A quick note on #Graphite

The other half of a Li-ion Battery

There has been huge interest in lithium in the last 18 months. The price of lithium has shot upward and shares in lithium explorers and developers have rocketed. The Chinese have been buying lithium producers and near producers for silly amounts of money.

At the other end of a Li-ion battery, the battery used to power electric vehicles, is the graphite anode, representing 40-50% of the materials used in a Li-ion battery. Two things to know about battery graphite anodes, 1) a lot of the graphite used presently is “synthetic” graphite made from petroleum coke using an process so environmentally toxic that even the Chinese are scaling back production, 2) virtually all graphite anodes are made in China.

In the next few weeks I will be doing a deep dive into graphite, Li-ion batteries and EVs.

The reality is that natural graphite is becoming the preferred anode material both because the Chinese supply of synthetic graphite is shrinking and because, by no stretch of the imagination can synthetic graphite be rated “green”.

My own book holds three graphite companies: Gratomic (GRAT.V), Ceylon Graphite (CYL.V) and Canada Carbon (CCB.V). I fear, following the death of its founding CEO, Bruce Duncan, CCB is going through a fairly rough restructuring and it will take a while to really snap back into business.

GRAT and CYL are both going concerns. Both are developing very different vein graphite deposits, GRAT in Namibia, CYL in Sri Lanka.

GRAT has one, very large, vein graphite deposit, a mill, offtake agreements and is in “ramp up” production. CEO, Arno Brand, is Namibian by birth and has huge ambitions for the company including a joint venture to spheronize the vein graphite the company produces. I will go into detail in a later post but spheronization adds huge value to the already valuable vein graphite.

CYL, has a set of almost artisanal mines in Sri Lanka. Using very primitive equipment, its miners chase rich veins of graphite deep into the ground. New CEO Don Baxter is a Canadian mining engineer who is looking at ways to modernize the mining operations and to increase the number of these small operations. The current troubles in Sri Lanka are a concern, but CYL’s share price has remained steady at around $0.20.

My overall investment thesis is that graphite demand will soar in much the same way as lithium demand has. I looked for companies which had an edge and having vein graphite is a big edge. (I’ll talk about flake vs vein graphite in a later post.) I also wanted companies which were not facing a huge CAPEX in order to mine their graphite. Both GRAT and CYL have already raised and spent the money required to get into production. In choppy markets this is a huge advantage.

CYL is trading about where it was a year ago - which in the current junior market is a win. GRAT had a crazy, but fun, run up in July 2021 and touched $1.68. It has fallen back to Earth and is now trading at $0.48. Both are worth a careful look.

[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.

I currently own shares in $GRAT.V and CYL.V which I intend to hold but which I may sell at any time.]