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➤ Russia's invasion of Ukraine has driven up the price of petroleum coke used in synthetic graphite production, accelerating a shift to natural graphite by battery makers.
➤ Graphite developer Evolution Energy Minerals Ltd. will target the growing European market as China, which currently dominates the graphite supply chain, is already well-supplied.
➤ Environmental, social and governance experience drove the company to look further downstream instead of focusing on mined graphite production.
Evolution Energy MineralsEvolution Energy Minerals, which listed on the ASX in November 2021, aims to start construction of its Chilalo graphite project in Tanzania in the second half of 2022 before starting production in the first half of 2024. It is also considering going downstream to produce battery anode material, expandable graphite, micronized graphite and graphite foil.
Executive Director Michael Bourguignon oversaw the construction of Syrah Resources Ltd.'s Balama project in Mozambique — the first producing graphite mine to be built outside China in 20 years — as capital project manager. Bourguignon has been managing Chilalo's project development and on-the-ground activities in Tanzania since January, among other projects.
S&P Global Commodity Insights interviewed Bourguignon on the lessons learned from the Syrah experience for global graphite developers, how it helped form the drive to go further downstream, and the future evolution of the graphite market given recent geopolitical events. The following is an edited transcript of the interview.
S&P Global Commodity Insights: Evolution Energy Minerals' Managing Director Phil Hoskins told an industry conference on April 6 that fine flake graphite prices had risen 30% over the last six months, and more sharply in the past month. How much of that is sentiment versus on-the-ground reality?
Michael Bourguignon:
Commodity prices rising in general at a time of conflict is largely emotive. People assume supply chains or transport corridors could be interrupted, which in turn could affect operational stability. It creates hypothetical uncertainty around future disruptions, particularly if people assume such conflict can escalate and interfere with shipping routes etc.We have become aware that BTR New Material Group Co. Ltd., a major Chinese cathode and anode materials manufacturer for lithium-ion batteries, is seeking new natural graphite supply as a result of rising petroleum coke prices stemming from the Russia-Ukraine war. Petroleum coke is a key input to synthetic graphite, which is a competing product to natural spherical graphite in lithium-ion battery anodes. In general, battery manufacturers are moving to natural away from synthetic due to natural being cheaper and a much lower carbon footprint.
While continued growth from lithium-ion batteries and economic recovery from COVID-19 restrictions is aiding graphite demand, the real driver in the past six months is supply restrictions. China controls 75% of flake graphite supply, predominantly from the northern Heilongjiang province which experiences seasonal downturns in winter, which were exacerbated this year by power shortages to coal-fired power, government-imposed environmental shutdowns, and shutdowns for the Beijing Winter Olympics.
This price increase and reliance on China is why western economies list graphite as a strategic critical mineral, and why a substantial deficit of sustainably produced graphite is coming for highly regulated western battery manufacturers.
Given facilitative policies in Europe such as its battery passport system, do you expect to sell much of your graphite into that market, or is China still the main game?
China remains the largest global graphite consumer given its historical dominance of the milling/purification process to produce battery precursor material. However, China is already reasonably well-supplied with fine flake graphite from domestic sources. China, and indeed the world, is lacking coarse flake graphite supply. Regarding fine flake for batteries, Europe has a well-publicized issue in securing the raw materials to meet its growing battery industry.
Evolution is targeting Europe for fine flake and, subject to the successful conclusion of our current anode program, we intend to provide a mine-to-coated-anode supply chain utilizing thermal purification as opposed to highly toxic hydrofluoric acid.
The plant at Syrah Resources' Balama graphite project in Mozambique, in which Michael Bourguignon was a key player.
What lessons have you learned about building graphite mines outside China?
The main lesson learned is to understand the market, and where your product fits into the market. Not all graphite is suitable for use in battery anode material, and similarly not all graphite is suitable for expandable graphite and graphite foils. It's a sensible strategy across any commodity. Knowing where your material is most suited allows you to come up with the most appropriate process design and play to your deposit's strengths.
How much of that experience has led you to see benefit in Evolution Energy Minerals looking to move downstream to anodes, expandable graphite and graphite foil?
My experience across several commodities, particularly with the focus on ESG, has led to that strategy. Evolution Energy Minerals could easily sell typical fine and coarse flake graphite concentrate and due to the leading flake size distribution, it would be a financially sustainable business. But the number of end-users of graphite products who want a traceable, carbon neutral supply chain is increasing.
Recognizing what the end-users want, and what they are willing to pay for it is vital. Companies that have experienced long-term success in the graphite market like Imerys SA, Asbury Carbons Inc. and Superior Graphite Co. have diverse downstream strategies. The three things required for downstream success are an understanding of the market including customers and specifications, having access to the technology, and the customers having determined the suitability of the flake graphite.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.
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