HardAssetsInvestor

Written by Tom Vulcan  |

May 23, 2012

Un-Hyping Graphite With Basic Facts For Investors

Details

While much of graphite’s interest comes in the form of future expectations, we offer some basic facts and fundamentals of what many see as the ‘next big mineral thing.’

 

Since so much of graphite’s hype is based on conjecture — bullish projections for the future production of electric and hybrid vehicles, the successful commercialization of graphene, the growth in the number of pebble bed nuclear reactors (PBNRs) — it is perhaps worth standing back and looking at what graphite is currently all about.

Graphite Basics

Some of the characteristics of graphite that set it apart as an extremely useful industrial mineral are:

• Absorbs radio waves
• Chemically inert
• Flame retardant
• Good electrical conductivity; unique as a non-metal in this capacity
• Good machinability
• High absorption of gases and vapors
• High compressive strength
• High conductivity as a solid; low conductivity as porous foam, cloth and tape
• High melting point
• High moderating ratio
• High radiation emissivity
• High resistance to chemical attack and corrosion
• High resistance to erosion
• High resistance to thermal shock
• High thermal and electrical conductivity
• Low coefficient of thermal expansion
• Low friction; self-lubrication
• Power to bulk neutron absorption coefficient
• Stability and strength at high temperatures (up to 4,500° F in non-oxidizing atmospheres)
• Stiffness of solid; flexibility of filament, cloth or tape

 

Source: Archer Exploration Limited

 

Aside from synthetic graphite, there are three different types of naturally occurring graphite, all of which occur in metamorphic rocks: amorphous, flake/crystalline flake and vein/lump.

 

	Amorphous	Flake/Crystalline Flake	Vein/Lump
Abundance	Common	Less Common	Rarest
Carbon Content	70-85%	85-90%	90-96%
Price	Cheapest	≤ 5x price of amorphous	Most expensive
Physical Characteristics	Small crystals	Larger crystals, separate flakes	Solid lumps

 

 

 

Where To Find Graphite?

There are graphite mines dotted around the world, with China, India, Brazil and North Korea reported, by the USGS, as the major graphite producers in 2011.

 

Graphite Mining Producing Countries in 2011

Sources: Data – USGS; Image – Matthew Brett, Substance

 

And How Much?

Unlike the rare earths, graphite (all types taken together) is produced in somewhat larger quantities.

 

Global Graphite Production – 2006-2011 (’000s Tonnes)

Source: USGS

Notes: a) 2011 figures are estimates; “Other” countries include b) Austria, Czech Republic, South Korea, Sweden, Turkey, Uzbekistan and Zimbabwe; c) figures for both India and Turkey are run-of-mine

 

Graphite Output

Source: Industrial Minerals

 

 

 

Big Producing Countries

China

China is by far the largest producer of graphite (amorphous, 55 percent; flake, 45 percent) in the world; hence the perceived supply-restraint issue (drawing a comparison with rare earths) for a number of people, particularly in the U.S.

That said, according to the USGS, from 2007-2010, the U.S. only obtained 51 percent of its graphite imports from China, with the rest coming from Mexico (20 percent), Canada (19 percent), Brazil (6 percent) and others (4 percent).

According to an excellent map of the world titled: Natural Graphite 2012: Production & Exploration produced by Industrial Minerals, the lay of the land in China was:

Province	Type	Production	Capacity	Major Producers
Shanxi	Flake	50	60	2
Inner Mongolia	Flake	20	60	2
Heilongjiang	Flake	250	250	9
Heibei	Flake	10	10	1
Shandong	Flake	75	90	3
Henan	Flake	15	15	1
Hunan	Amorphous	550	700	>200
Hubei	Flake	-	28	2

Notes: Production/Capacity: ’000 tonnes

 

Industrial Minerals did, however, report in May that the Chinese government was undertaking a huge consolidation of the various amorphous graphite producers in Hunan province. It is expected that only about 20 producers in the province are likely to survive.

 

India

As the second-largest producer of graphite in the world, India produces both amorphous and flake graphite, but the run-of-mine production only contains, on average, just 10 percent fixed carbon. So in order to become marketable, it has to undergo considerable beneficiation.

In the years 2009-2010, there were some 30 graphite mines in India, of which 29 were private sector. Tamil Nadu Minerals Ltd. was the only public-sector miner of graphite.

They were to be found in:

	Number of Mines
Jharkhand	9
Odisha	19
Tamil Nadu	2

 

Eight principal producers accounted for 85 percent of the output for the period, with 69 percent of production coming from just four mines, each producing more than 5,000 tonnes. Tamil Nadu accounted for 48 percent of production, with the remaining two states contributing 26 percent each.

