Will graphite explorers (again) be the next to benefit ...minexconsulting.com/wp-content/uploads/2019/04/... · 1984 –New World X √√ 1984 –Old World √√ X X 1984 –Third

MinEx Consulting Strategic advice on mineral economics & exploration

Will graphite explorers (again) be the next to benefit from the

renewable energy transition?

John SykesStrategist, MinEx Consultingalso

PhD Candidate, Centre for Exploration Targeting,

The University of Western Australia (UWA)

Lecturer, Strategic Management of Resource Companies,

Business School, UWA

Managing Director, Greenfields Research

Mines and Money Conference 28th November 2017, London, UK

1


Overview

1. What did we learn from the last graphite boom?

2. Is the graphite demand opportunity still there?

3. Can graphite supply scale up enough to meet

demand?

4. How do we put the graphite mining story together?

5. Conclusions

2


1. WHAT DID WE LEARN FROM THE LAST GRAPHITE BOOM?



3


The world is entering the ‘energy transition’

BATTERIES

• Power storage / averaging

• Portable energy• Rechargeable

(reduced waste & energy efficient)

RENEWABLES

• Theoretically infinite

• Non-carbon emission generating (at source)

• Distributed sources

Increased energy

demand

Increased environment

focus

Increased transport

Images: Shutterstock

4


Creating new opportunities for energy metals

RENEWABLES METALS

Uranium

Rare earths (neodymium,

praseodymium &dysprosium) – in

the generator magnet

Silicon & germanium;Gallium-arsenide;Copper-indium-gallium-selenide(CIGS);Cadmium-telluride

Images: Shutterstock; Wikipedia; solarchoice

Lead-acid Alkaline (zinc-manganese)

Lithium-ion (graphite,

manganese &cobalt)

Nickel-cadmium /

zinc

Nickel metal (lanthanum-rare

earth) hydride

Vanadiumredox

BATTERY METALS

5

https://commons.wikimedia.org/wiki/File:NiCd_various.jpg

https://www.solarchoice.net.au/blog/imergy-vanadium-flow-batteries-australia


Straining supply chains: the ‘critical metals’

antimony, arsenic, barium, beryllium, bismuth, boron, cadmium, chromium,

cobalt, gallium,

germanium, graphite,

indium, lithium, magnesium, manganese, mercury,

molybdenum, niobium, PGMs, rare earths,

rhenium, selenium, silicon, silver,

strontium, tantalum,

tellurium, thorium,

tungsten, vanadium

Components of ‘criticality’

ECONOMIC PARADIGM

Important uses

STRATEGIC PARADIGMPotentially geopolitically restricted production, e.g. USDOE critical metals reports

SUSTAINABILITY PARADIGMPotentially

environmentally / socially restricted production, e.g. EU critical metals

reports‘China produces

65% of the world’s natural graphite’

- Olson, 2017

“Dust emissions from the mining of…

graphite had become a major

issue, air pollution from dust had

become… known as graphite rain.”

- Olson, 2017

Sources: Sykes et al., 2016a,b

6

https://minerals.usgs.gov/minerals/pubs/commodity/graphite/mcs-2017-graph.pdf

https://minerals.usgs.gov/minerals/pubs/commodity/graphite/myb1-2014-graph.pdf


The mining sector and investors have piled in!

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Lithium (again)

RARE EARTHS

BECOME HOT

COMMODITIESTheBull.com.au, 06 Jun

2011

Why these graphite

miners have soared

more than 87%The Motley Fool, 24 Jun 2014

Lithium-ion

battery demand

sends shares in

miners soaringABC, 14 Jun 2016

Investors

put stock

in uraniumABC, 24 May 2006

GraphiteRare earthsLithiumUraniumCobalt

Graphite?

