Graphite Wars: The Trillion Dollar Battery Race Has A Big Problem
The EV industry faces a huge challenge of replacing, in record speed, internal combustion engines (ICE) that have ruled the roads for over a century—and domesticating the entire supply chain to meet the demands of an electric vehicle industry quickly closing in on a trillion-dollar market value.
So far, it’s all been done backwards, which is how many revolutionary ideas unfold …
North America is building EV factories first, then battery gigafactories. Only after these grand plans has enough attention been given to mineral processing. And coming in last, is mining of those critical minerals necessary to make it all happen.
This is the necessary reality. Investors saw what happened to lithium mining when it attempted to surge ahead into its proper place: The market wasn’t ready for supply to catch up with future demand, but lithium miners fought on.
Now, it’s graphite’s turn.
Graphite makes up 95-99% of the anode (negative electrode) material in lithium-ion batteries, making it the largest component in any EV battery. Once you get past the lithium hype, quiet graphite is the most critical element here. A “lithium-ion” battery can contain 15X more graphite than lithium, and make up some 25% of a battery’s total volume, leading Tesla’s Elon Musk to state that they should, effectively, be called “nickel-graphite batteries”.
Now, with EV demand explosive and the industry on track to grow another 35% this year, we need experienced operators who can feed the battery gigafactories with refined graphite.
For North America, which has zero commercial production of refined graphite, that advantage goes to Graphex Group Ltd (NYSEAMERICAN:GRFX), led by John 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.
In an effort to domesticate the graphite supply chain for North America’s gigafactories, Graphex Group is building a 15,000 tons-per-annum graphite refining facility in the heart of America’s auto industry—Detroit—with construction and first production expected in late 2024, subject to typical construction schedule impacts.
Importantly for investors and for North America’s future supply chain, Graphex Group isn’t a new player in this game. It already produces 10,000 tons-per-annum of refined graphite in Asia. Now, it’s bringing its technology and expertise home in a first for North America.
Refining graphite is a tricky business, and there is no commercial graphite refining in North America--yet. But Graphex Group has mastered the process. While potential competitors are still in the pilot or lab stage of production, Graphex Group is already commercial and can produce to scale. It’s ready to plug and play and feed the Gigafactory demand.
And that timing is now critical, given the massive amount of battery production planned in North America.
Supply Deals De-Risk North America’s First Domestically Refined Graphite
Outside of China, few graphite mines are producing significant quantities. Even fewer are doing any refining—the most profitable aspect of the graphite supply chain--for the EV industry.
To bring graphite refining home to North America, it is necessary to secure enough raw material, and to avoid regulatory complications and non-compliance with the Inflation Reduction Act (IRA), that raw material should come from outside of China.
This is the greatest challenge for a North American domestic graphite supply; but Graphex Group appears to have met the challenge.
In December, Graphex Group (NYSEAMERICAN:GRFX), entered into a non-binding LOI (letter of intent) with Northern Graphite Corporation (TSXV:NGC) to aggregate NCG’s raw material supply capabilities with Graphex’s proven downstream processing expertise to narrow the supply-demand gap for North America.
That agreement preceded a much bigger one in January this year that saw Graphex Group and Northern Graphite join forces on the construction of a large-scale graphite processing facility in Quebec’s Baie-Comeau region. The partners are now evaluating sites to house a facility that could produce up to 200,000 tons of graphite annually.
Also in December, Graphex Technologies (a wholly-owned subsidiary of Graphex Group) signed an MOU with private mining outfit Reforme Group Pty Ltd to provide raw materials for Graphex’s Michigan facility.
Again, in January, Graphex announced an LOI with Ontario-based Gratomic Inc for more raw supplies.
But the biggest deal yet came on August 1, when Graphex Technologies signed an agreement with Syrah Resources’ Balama graphite operation in Mozambique, further diversifying the raw materials supply chain. Syrah’s Balama graphite operation is the largest in existence outside of China, with a production capacity of 350,000 metric tons per year.
The significance of this most recent deal is that it adds the final de-risking element for Graphex Group’s raw material supply question—and without any reliance on China.
