmental protection.
Graphex Group already has a decade of commercial graphite refining experience and currently produces 10,000 metric tons of finished anode material annually, and they operate on a 24/7 basis, unlike others who have only produced sample materials at a pilot scale. This is a defining factor in the industry.
There are few—if any--companies larger than Graphex in terms of production volume outside of China; and they have strong ties to Beijing, which is a riskier selling point in the current geopolitical atmosphere, heightened by a battle for technological dominance through access to critical minerals.
While Graphex has extensive experience in China, it is not a Chinese company. Graphex Group Limited is a Cayman Island company with its principal offices in Hong Kong and regional offices in Shanghai and Royal Oak, Michigan, but it is seeking to create a standalone U.S. entity to “make the distinction even more clear, and to qualify unhindered for U.S. and Canadian incentives, grants, loans, etc.,” according to the company’s website.
Now, it’s all about bringing critical graphene home to North American markets as the energy transition gains serious momentum.
Possibly the Most Important Expansion in our Energy Transition
Already producing 10,000 tons per annum, Graphex (NYSEAMERICAN:GRFX) is currently implementing a large-scale expansion to increase production to 20,000 tons per annum within the next 12 months, with construction completion and production implementation expected to be concluded within that timeframe, subject to typical construction scheduling.
The expansion news has been fast-flowing.
In February last year, Graphex announced the joint-venture construction of its first-ever facility outside of Asia—in Warren, Michigan, a 15,000 tons-per-annum plant resurrected from an abandoned manufacturing sight in the Detroit automotive sector. Operations are expected to launch in Q1 2024.
Graphex has prioritized North America to localize end-to-end graphite processing and production capabilities, and the 15,000 tpa plant in Michigan is a major step towards that goal.
An international collaboration with Canada will also play a role, with Canada eyeing high-level status in the North American critical minerals game.
Finally, Graphex has secured raw materials supply from one of the largest, high-quality graphite mines outside of China, with other offtake agreements either secured or in the works—all outside of China.
- Canada: Offtake/Joint venture collaboration agreement with Northern Graphite
- Australia: Offtake/Joint venture collaboration agreement with Reforme Group
- Brazil: Offtake/Joint venture collaboration agreement with SouthStar Battery Metals
- Offtake/Joint venture collaboration agreement with Gratomic
- US: Offtake/Joint venture collaboration agreement with SouthStar Battery Metals
- Tanzania: Offtake agreement with Volt Resources
Electrification = Batteries. Batteries = Graphite. Graphite = Graphex.
But this could go far beyond batteries and gigafactories.
Graphex (NYSEAMERICAN:GRFX) has undertaken extensive scientific research and sees a multitude of applications for graphene that may likely increase demand even further in the future. Graphene’s unique properties will likely have major biomedical use, specifically with targeted drug delivery, smart implants, and tissue engineering. In the industrial sector, graphene-based composites can be used as a non-toxic rust-proofing alternative, as well as an improved coating for touch screens, phones and tablets.
Graphene can also be used for enhanced computer circuitry, while graphene supercapacitors are huge boosts of power with comparably little energy. Eventually, because graphene is lightweight, it could be used in the manufacture of cars and planes, significantly reducing their weight. Finally, but not exclusively, graphene ultra-sensitive sensors could detect minute airborne particles, making it a potential preventative technology for any future pandemics.
Domesticating the entire graphite supply chain is a daunting task, but Graphex Group has a clear advantage in North America.
This is a team of veterans led by DeMaio, who has 35 years of experience in the energy and infrastructure sectors, including as former President, CEO and Board Member of JouleSmart Solutions, general manager of Siemens Smart Infrastructure, VP of MWH Global, VP of SPG Solar and COO of Thompson Solar Technologies.
It has a decade of commercial graphite refining experience, but one very distinct advantage: Its would-be competitors are new to midstream graphite. They’re only producing at lab or pilot scale, and scaling up can be accompanied by all sorts of challenges and misfires.
Graphex is already producing through full-scale commercial processes with continuous output, and it’s at the forefront of creating one of the most critical North American supply chains of the coming decades.
Other resource companies to keep an eye on:
Freeport-McMoRan Inc. (NYSE:FCX), standing tall amidst giants, is revered for its unparalleled focus on copper, molybdenum, and gold. From the American landscapes to the vastness of Indonesia, their mining prowess resonates in the global circuits. The Grasberg mine, a testament to their dedication, encapsulates the richness of their resource pool.
Diving deeper, FCX doesn't simply extract; it envisions and innovates. Their approach to sustainable mining practices, coupled with community engagement, sets a gold standard in responsible resource extraction. They understand that the minerals they pull from the Earth's depths power tomorrow's industries, and they're primed to be at the heart of it.
For investors, Freeport-McMoRan is more than just a mining venture. It's an opportunity to be a part of the backbone that supports global development and electrification, making it an enticing prospect for those attuned to the future's mineral-driven demands.
Southern Copper Corporation (NYSE:SCCO) embodies a legacy that's interwoven with history and innovation. A subsidiary of the mighty Grupo Mexico, it claims a heritage that has witnessed the ebb and flow of copper markets and has thrived regardless. Their assets, boasting some of the world's largest proven copper reserves, narrate tales of sheer abundance.
Yet, it's not just about vastness. SCCO melds technology with tradition. Their pursuit of efficient, sustainable mining practices ensures that every ounce extracted does so without compromising the environment, making them a beacon for ethical mining.
For the discerning investor, Southern Copper is more than a mere ticker symbol. It represents stability, a commitment to a brighter, greener future, and a promise of sustained growth, making it a shimmering opportunity in the world of metals and mining.