Talison Lithium to raise $194m in IPOBusiness News WA,24 Nov 2009

Profit from the

cobalt boomThe Motley Fool, 17 Feb 2017

Ontario

Graphite

seeks £40M

AIM listing

The Telegraph, 29

Oct 2017

7

http://www.thebull.com.au/articles/a/20330-rare-earths-become-hot-commodities---us-ipo-molycorp-up-400-in-10-months.html

http://www.fool.com.au/2014/06/24/why-these-graphite-miners-have-soared-more-than-87/

http://www.abc.net.au/news/2016-06-14/lithium-ion-battery-demand-fuels-stock-bubble/7510624

http://www.abc.net.au/worldtoday/content/2006/s1646337.htm

https://www.businessnews.com.au/article/Talison-Lithium-to-raise-194m-in-IPO

https://www.fool.com.au/2017/02/17/2-shares-to-profit-from-the-cobalt-boom-in-2017/

http://www.telegraph.co.uk/business/2017/10/29/ontario-graphite-seeks-40m-aim-listing/


But it’s been a mixed market story so far…

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Growth of metal market groups 2007-16 (US$ billions)

Minor Critical Metals Minor Battery Metals

Minor Renewables Metals Precious Metals

Base Metals

Battery Metal

2007-16Price

Change

Graphite 114%

Lithium 110%

Manganese 2%

Lead -35%

Zinc -40%

Vanadium -44%

Cobalt -54%

Nickel -75%

Cadmium -83%

Renewables Metal

2007-16Price

Change

Rare earths 135%

Silicon 39%

Arsenic 35%

Copper -16%

Selenium -21%

Germanium -23%

Gallium -25%

Indium -47%

Tellurium -59%

Source: USGS (2016, 2017) For category definitions see appendices

8


2. IS THE GRAPHITE DEMAND OPPORTUNITY STILL THERE?



9


“All the batteries on earth can store only ten minutes of the world’s energy

needs.”

Isodor Buchmann (2011)

‘Batteries in a Portable World’

10


Many batteries, many uses & raw materials

Lead-battery systems Lithium-battery systemsNickel-battery systems Other battery systems

ICE vehicles Electric vehiclesConsumer products Energy storage

Source: Battery University

11


“The battery has not advanced at the same speed of electronics,… Instead of two years, the capacity of lithium-ion

took ten years to double.”



12


Many lithium batteries, uses & inputs too

Source: Battery University

Lithium Cobalt Oxide

Anode: Graphite

Lithium Nickel Manganese

Cobalt Oxide; Anode: Graphite

ICE vehicles Electric vehiclesConsumer products Energy storage

Lithium Iron Phosphate

Anode: Graphite

Lithium Nickel Cobalt Aluminium

OxideAnode: Graphite

Lithium TitanateAnode: Lithium

Titanate

Lithium Manganese OxideAnode: Graphite

Lithium AirAnode: Air

Lithium MetalAnode: Graphite

Solid-state LithiumAnode: Lithium

Lithium SulphurAnode: Lithium

Current

Future

13


“…the battery is best suited for portable and stationary systems. For [large] motive systems the battery lacks

capacity, endurance and reliability. The dividing line… lies with the electric

vehicle.”



14


Batteries are not yet driving graphite

Natural graphite uses, 2014 (%)

Brake linings & refractories Foundaries & lubricants

Batteries Other

• The battery opportunity

for graphite is exciting;

• Potential 15-25%

growth rates for the

battery segment;

• But still emerging?

• Graphite is still mainly

used for non-battery

applications;

• Is it supply

constrained?

Data: USGS

15


3. CAN GRAPHITE SUPPLY SCALE UP ENOUGH TO MEET DEMAND?



16


Graphite is looking supply constrained

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400

600

800

1,000

1,200

1,400

1,600

1,800

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97

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Production (Kt) Price (2016 US$/t) Value (2016 US$M)

Volume driven growth

Price driven growth

Data: USGS

17


Supply constraints need resolving

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

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Production (Kt) Price (2016 US$/t)• The short-termist view is that miners

and explorers benefit from price

spikes;

• Price spikes are good for profits &

raising capital, but not for building

mines;

• Each spike, destroys demand and

stops market expansion – it is bad

over the long term

• Over the long-term graphite suppliers

need to vastly overfulfil consumer

demand (and complimentary

minerals, e.g. lithium, cobalt,

manganese)

• These metals need to become

‘uncritical’.

