Battery Metals

Graphite Investing

The ability to produce flake graphite concentrate that can be converted into spherical graphite is becoming increasingly important for graphite-focused companies.

Independent third parties have been able to manufacture spherical graphite using flake graphite concentrate from Energizer Resources‘ (TSX:EGZ,OTCQX:ENZR) Madagascar-based Molo project. According to the company, that spherical graphite meets “all specifications and quality requirements for battery anode material production.”
A company release put out Thursday states that testing was completed by a leading Japanese manufacturer of battery anode material and a leading European supplier of spherical graphite for electric vehicles. Both tested 20-kilogram samples of flake graphite concentrate from Molo; they contained material from -200 mesh (small and fine flake) to +32 mesh (extra large and jumbo flake). All in all, the third parties “confirmed to Energizer that the Molo concentrate showed very good potential compared to their respective current suppliers.”
Commenting positively on the news, Craig Scherba, president and CEO of Energizer, said, “[w]e are pleased to have highly reputable, third-party validation that our Molo concentrate can be manufactured into high-quality spherical graphite for electrical vehicles. This positions Energizer well for this burgeoning market.”

Spherical graphite key

The ability to produce flake graphite concentrate that can be converted into spherical graphite is becoming increasingly important for graphite-focused companies. That’s because spherical graphite is a crucial ingredient in lithium-ion batteries — and as anyone who’s been watching the critical metals space well knows, that’s an arena that’s expected to see increased demand in the coming years as electric vehicles become more widespread.
And indeed, Energizer is not the only company keen on producing spherical graphite. Just last week, Triton Minerals (ASX:TON) made a similar announcement, noting that initial laboratory tests have confirmed that spherical graphite can be produced from flake graphite concentrate from its Nicanda Hill project in Mozambique. Both companies are clearly looking to the future and realizing that succeeding in the graphite market will ultimately require creating value-added products like spherical graphite.

The hunt for financing

Of course, financing is a key issue for Triton, and the same can be said for Energizer. In fact, in a note released Thursday, David Talbot of Dundee Capital Markets states that reducing financial risks is key for the company. “Financing will likely be the main issue from here on out, and may be the reason for any slippage in development time horizons,” he said. His firm believes Energizer may require over US$200 million in order to cover capex and working capital for Molo.
That might sound negative, but it’s important to note that Dundee doesn’t see financing as a challenge because Molo is a bad project. Rather, Talbot sees current graphite market dynamics as the main issue in terms of financing. He states in his note that “[t]here isn’t much room today for new graphite material,” though he adds that circumstances could change by 2017. Molo he is positive on, and lists a number of its good attributes, including its relative closeness to production and its proximity to both Asian and European markets.
Talbot concludes by commenting that the solution to Energizer’s funding needs may be an offtake agreement or strategic partnership. “A significant off-take may be required — initial discussions with potential debtors indicate that this will likely be needed to secure financing,” he states. Encouragingly, he believes Energizer is on the right track to securing such agreements, noting that the “seemingly endless studies testing the suitability of Molo as a high quality spherical graphite source are an important step” — essentially, he believes that such studies are helping add value to Molo and thus Energizer.

Next steps

Energizer states in its release that based on Thursday’s results, it is now qualified to move on to the next stage in product analysis. That “will include additional bulk-sample testing stages down each of the company’s respective customer supply chains.” The company is currently sorting out timelines and logistics for these stages with both third parties.
At close of day Thursday, Energizer’s share price was flat at $0.055. Dundee has a “buy” rating on the company and a price target of $0.40. For investors confident in the company and its project, now could be a buying opportunity.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Energizer Resources is a client of the Investing News Network. This article is not paid-for content.
Related reading:
Energizer Resources Reaches Milestone with Molo Deposit Feasibility Study
Energizer Resources: Molo BFS a Catalyst for Advancing Offtake Agreements

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