Graphite has enjoyed investor interest in recent years thanks to expected growth in demand for electric vehicles. However, China is the top producer of graphite by a long shot, and it’s not particularly easy — or desirable — to invest in companies mining graphite there.
Many investors are instead looking to North America for graphite opportunities, especially since Tesla’s (NASDAQ:TSLA) announcement that it plans to source the lithium, graphite and cobalt it needs for its Nevada-based 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.
But while investors are keen to take stakes in North America-focused graphite companies, there are very few companies actually producing graphite in the region. In fact, in 2016 only two North American countries produced any graphite at all — Canada put out 21,000 MT of the metal, while Mexico produced 22,000 MT. The US produced none at all.
For those reasons, market watchers are 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 may be next.
Graphite mining in the US: Lack of supply
Graphite is deemed a critical material by the US, and about a century ago it was mined abundantly in the country, 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 2016, 98 US firms consumed 24,200 tons of natural graphite valued at $25.6 million.
Total imports for that year stood at 39,500 tons of natural graphite — of that amount, 70 percent was flake and high-purity graphite, 29 percent was amorphous graphite and 1 percent was lump and chip graphite. The US’ main sources of graphite for the year were China (34 percent), Mexico (33 percent), Canada (18 percent) and Brazil (7 percent). The other 8 percent was derived from various other sources.
The US mainly used that graphite in brake linings, foundry operations, lubricants, refractory applications and steelmaking.
Graphite mining in the US: Demand rising
Demand for graphite was once closely tied to steelmaking and manufacturing, but is now more closely associated with the production of lithium-ion batteries. Interestingly, these batteries actually contain 10 to 30 times more graphite than lithium.
Tesla’s gigafactory and policy of sourcing the materials it needs from North America is playing a significant role in driving demand for US-produced graphite. The company is planning to add an additional two or three factories in the US in the coming years, and a multitude of manufacturers are following suit with up to 12 gigafactories planned for 2020 throughout the world.
Another potential graphite demand source is the US government. In 2015, the US Department of Defense released its Strategic and Critical Materials 2015 Report on Stockpile Requirements. and its shortfall materials list includes graphite with a shortfall of 82,612 MT. While more recent reports show no graphite shortfall, the report illustrates the importance of US-produced graphite when it comes to national defense.
It’s important to note that graphite demand changes based on the type of graphite. Flake, amorphous, vein and synthetic graphite differ in their uses, and when it comes to the emerging battery market, graphite sources also have to be high in purity.
Graphite mining in the US: Companies exploring
It’s clear that while graphite mining in the US is not happening right now, the country recognizes that it’s something that needs to occur. Even so, currently there are not very many companies targeting graphite mining in the US.
One example is Graphite One Resources (TSXV:GPH). The company is focused on its Graphite Creek deposit, which it bills as North America’s largest-known flake graphite deposit. Graphite Creek is located in Alaska, and consists of 200 mineral claims covering 9,600 hectares. According to Graphite One, it “controls all prospective lands with known graphite mineralization in the region.”
Graphite One has branded the graphite at Graphite Creek as “STAX graphite” in recognition of its four distinguishing features — the company says graphite at the deposit is Spheroidal, Thin, Aggregate and eXpanded, making it advantageous for use in lithium-ion batteries.
The company released a resource estimate for Graphite Creek in 2015, and put out a preliminary economic assessment (PEA) for the project earlier this year. It plans to proceed to a feasibility study, and in the last few months has begun narrowing down its list of potential sites for a refinery; it closed a non-brokered private placement for gross proceeds of $678,800 in July.
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 the company says both are “within the heart of a previously producing region.”
Additionally, Alabama Graphite has been working this year on the research and development of its proprietary manufacturing and technological method for battery materials processing. Most recently it succeeded in producing silicon-enhanced coated spherical purified graphite for use in lithium-ion 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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This is an updated version of an article originally published by the Investing News Network in 2015.
Securities Disclosure: I, Sivansh Padhy, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Graphite One Resources is a client of the Investing News Network. This article is not paid-for content.