Volume driven growth

Price driven growth

Data: USGS

18


Metals markets have transformed before

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400

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700

800

900

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00

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51

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68

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85

20

02

Growth in market size indices of copper and aluminium 1900-2014

(1900 = 1)

Cu Index Al Index

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50

100

150

200

250

300

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00

19

17

19

34

19

51

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68

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85

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02

Growth in market size indices of copper and

nickel 1900-2013 (1900 = 1)

Cu Index Ni Index

0

5

10

15

20

25

30

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50

19

58

19

66

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74

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82

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90

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98

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Growth in market size indices of copper and uranium 1950-2013

(1950 = 1)

Cu Index U Index

Source: Sykes et al., 2016b; Data: USGS

19


Discovery, supply and demand togetherNickel

Discoveries in Sudbury & New Caledonia

Bulk open pit mining

Flotation & smelting

advances

Demand for armour

Ability to handle radiation

Uranium

Demand for nuclear weapons

Demand for nuclear power

Bulk mining for very low

grade radium

Radium-uranium discoveries in the Congo

Aluminium

Bauxite discoveries in North America

Bayer and Hall-Heroultprocesses

Transportation demand

Bulk open pit mining

Source: Sykes et al., 2016b; Images: Shutterstock

20


Graphite has great potential for growth

Metals Constraints removed

Graphite Discovery Sup. Use

Copper Dis. Supply Use

Germanium Dis. Sup. Use

Indium Dis. Sup. Use

Tellurium Dis. Sup. Use

Arsenic Discovery S Use

Gallium Dis. Sup. Use

Selenium Dis. Sup. Use

Silicon Dis. Sup. Use

Cobalt Dis. S Use

Lithium D Sup. Use

Metals Constraints removed

Nickel Dis. Sup. U

Vanadium Dis. Sup. U

Lanthanum D S Use

Lead Discovery S

Cadmium Dis. Sup.

Manganese Dis. S U

Zinc Dis. S U

Neodymium D S Use

Praseodym… D S Use

Dysprosium D Use

Uranium D S

Fully

un

con

stra

ined

Fully

un

con

stra

ined

Most constrained

Least constrained

Source: Sykes et al., 2016a

21


4. HOW DO WE PUT THE

GRAPHITE STORY TOGETHER?



22


Navigating the energy transition is complex

Wonderland

1984

Third

World

New

World

Old World

NOW

(An unknown

number of

economic

cycles to come)

Old

World

(Beyond which is

the unknown)

‘Economic paradigm’

‘Sustainability

paradigm’

‘Strategic paradigm’

‘Transition’

Source: Centre for Exploration Targeting PhD Students Scenarios Workshop, 2016

23


WONDERLAND?

GREEN

ECONOMY

STRATEGIC

RESOURCES

SILICON

VALLEY

PROTECTIONISM

STRATEGIC

RESOURCES

ISIS

DISRUPTION VOLATILITY

CETA

DEAL

INNOVATIONPARIS

AGREEMENT

Disruptive innovation within a global regulatory framework

allows leads to voluntarily industry-led energy transition

TESLA

Source: Centre for Exploration Targeting PhD Students Scenarios Workshop, 2016; Images: Shutterstock

24


Nineteen Eighty-Four?

BREXIT

STRATEGIC

RESOURCES

OLD

WORLD

MILITARY-

INDUSTRIAL

COMPLEX

TRUMPSTRATEGIC

PARADIGM

WAR

PUTIN

MIDDLE

EASTERN

PROBLEMS

Geopolitics and conflict forces a government-led energy

transition in the fossil-fuel poor parts of the world

Source: Centre for Exploration Targeting PhD Students Scenarios Workshop, 2016; Images: Shutterstock

NEW

WORLD

25


Different implications from each scenario

WONDERLAND

Business capabilities

• Spot new technology by working with

innovators ‘on the ground’;

• Understand niche markets before they

become the next big thing;

• Be able to scale globally quickly.

Winners & losers

• In a globalised world only one or two battery

technologies, hybrid car companies, and

renewable energy sources will win, so

backing the right idea early is critical.

• However advantage is only ever temporary,

as the next big thing is already on its way –

innovate ruthlessly to stay on top.

NINETEEN EIGHTY-FOUR

Business capabilities

• Work closely with government to ensure you

get the big contracts;

• Global scaling is impossible;

• Understand your local market, and what

technologies can work there.

Winner & losers

• In a divided world many ‘just good enough’

energy technologies will exist, supported by

government and their geopolitical need, so

picking ‘a winner’ is less important.

• The slow changing nature of government

means that within each block this is a stable,

slow changing world.

