Given the growing expectations of a graphite supply crunch, it’s no surprise that investor interest in the metal is rising. However, China is the top producer of graphite by a long shot, and it’s not particularly easy — or indeed desirable — to invest in companies mining graphite there.
Instead, many investors are looking to North America for graphite investing opportunities, particularly since Tesla Motors’ (NASDAQ:TSLA) announcement that it plans to source the lithium, graphite and cobalt it needs for its gigafactory from companies working on the continent. In 2015, Tesla backed up that statement by signing two lithium supply deals with companies whose projects are in North America, and that has only strengthened interest in the area.
But while investors are keen to take stakes in North America-focused graphite companies, the fact remains that very few companies are producing graphite there. In fact, in 2015 only two North American countries produced any graphite at all — Canada put out 30,000 MT of the metal while Mexico produced 22,000 MT. Meanwhile, the US produced none at all.
Market watchers are thus understandably wondering whether North American graphite production is set to rise, and in particular whether graphite mining in the US will ever happen. On that note, here’s a look at the history of US graphite production and what the country may do in the future.
Stats on graphite mining in the US
Graphite is deemed a critical material by the US and other countries, and about a century ago it was mined abundantly there, mostly in Alabama. A New York Times article states that in 1916 the country produced 10.9 million pounds of crystalline graphite, while in 1917, it put out 2,622 tons of amorphous graphite.
However, according to a report from the US Geological Survey, graphite mining in the US has long since stagnated. In fact, the metal has not been mined in the country since 1990, when United Minerals suspended operations at its graphite mine in Montana.
As a result, the US now imports all of the graphite it requires. In terms of exactly how much the country needs, another US Geological Survey report states that in 2015, 90 US firms consumed 54,400 MT of natural graphite valued at $50.7 million.
Total imports for that year stood at 65,900 MT of natural graphite — of that amount, 65 percent was flake and high-purity graphite, 34 percent was amorphous graphite and one percent was lump and chip graphite. The US’ main sources of graphite for the year were China (38 percent), Mexico (32 percent), Canada (18 percent) and Brazil (6 percent). The other 6 percent was derived from various other sources.
The US mainly used that graphite in brake linings, foundry operations, lubricants, refractory applications and steelmaking.
A growing need for graphite
The above statistics indicate that the US seems to be meeting its graphite needs despite the fact that it does not produce the metal. However, the country has made clear that it’s not satisfied with the status quo, and — as mentioned — considers graphite a critical material.
Case in point: in its Strategic and Critical Materials 2015 Report on Stockpile Requirements, the US Department of Defense includes graphite on its list of shortfall materials, identifying a gross shortfall of 82,612 MT. Of the metal, the report states, “[o]ne key sub-segment of the market for graphite is in high demand whilst supply adequacy is uncertain.” Specifically, it identifies lithium-ion batteries and expandable graphite as applications that require “top quality flake graphite.”
What’s more, the report appears to recognize that the US may not always be able to get its graphite from the sources it currently uses. “Demand for top quality natural flake graphite has led to recent exploration activity mainly in Canada but exploration often fails to result in production,” it states.
And while the report does note that synthetic graphite and organic composites could be used as substitutes for natural graphite, it cites “[i]ncreased costs” and the lengthy production process for synthetic graphite as issues with both of those plans.
Companies targeting graphite mining in the US
It’s clear that while graphite mining in the US is currently not happening, the country recognizes that it’s something that needs to occur. In that vein, there are a number graphite companies targeting graphite mining in the US.
For example, Graphite One Resources (TSXV:GPH) is focused on the Graphite Creek deposit, which it bills as North America’s largest-known flake graphite deposit. Graphite Creek is located in Alaska, and consists of 129 mineral claims covering 6,799 hectares. According to Graphite One, it “controls all prospective lands with known graphite mineralization in the region.”
Significantly, TRU Group’s Stage B Report on Graphite Creek from April 2016 shows that mineralization at the project has “distinguishing features can be described as Spheroidal, Thin,Aggregate and EXpanded, or STAX. On March 17, 2016, Graphite One announced it had completed the first three phases of a five phase exploratory product development program to produce carbon-coated spherical graphite. Testing achieved a minimum purity level of 99.98+ percent Cg in three samples totaling 3,000 grams.
On July 15, 2016, the company announced its intention to complete a non-brokered private placement offering to raise gross proceeds of up to $1 million.
By the end of the year, the company raised over $2.8 million in new financing, exceeding their initial target of $2.4 million. As a result Graphite One conducted a comprehensive product development program.
Alabama Graphite (TSXV:ALP) is another company aiming to bring back graphite mining in the US. It holds two flake graphite projects in Alabama: Coosa and Bama. Respectively, they are in Coosa County and Chilton County, and according to the company both are “within the heart of a previously producing region.”
“The pilot plant results have demonstrated that the Coosa Graphite Project holds the potential to produce a high-carbon concentrate, across all flake sizes, from mechanical means – without chemical or thermal treatment,” said Alabama president and CEO Don Baxter in a statement. “More importantly, however, is that the graphite concentrate produced is well suited for our secondary processing to produce specialty CSPG graphite.”
On July 18, 2016, the company announced the execution of six non-disclosure agreements with the US Department of Defense lithium-ion battery solution providers for coated spherical graphite samples.
At the end of the year, Alabama provided graphite product samples to Stanford University to work on the development of large-scale aluminum batteries.
Certainly, those interested in graphite mining in the US will be keeping a close eye on both of these companies.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Graphite One Resources and Alabama Graphite are clients of the Investing News Network. This article is not paid for content.
This article was originally published by the Investing News Network on September 23 2015.