As the boundaries of technology continually expand, so does the demand for graphite. With uses developing and supply mainly controlled by China, prices for graphite should continue to climb, says Kevin Puil, senior analyst for the Encompass Fund and portfolio manager with San Francisco-based Malcolm H. Gissen & Associates. In this interview with The Critical Metals Report, Puil shares some junior miners set to soar alongside demand.
The Critical Metals Report: Over the last two to three years, your firm has had a lot of success with small-cap mining equities, especially those involving rare earth elements (REEs). Are you hoping to achieve similar success with small-cap graphite equities?
Kevin Puil: I am. Since I joined the firm three years ago, I've always tried to find great opportunities and put our fund and clients in a position to benefit from them. This is definitely the case with graphite companies.
TCMR: China controls the majority of the world's graphite supply and has implemented export quotas and duties. This has caused the price of graphite to more than double in some cases. Do you see more price pressure ahead?
KP: China definitely has a stranglehold on the global graphite supply, producing nearly 70% of the world's supply. Its 20% export duty, 17% value added tax and export licensing system should further tighten supply and drive prices higher.
TCMR: How do graphite plays differ from rare earth plays?
KP: Rare earths often involve large capital expenditure (capex) requirements and complex metallurgy. Graphite, on the other hand, is relatively simple to mine. It's an excellent electrical and heat conductor and shows up well on electromagnetic surveys, which offer an inexpensive way to explore for deposits. Most flake and amorphous graphite is found near the surface, reducing the risk and uncertainty involved in drilling deep deposits. This also shortens the time from discovery to production. A good deal of flake and amorphous graphite is mined using the open-pit method, which is also comparatively inexpensive. The majority of graphite is crushed, ground and floated, as opposed to rare earths, which are often refractory and need to be roasted at a high cost.
TCMR: What are the primary uses for graphite in manufacturing?
KP: Amorphous and lump graphite has long been used in refractories, steel, brake linings, lubricants and pencils. However, a lot of attention these days is being placed on flake graphite, which is sought after for its applications in new technologies like lithium-ion batteries, fuel cells, solar panels, pebble bed nuclear reactors and vanadium redox batteries. Less than half of the graphite produced is of the flake variety, and this, coupled with the increased demand for this essential mineral, has seen flake graphite command a much higher price than fine-mesh or amorphous graphite.
TCMR: Will new technologies drive growth in the graphite industry?
KP: Absolutely. Currently, there is no substitute for graphite in many technologies, such as lithium-ion batteries. Between cell phones, tablets, laptops, hybrid and electric cars, all of which require a lot of graphite, the industry is growing at 25%-30% annually. Large-scale uses include hybrid cars, which can require up to 40 pounds of graphite for the battery alone, while the new Boeing 787 Dreamliner's fuselage is made from a graphite composite. Vanadium redox batteries are used to store energy generated from wind turbines and solar panels and require up to 300 tons (t) of graphite per 1,000 megawatts of storage. This is all flake graphite. In addition, pebble bed nuclear reactors, which are slated to come online this decade, require 3,000 t of graphite to start and 1,000 t a year to operate.