26


Enter via existing consumer markets

ICE Vehicles Consumer Products

Electric Vehicles

Energy Storage

Wonderland X √√√ √√√ √√√

1984 – New World X √√ √√ √√

1984 – Old World √√ √√ X X

1984 – Third World √ √ X X

• The various existing consumer products for graphite will be

around in any future, unless prices are so high they destroy

demand;

• This would also destroy the nascent graphite-in-batteries

market;

• Existing graphite consumer markets are a good entry point for

miners.

27


5. CONCLUSIONS ON GRAPHITE & THE ENERGY TRANSITION



28


Graphite and the energy transition

• The energy transition will likely have a substantial impact on some

currently minor metal markets, including graphite;

• The multitude of renewable energy, electric vehicle and battery

technologies, however, means it is not clear which technologies

(and thus minerals) will be required in the future;

• However, graphite is broadly exposed to the lithium-ion (and some

other) battery markets, so a relatively robust bet;

• Unfortunately, many minor ‘critical’ metals, including graphite, are

supply-constrained by non-geological and non-technical issues;

• The mining industry will therefore have a major impact on which

minor metals will become available for mass consumption as

energy metals by renewables and battery companies;

29


Graphite mining and the energy transition

• So far, the graphite (and wider energy transition) opportunity has not been fully realised by the mining sector;

• Nonetheless, graphite (and some minor metals markets) have the latent potential to become major industrial mineral markets;

• Miners therefore need to think carefully about their strategy aligning supply capabilities with appropriate market entry and demand scenarios;

• In the end, the socio-political context of the energy transition will determine into which sort of future we progress and how graphite is used;

• With this uncertainty, a ‘hedging’ type strategy is most appropriate, with the best hedge for graphite being a focus on existing graphite consumer product markets.

30


Contact details

John SykesStrategistMinEx Consulting Perth, Australia

Email: [email protected]: www.MinExConsulting.com

Copies of this and other similar presentations can be downloaded

from my website

Thank You

31

mailto:[email protected]

http://www.minexconsulting.com/


Acknowledgements

• Buchmann, I., 2011, Batteries in a Portable World, Third Edition, Cadex Electronics: Richmond, BC, 328p.

• Buchmann, I., 2017, Battery University: Cadex Electronics, accessed 28 November 2017, at

http://batteryuniversity.com/

• Kelly, T.D., and Matos, G.R., comps., 2014, Historical statistics for mineral and material commodities in the

United States (2016 version): U.S. Geological Survey Data Series 140, accessed 28 November 2017, at

https://minerals.usgs.gov/minerals/pubs/historical-statistics/

• Sykes, J.P., Wright, J.P., & Trench, A., 2016a, Discovery, supply and demand: From metals of Antiquity to

critical metals, Applied Earth Science, 125, 1:3-20.

• Sykes, J.P., Wright, J.P., Trench, A., & Miller, P., 2016b, An assessment of the potential for transformational

market growth amongst the critical metals, Applied Earth Science, 125, 1:21-56.

• U.S. Geological Survey, 2017, , Mineral commodity summaries 2017: U.S. Geological Survey, 202p.,

accessed 28 November 2017, at https://minerals.usgs.gov/minerals/pubs/mcs/2017/mcs2017.pdf

• We’d like to acknowledge the efforts of the Centre for Exploration Targeting scenario planning team whose

work contributed to this presentation: John Sykes, Allan Trench, T. Campbell McCuaig, Jonathan Bell,

Jeremie Giraud, Constanza Jara Barra, Ahmad Saleem, Dave Stevenson and Jan Tunjic.

32

References

http://batteryuniversity.com/

https://minerals.usgs.gov/minerals/pubs/historical-statistics/

https://minerals.usgs.gov/minerals/pubs/mcs/2017/mcs2017.pdf


Category definitions for slide 8

• Precious metals: gold, platinum groups metals & silver

• Base metals: aluminium, copper, lead, nickel, tin & zinc

• Renewables metals: arsenic, gallium, germanium, indium, rare earths,

selenium, silicon & tellurium

• Minor battery metals: cadmium, cobalt, graphite, lithium, manganese &

vanadium

• Other minor critical metals: antimony, barium, beryllium, bismuth, boron,

chromium, magnesium, mercury, molybdenum, niobium, rhenium, strontium,

tantalum, thorium & tungsten

33

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Will graphite explorers (again) be the next to benefit ...minexconsulting.com/wp-content/uploads/2019/04/... · 1984 –New World X √√ 1984 –Old World √√ X X 1984 –Third