Graphite Wars – The Trillion Dollar Battery Race has a Big Problem

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 …   Companies mentioned in this release include:  Tesla, Inc. (NASDAQ:TSLA), QuantumScape Corporation (NYSE:QS), NIO Inc. (NYSE:NIO), EnerSys (NYSE:ENS), Teck Resources Limited (NYSE:TECK).

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 (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 (GRFX),  entered into a non-binding LOI (letter of intent) with Northern Graphite Corporation (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. 

DeMaio said in a statement on August 1 said:

The agreement with Syrah could change the graphite game in North America.

“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 (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. 

The Battery Industry Is Booming

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.

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.

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.

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.

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.

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Graphite Wars: The Trillion Dollar Battery Race Has A Big Problem, London, August 23, 2023