Vale S.A. (NYSE:VALE), a titan emerging from Brazil's heartlands, transcends its identity as a mere iron ore producer. Their vast portfolio encompasses nickel, manganese, and even coal, painting a canvas of multifaceted mineral might. The Carajás Mine, a marvel in modern mining, showcases their capability and scale.
Beyond extraction, Vale's ethos is built on transforming natural resources into prosperity. Their commitment to safety, sustainability, and stakeholder engagement provides a refreshing take on the traditional mining narrative, positioning them as leaders in responsible resource utilization.
Investors eyeing the vast terrains of infrastructure and modern development will find Vale not just a potential asset but a partner. A partner dedicated to forging a path of progress, growth, and shared prosperity.
With a name echoing the rivers of Spain, Rio Tinto Group (NYSE:RIO) stands as a global testament to exploration and innovation. It's not simply a miner; Rio Tinto is a storyteller, tracing tales from the red landscapes of Pilbara to the icy stretches of Canada. But while iron ore paints much of their narrative, their story branches into diamonds, copper, and aluminum.
Their commitment to the environment is not mere corporate speak. It's tangible, as seen in their ambitious projects aiming at lower carbon aluminum and piloting underground mines powered entirely by electricity. It's a company that doesn't just adapt to the future but seeks to shape it.
For the eclectic investor, Rio Tinto offers a palette of opportunities. Their diversified portfolio combined with their dedication to technological advancements makes them an appealing prospect in the evolving realm of mining.
Hailing from the 'Land Down Under', BHP Group (NYSE:BHP) is more than its rich Australian roots. It's a vibrant tapestry of minerals and metals, spanning continents, a company that has, time and again, redefined the mining frontier. From petroleum to potash, their reach is vast and varied.
But BHP's real strength lies not just in its resources but its people. Their commitment to a diverse workforce, ensuring that local communities benefit directly from their presence, is commendable. Their ethos: 'Think Big', is not limited to production but extends to a broader vision of societal impact.
Investors don't just buy into a company with BHP; they buy into a philosophy. One that believes in continuous growth, sustainability, and community development, marking BHP as a resilient cornerstone in the commodities market.
Albemarle Corporation (NYSE:ALB) is not merely a name; it's a revolution in the lithium industry. As the electric vehicle market burgeons, Albemarle stands at its epicenter, powering the drive towards a more sustainable future. But lithium is just one shade in their vibrant spectrum, with bromine and catalyst solutions adding depth to their identity.
Their expansion endeavors, like the joint venture in Western Australia's Greenbushes lithium mine, reflect their foresight. Albemarle is a company that doesn't wait for the future; it actively crafts it. Their sustainable practices ensure they meet today's needs without jeopardizing tomorrow's possibilities.
For the forward-thinking investor, Albemarle is an emblem of innovation. In a world making rapid strides towards electrification, an investment in Albemarle is a step towards a brighter, cleaner future.
Teck Resources Limited (NYSE:TECK) is the epitome of diversified mining operations. Unlike many in its league, Teck doesn't wear a single crown. From steelmaking coal to zinc, its portfolio resonates with diversity and adaptability.
Their trailblazing sustainability initiatives, such as the ambitious 'RACE21' program, look to harness technology and innovation to redefine the very essence of mining. Teck isn't just mining resources; they're mining possibilities, pushing boundaries to unlock potential where others might not look.
Investors venturing with Teck aren't signing up for a static journey. With Teck, they're embarking on a dynamic voyage, one colored with evolving strategies, tech-driven transformations, and a vision that stretches beyond the horizon.
Sociedad Química y Minera de Chile (NYSE:SQM) is dripping with a legacy that has touched multiple industries from agriculture to electronics. While globally known as a lithium stalwart, its portfolio richly spills into potassium, iodine, and even solar salts.
SQM's real brilliance shines in its adaptability. They're not just extracting resources; they're harmonizing with the environment. Utilizing unique solar evaporation techniques to produce lithium, SQM emphasizes an environmentally-conscious extraction process.
For investors, SQM represents an opportunity steeped in innovation and reverence for nature. In a world echoing with sustainable calls, aligning with SQM's vision can be a strategic step towards responsible and impactful investments.
Turquoise Hill Resources Ltd.’s (NYSE:TRQ) essence is woven around the grandeur of the Oyu Tolgoi mine. A venture not just of metals but of collaboration, bridging Mongolia's treasures with global markets. This copper-gold mine, however, is not just about extraction; it's a saga of partnership, development, and growth.
Turquoise Hill's approach is collaborative, emphasizing shared benefits, community engagement, and fostering local employment. Their story isn't about lone success; it's about collective triumph, a success shared with the very soil they operate on.
Investors resonating with community-driven progress will find Turquoise Hill's narrative compelling. It offers a unique blend of resource-rich potential coupled with sustainable community development, making it an intriguing proposition in the mining space.
Lithium Americas Corp. (NYSE:LAC) is eying the electric future with determination and readiness. Spanning from the vastness of Nevada to the stretches of Argentina, LAC is poised to fuel the world's electric dreams. However, it's not just about lithium; their boron assets add a unique facet to their identity.
Their endeavors, such as the Thacker Pass project, signal not just a commitment to production but to sustainability and community-centric growth. LAC's narrative is one of balance, aligning commercial goals with environmental and social aspirations.
Investors plugging into the Lithium Americas story are not just tapping into the burgeoning EV market but aligning with a vision of balance and harmony. LAC emerges as an enticing prospect for those eager to be part of the green revolution, both in intent and action.
By. Tom Kool
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