What are Graphite Stocks?
Graphite stocks are the companies that own and operate graphite mines across the world.
Graphite is a soft and greyish-black mineral crystal that often occurs in the form of carbon. A good conductor of electricity and heat, graphite is the best raw material for producing electrodes, solar panels, and batteries. Graphite is also used extensively in steelmaking, lubricants, and refractory applications largely due to it being relatively non-reactive and having a low gravity.
On Graphite Supply & Demand
In 2020, the United States consumed 41,000 metric tonnes of graphite, valued at $21 million. Of the total imports, 71% was pure graphite, 28% was amorphous graphite, and 1% was lump and chip graphite. The top four major importers of graphite to the United States are China (33%), Mexico (23%), Canada (17%), and India (9%).
The graphite demand and consumption in the United States have been fluctuating since 2015. Here is how the graphite consumption fluctuated between 2015 and 2019:
The consumption decreased by 39% and 30% in 2015 and 2016, respectively
The consumption increased by 54% and 59% in 2017 and 2018, respectively
The consumption decreased again by 14% in 2019
The supply-side issues of graphite are still persistent in America. North America (Canada and Mexico) produced 2% of the total global graphite supply last year. Graphite hasn’t been mined in the United States since 1990, when United Minerals suspended operations at Montana’s graphite mine. Today, the country imports all the graphite it needs to meet domestic demand.
To reduce the dependency on imports, graphite mining companies are exploring and developing projects in Alabama and Alaska. However, these projects are still in the early stages of exploration. Supply-side issues in the United States may continue to exist due to relatively small domestic recoverable graphite resources.
The future of graphite looks bright as it is the vital raw material for producing lithium-ion batteries for electric vehicles. In fact, lithium-ion batteries use up to 30 times more graphite than lithium. Since electric vehicles are expected to replace automakers’ traditional vehicles by 2035, the demand for graphite would grow significantly in the medium to long term. Forecasts indicate that lithium-ion batteries may consume over 4.5 million tons of graphite per year by 2050, a 318% increase from the total graphite production capacity in 2019.
Another major source of demand for graphite is the U.S. Department of Defense, which uses high-density graphite to make nozzle throats and chokes in both missiles and rockets.
Investors may be interested in graphite miners and stocks for the following reasons:
Anticipated consistent demand for graphite in the lithium-ion battery market
U.S. Defense Department’s stockpile
Diverse use cases of graphite product lines
Fuel-cell applications that could consume huge amounts of graphite in the future
Risks of Investing in Graphite Mining Stocks
The graphite mining business is complex and cost-oriented. It may take up to several years and millions of dollars to explore the mineral resources. Though deposits are found, they may not become economically feasible graphite-producing mines. Investing in graphite mining companies that are still in their early stage of exploration can be risky. Retail investors may need to understand and embrace the following risks before investing in graphite mining stocks:
Geopolitical factors of the location where mines are located
The long production lifecycle
Stringent regulations and laws
Capital intensive as mining companies need to constantly infuse capital to explore mines
Liquidity risk: Most graphite mining stocks are traded in over-the-counter (OTC) markets. Investors may find it very difficult to sell their investments at a fair value.
Legislative risk: The legislative risk is very high for stock market investments in graphite mining companies because the industry is vulnerable to the government’s actions, policies and regulations. The risks may arise in the form of antitrust laws, taxes, and environmental regulations.
Graphite Mining Companies to Keep an Eye On
There are several graphite mining companies in the world, but most of them aren’t worth considering. We have chosen the top three graphite mining companies to closely monitor and consider adding to your portfolio.
Mason Graphite (OTCMKTS: MGPHF)
Graphite One Resources, Inc. (OTCMKTS: GPHOF)
Syrah Resources, Ltd. (OTCMKTS: SYAAF)
All data and figures are according to the date of publication.