“The agreement with Syrah could change the graphite game in North America,” DeMaio said in a statement on August 1. “Connecting Syrah’s volume without proven experience and ongoing build-out of domestic processing capacity in North America represents a giant leap forward in meeting the demand for high-quality, high-volume, US IRA-compliant graphite anode material in the EV and renewable energy industries,” he said.
Graphite, at A Critical Moment
Graphite is a $23-billion industry and represents one of the biggest opportunities in the huge investment arena of batteries, the backbone of an everything-electric future. In less than a decade, graphite will be worth an estimated $43 billion.
Despite the fact that North American battery factories represent some 1 million metric tons per year of demand for graphite anode material, there is no commercial production in North America.
Graphex Group (NYSEAMERICAN:GRFX), is operating in the most profitable area of the graphite supply chain—refining—and its first North American plant is being built and is expected to start operations next year.
In creating a domestic supply chain for graphite in North America, Graphex is poised to take on market share because of its expertise, its ability to transfer its proven technology here for commercial production. This isn’t a pilot project. Already producing 10,000 tons per annum, Graphex is currently implementing a large-scale expansion to increase production to 20,000 tons per annum.
Because China dominates the graphite supply chain, North America is looking for a foothold that will allow it to secure its own supply. Most companies larger than Graphex by production volume are Chinese, giving Graphex a clear advantage in a space dictated both by the challenge of supply meeting demand and by geopolitics.
With a decade of graphite refining experience already behind it, and with the need for flake graphite set to reach 4.1 million tons per year by 2030, North America is looking to Graphex to replicate its full-scale commercial processes first in Michigan by next year, and then in Quebec—and beyond.
Other companies involved in the battery industry:
Few companies have heralded the electric future quite like Tesla, Inc. (NASDAQ:TSLA). Headed by the enigmatic Elon Musk, Tesla is more than just electric vehicles. It's about reimagining transportation through innovation and unparalleled battery tech. Their Gigafactories aren't just manufacturing units; they're global symbols of Tesla's ambition to lead the EV and energy storage revolution.
Tesla's in-house battery cells, known for their range and durability, have not just powered their vehicles but have sparked a shift in automotive industry standards. From the Roadster to the Cybertruck, Tesla's vehicles boast unmatched battery lifespans and power capabilities.
For investors, boarding the Tesla train is about believing in a vision that doesn't just end at vehicles. It stretches to a world powered by sustainable energy, batteries that store this energy, and an ecosystem where electric mobility is not the future but the present.
Lucid Group, Inc. (NASDAQ:LCID) carries with it the promise of luxury electrified. But peel back the plush interiors and the state-of-the-art tech, and you'll find a heart beating with formidable battery prowess. Lucid Air's 500-mile range is not just a testament to car design but a showcase of battery innovation.
While Lucid cars ooze opulence, their emphasis on battery efficiency and fast charging denotes an underlying commitment to making EVs more accessible and integrated into our daily lives. The innovations from Lucid are expected to ripple across the EV industry, setting new benchmarks.
Investors eyeing Lucid are not merely investing in another EV manufacturer. They are buying into a brand that seeks to amalgamate luxury with groundbreaking battery technology, ensuring that opulence never compromises efficiency.
QuantumScape Corporation (NYSE:QS) is not just another name in the EV space; it's a beacon of next-generation solid-state battery technology. Shattering the constraints of traditional lithium-ion batteries, QuantumScape is pioneering batteries that promise faster charge times and a longer lifespan.
Their solid-state design replaces liquid electrolytes, unlocking higher energy densities and bringing forth a safer and more efficient battery. It's not about incremental changes but transformative leaps in battery innovation.
For investors, QuantumScape provides an avenue into the future of EVs—a future where charging might just take minutes, not hours, and where range anxiety becomes a forgotten term. By backing QuantumScape, investors are propelling an electric future closer to the present.
While many associate Energizer Holdings, Inc (NYSE: ENR) with the iconic bunny, there's more under the hood. Energizer, a household name in batteries, has been energizing devices long before smartphones became an extension of ourselves. From alkaline to rechargeables, their range is vast, touching myriad sectors.
With the world tilting towards portable devices, Energizer's innovations in battery technology ensure gadgets aren't just smart but also enduring. Their foray into lithium batteries caters to the increasing demand for reliable energy sources in compact forms.
