As A Graphite Supply Deficit Looms, Can This Company's Near-Term Production Save The Situation?

The push for a renewable energy future has increased interest in clean energy technology. More than ever, the world is turning to sources such as sunlight and wind for energy instead of the fossil fuels that cause global warming.

The switch from fossil fuels to renewable energy has caused a boom in various sectors of the clean energy economy, particularly electric vehicle (EV) production.

In the U.S., President Joe Biden’s executive order requiring that half of all new vehicle sales be electric by 2030 seems to have opened the floodgates. EVs are rolling off the production lines of players like Tesla Inc. TSLA, General Motors Co. GM, Nio Inc. NIO, and Ford Motor Co. F.

With such a massive universal acceptance for a clean energy future, the global EV market, valued at $165.01 billion in 2021, is projected to reach $434.4 billion by 2028, registering a compound annual growth rate (CAGR) of 17.5% from 2022 to 2028.

Sales of EVs have been rising steeply. In the second quarter of this year, just under 196,800 battery electric vehicles were sold in the U.S. This was a year-over-year increase of around 66.4% compared to the sales recorded in the second quarter of 2021.

The second quarter of this year also saw a hike in sales compared to the first quarter of 2022, making it the best quarter for EV sales in the past two years, according to Statista.

The talk about record EV sales and growth brings up the subject of the batteries that power them. The availability of materials used for manufacturing these batteries will play a crucial role in the sector’s growth.

Looming Graphite Supply Deficit?

Most EVs are powered by lithium-ion batteries. The largest component in these batteries by weight is graphite — each battery contains 20% to 30% of it. Graphite makes up 95% of the anode, coated spherical graphite coats a copper foil. Graphite is the supply critical material for a Li-ion battery.

 While graphite is considered essential to the global shift towards EVs, there could be a looming supply deficit on the horizon; the U.S. hasn’t produced any graphite for decades.

Currently, China is the only country with graphite processing facilities for anode graphite, and the global, 100%, reliance on China has emerged as a significant obstacle to EV production amid trade disputes and soaring demand.

Benchmark Mineral Intelligence (BMI) forecasts the graphite market could reach a deficit as early as this year, with the supply shortfall growing to 8 megatonnes (Mt) by 2040. BMI notes that to fill this gap, the mining industry would need to produce nearly eight times as much graphite as it does currently over the next 18 years.

Can This Company’s Near-Term Production Help Save The Situation?

The deficit challenges could put the spotlight on Ceylon Graphite TSX, a company involved in the exploration and production of graphite in historic resource jurisdictions in Sri Lanka.

The company says it holds a land package consisting of 121 km² of grids containing historic vein graphite deposits. These unique and comparatively higher margin vein (lump) deposits currently make up less than 1% of the world’s graphite production.

According to Ceylon Graphite, its exploration grids represent the majority of known historic graphite resources in Sri Lanka. The relevant areas in which these grids reside have previously had historical production dating back to the 1920s and 1930s.

Highest Grade Graphite In The World? 

Here is a quick look at the advantage Ceylon Graphite says it brings:

• Natural vein graphite: Above 90% high grade in the ground. 
• 121 square km — exclusive exploration mining licenses with Sri Lanka’s Geological Survey and Mines Bureau (GSMB). 
• Diverse applications: Li-Ion batteries, energy storage, coatings.
• Initial battery tests outperform synthetic graphite and flake graphite.

The nearest-term graphite producer also reports it runs an environmentally friendly mining process:

• Vein graphite with very high grade with 92% to 97% graphitic carbon (Cg) purity out of the mine
• No conventional primary processing required, so no tailings ponds, no acid mine drainage issues and no waste rock dumps 
• Small surface footprint
• Minimizes ecological impact

Ceylon Graphite believes its high purity vein graphite is ideal for energy storage and is also suitable for anode coating in lithium-ion batteries with high energy density. 

All eyes could be on Ceylon Graphite as it says it has free cash flow generation in sight with lithium investors moving into graphite.

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