Among the major private-sector graphite (all flake) producers (all privately held) were the following:

• Agrawal Graphite Industries
• Chotanagpur Graphite Industries
• G.R. Graphite Industries
• Lakshminarayan Makhanlal Co.
• Parijat Mining Industries (India) Private Ltd.
• T.P. Mineral Industries

 

 

 

Brazil

In Brazil, currently the two largest graphite producers (all private companies) are:

• Extrativa Metalquímica, owned by FASA Participações S/A, with operations in the south of Bahia State
• Nacional de Grafite, which describes itself as “the world's largest company producing natural crystalline graphite” with “an annual average output of 40,000 tons of concentrated natural crystalline graphite,” with three production plants in Minas Gerais State.

 

Both companies produce flake graphite. In the past, Grafite MG in Minas Gerais has also been a significant producer of graphite.

 

Canada

The largest graphite (flake) producer in Quebec, Canada, is TIMCAL Graphite & Carbon, part of Paris-based Imerys. Another, much smaller, Canadian graphite producer is Eagle Graphite out of British Columbia.

 

Sri Lanka

Sri Lanka is the home to the only vein/lump graphite (the highest quality — and value — type of graphite) in the world. Bogala Graphite Lanka Plc. is owned by the German company Ms Graphit Kropfmühl AG (GK), itself part of Advanced Metallurgical Group N.V.

 

Uses Of Graphite

Although there is much being written not only about graphene but also about the use of graphite in both pebble reactors and lithium ion batteries for electric vehicles and hybrids, one current estimate is that “the battery industry accounted for less than 5 percent of natural graphite demand in 2011.” And, it would also appear, battery manufacturers currently favor synthetic graphite, albeit significantly more costly, over natural graphite.

And as for pebble reactors, we hear from one writer on graphite that China has one already and has “firm plans to build 30 by 2020” and that “[i]t is estimated that each PBMR requires 300 tonnes of graphite at start up and 60-100 tonnes per year to operate.” And yet, from another, we learn that “pebble bed nuclear reactors … require 3,000 t of graphite to start and 1,000 t a year to operate.” Hmmm: an order of magnitude difference between the two.

So, aside from what its uses (and, of course, one shouldn’t forget either fuel cells, or vanadium redox batteries) might be in the future, graphite is currently, much less excitingly, used globally in:

Source: Industrial Minerals

 

And in the U.S. in 2011:

 

Source: USGS

 

 

 

Prospects For Investing In Graphite

If you are happy with risk and are bullish about the future of electric and hybrid vehicles, pebble bed nuclear reactors, vanadium redox batteries and, of course, graphene (will its development really affect demand that much?), then there are certainly a number of juniors, with more bound to appear, in this “space” to choose from.

When Technology Metals Research last updated its TMR Advanced Graphite Projects Index on April 10, it described it as containing: “7 advanced graphite projects, associated with 8 different companies and located in 3 different countries.” And all but two of these companies had some sort of stock market quotation. Unfortunately, since none of the more established and already-producing graphite-mining companies is quoted, pure-play graphite miners will necessarily be juniors, whatever the stage of their development.

In the meantime, for those who want to keep an eye on what’s being talked about in the sector, there are a number of websites dealing (wholly, or in part) with graphite; for example, Graphite Blog and the graphite section of Industrial Minerals.

Perhaps, though, one of the most interesting aspects of the developing graphite story — if it continues to develop — will be where new graphite deposits are developed, and as importantly, with the rise in awareness in many countries of the worth of their natural resources, the attitudes of the governments in those countries in which these deposits are developed.

This could be of particular significance if undeveloped resources in, for example, Angola, Ethiopia, Mozambique, Namibia, South Africa, Tanzania and Uganda are targeted for development. Many of these either have been or are actively reviewing just how they develop their natural resources to the greatest advantage of their peoples. One question will be whether their “management” of such development will cover just “mega” projects or stretch to cover smaller, junior-lead, projects.

 

Afterword

For anybody looking at graphite, it is vital to remember:

• Graphite comes in a variety of forms and some are worth more than others
• China does not have specific export quotas covering graphite
• The environmental risks associated with graphite extraction are not akin to those associated with rare earths
• For mines, infrastructure — particularly transport — is a very import
• Spectacular increases in demand will only be associated with both a spectacular improvement in the global economy and the significant adoption, in particular, of both electric and hybrid vehicles using lithium ion batteries

 

Resources

Indian Bureau of Mines

Industrial Minerals

Roskill Information Services

United States Geological Survey (USGS)