For investors, Energizer is a stable ship in tumultuous waters—a company with a legacy but with an eye firmly on the future. Investing here means banking on consistent innovation in the battery space, ensuring our devices never sleep.
NIO Inc. (NYSE:NIO) isn't just a car brand; it's a symbol of Chinese prowess in the EV race. Their vehicles are sleek, smart, and, most importantly, backed by battery tech that aims to alleviate range woes and long charging downtimes.
NIO's Battery as a Service (BaaS) is groundbreaking. Instead of buying an EV with a battery, consumers lease the battery, swapping it out when depleted. This not only reduces the EV's cost but also ensures the vehicle is always powered by the latest battery tech.
For investors, NIO represents a holistic approach to EVs—one that incorporates vehicles, battery tech, and innovative ownership models. Investing in NIO means investing in a comprehensive EV ecosystem that's redefining mobility in the world's largest auto market.
Deep within Earth's crust, Vale S.A. (NYSE:VALE) unearths minerals that power our modern world. As one of the world's largest nickel producers, Vale holds the keys to a metal crucial for EV batteries. But their journey isn't confined to extraction; it's about responsible mining and sustainable practices.
With the EV boom, the demand for nickel is skyrocketing, and Vale's expansive operations are positioned to meet this surge. They're not just extracting nickel; they're ensuring it's mined responsibly, reducing environmental impacts.
Investors peeking into Vale are glimpsing a future electrified. As the EV market burgeons, so does the demand for high-quality nickel. Aligning with Vale means being at the forefront of this surge, ensuring the wheels of the electric revolution keep turning.
Livent Corporation (NYSE:LTHM) stands tall as a top lithium producer, powering a world that's rapidly electrifying. Their operations span continents, ensuring a steady supply of this critical EV battery component. But for Livent, it's not just about production; it's about sustainable practices and innovations.
Their methods emphasize reduced water usage and carbon footprints, ensuring that the lithium powering our EVs doesn't come at Earth's expense. Livent's commitment to sustainability is not just a tagline—it's a core business philosophy.
For investors, Livent offers a balanced equation of high demand and responsible production. In a world thirsty for lithium, Livent quenches this demand without dehydrating our planet—a symphony of sustainability and supply that's music to investor ears.
Beyond the consumer eye, EnerSys (NYSE:ENS) powers industries with robust battery solutions. Their offerings aren't limited to one domain; they span from telecom to aerospace, showcasing versatility. With a focus on innovation, EnerSys doesn't just create batteries; they redefine energy storage possibilities.
Their portfolio includes lithium batteries tailored for specific industry needs, ensuring performance isn't compromised. EnerSys's vision isn't just to provide energy but to ensure it's consistent, reliable, and efficient.
For investors, EnerSys represents a dive into diverse sectors, all united by a singular need: dependable energy storage. By investing in EnerSys, one is backing a brand that powers industries, ensuring they operate seamlessly, without energy hiccups.
Piedmont Lithium Limited (NASDAQ:PLL) is an Australian company that focuses on North Carolina's mineral-rich terrains. At a time when global lithium supply chains are stretched, Piedmont aims to carve a self-sufficient path for the US.
Piedmont's approach is holistic, encompassing every facet of the lithium cycle, from extraction to production. By doing so, they're not just ensuring quality but also reducing dependencies on foreign supply chains.
Investors exploring Piedmont are venturing into a story of self-reliance and innovation. With the US aiming to bolster its domestic EV infrastructure, Piedmont's vision aligns perfectly, offering a home-grown solution to global demand.
Teck Resources Limited (NYSE:TECK) is one of the most diversified miners out there. Their portfolio, ranging from copper to zinc, is a testament to adaptability in an ever-evolving market.
Their significant stake in the Fort Hills oil sands project might raise eyebrows, but their sustainable initiatives, such as the 'RACE21' program, underscore a commitment to responsible extraction. With Teck, it's about unearthing potential without compromising the planet.
Investors allying with Teck are charting a course that's both diverse and dynamic. It's about embracing a company that's as versatile in its operations as it is steadfast in its commitment to sustainable practices.
By. Tom Kool
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