1. Mason Graphite (OTCMKTS: MGPHF)
Mason Graphite is a mining and mineral processing organization headquartered in Quebec, Canada. The company owns the Lac Guéret Graphite mine that has 25 years of project life. A feasibility study conducted on this project in 2015 indicated that it has mineral reserves of 4.7 million tons grading 27.8% Cg (total carbon in graphite form). The mineral reserves comprise 1.317 million tons of graphite. The average production cost of Lac Gueret is as low as $483 per ton of graphite concentrate. The production cost may go down 20% further if the organization can achieve economies of scale by increasing the production capacities and operational efficiencies. With current capabilities, Mason is positioned to produce 51,900 tons of graphite per year from the Lac Gueret Graphite Project.
Mason looks more attractive after the announcement that it would purchase 66.67% of Black Swan Graphene, a patented graphene processing technology from Thomas Swan.
This transaction may help Mason Graphite in two ways:
It gives access to strategic assets related to the graphene processing technology
It enables Mason to seek production and commercialization expertise and subject matter experience from Thomas Swan
You may keep this Canadian company on your watchlist because of the longevity of the Lac Gueret Graphite Project and the huge potential for commercial application of graphene technology to enhance the performance of lithium-ion batteries.
2. Graphite One Resources, Inc. (OTCMKTS: GPHOF)
Graphite One Resources, Inc is a Canadian graphite mining organization that produces high grade Coated Spherical Graphite (CSG) through its Graphite One Project. This project aims to mine, process, and manufacture high-grade CSG that helps to enhance the efficiency of lithium-ion batteries. It also trades on TSX Venture Exchange (TSX-V) with the ticker name GPH.
Graphite One Resources has been actively engaged in exploring large-flake graphite deposits on the Seward Peninsula in western Alaska since 2011. The project is named Graphite Creek Property. The organization drilled over 10,000m through six exploration programs between 2012 and 2021. The preliminary feasibility study of this project is underway. If this project materializes, Graphite One Resources may become the dominant player in the American graphite mining industry.
Graphite One Resources can be a perfect stock for your mining and metals portfolio because of its mining projects like Graphite One Project and the Graphite Creek Property.
3. Syrah Resources Ltd. (OTCMKTS: SYAAF)
Syrah Resources Ltd is an industrial minerals company headquartered in Melbourne, Australia. It is engaged in two notable projects, including Balama Graphite in Mozambique and Vidalia Battery Anode Material Project in the United States.
With over 50 years of project life, Balama Graphite has 1,422 million tons of mining resources as of December 2019. This project enables the organization to participate in the long-term growth story of electric vehicles. Syrah aims to become one of the largest natural graphite Active Anode Material (AAM) producers in the world by 2030. The organization would produce battery-ready AAMs for electric vehicles through Vidalia Project.
The strategic plans of Syrah are impressive. The organization is planning to vertically integrate both Balama Graphite and Vidalia to enhance the efficiency of the supply chain and gain a competitive advantage.
The vertical integration works in three steps:
The natural graphite concentrate is transported from Balama to Vidalia
The natural graphite is converted into high-purity graphite to produce Anode Precursor Material.
The Anode Precursor Material is then heat-treated to manufacture a finished AAM
Syrah Resources is a long-term investment opportunity whose success is closely associated with the rollout of electric vehicles. With the estimation that over 145 million electric vehicles will be on the road by 2030, Syrah has a huge potential to generate handsome returns for its investors in the long term.
More on Graphite Mining with WALLSTNOW
Several factors, including geopolitical issues, long mining production cycles, and stringent regulations, influence mining stocks. Investors also need to closely monitor the graphite pricing cycles as they move the stock prices of graphite companies. The top three graphite mining companies reviewed in this article have great projects in their pipeline. These companies could pay dividends by playing a huge role in the growth story of the renewable energy market.
Most graphite mining stocks are highly volatile and less liquid as they are trading in over-the-counter markets with low market caps. Investors may also look at investing in metals and mining exchange-traded funds (ETFs) listed on NYSE and NASDAQ that may generate better returns than the benchmark indexes over the long term.
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Disclaimer: All investments involve the risk of loss. Nothing on this website should be misconstrued as investment advice. Any reference to an investment’s historical or projected performance is not a recommendation or guarantee of profit or desired outcome.
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