As global markets become increasingly dependent on electricity and the batteries that store it, the demand for graphite will drastically increase as well. Brazil is one of the key players in supplying this demand.
The rise of electric vehicles (EVs) and the modernization of global industry means batteries are more important than ever before. As a result, the global battery metal market, valued at $11.3 billion in 2019, is expected to nearly double by 2027 at a compound annual growth rate (CAGR) of 8.2 percent from 2020 through 2027.
The global energy battery market continues to grow and the surge in initiatives for electrification drive the spike in demand for energy storage batteries. Despite the call for a transition towards green energy and the dependency of households on electric grids, the use of batteries still increases to patch up power interruptions. The installation of energy storage batteries in residential areas is expected to rise with a CAGR of 50.1 percent globally in the next seven years.
Mining and supply of battery metals such as graphite are essential in meeting this growing demand, and Brazil is a key location for such projects. Brazil is currently ranked as the third most important battery metals producing jurisdiction in the world. The growth potential in the region is enormous, driven by growing graphite demand for primarily nickel-metal hydride and lithium-ion batteries.
Lithium-ion batteries are a type of rechargeable battery found in everything from your cell phone to interplanetary space ships. It is the fastest growing and most promising battery chemistry and is essential for the growth of a technology-driven society.
In order for lithium-ion batteries to function, they rely on a graphite anode which actually constitutes the largest portion of the battery itself; 10 to 15 times more than actual lithium. In fact, a large EV battery requires around 75 to 115 kilograms of graphite for its lithium-ion anode.
Therefore, as global markets become increasingly dependent on electricity and the batteries that store it, the demand for graphite will drastically increase as well. Brazil is one of the key players in supplying this demand.
Graphite and electric vehicles: What you need to know
The rise of EVs is one example of an industry driving the battery production trend forward. According to market research, the global EV market size is expected to grow from 4,093 units in 2021 to nearly 35,000 in 2030, at an average CAGR of 26.8 percent. However, in order for these numbers to be realized, graphite will be expected to play a crucial role.
Automobile manufacturers like Volkswagen (ETR:VOW3) and Tesla (NASDAQ:TSLA) will need hundreds of gigawatt-hours to meet the sales targets forecasted in their business plans. Seeing as graphite is the dominant active node in all lithium-ion batteries, billions of dollars of investment will be required for new graphite mines and facility upgrades if demand is to be met.
EVs are just one of many industries in which battery metals play a key role. In a report from IEA on the role of critical minerals in clean energy transitions, demand for graphite alone will grow 25X by 2040 in order for clean technology development to be truly sustainable.
Battery metals exploration in Brazil
Brazil was hailed third in the world in terms of graphite mine production and reserves in 2020. The country’s mineral reserves also contain significant amounts of granite, iron ore, aluminum, manganese and other battery metals that continuously attract mining companies to explore its vast resource.
South Star Battery Metals (TSXV:STS,OTCQB:STSBF), formerly South Star Mining, boasts one of the most exciting new projects: the Santa Cruz Graphite Project located in Bahia, Brazil.
The Project consists of 13 approved exploration licenses covering approximately 13,000 hectares. In addition, it is also fully licensed and construction-ready to begin mining large flake graphite, with commercial production planned for Q4 2022. South Star’s Santa Cruz Project is projected to be the first new graphite producer in the Americas in more than a decade.
A recent staking rush between Anglo American (LSE:AAL) and Nexa Resources (NYSE:NEXA) resulted in over three million hectares being picked up in the Amazon rainforest of Mato Grosso and Para states, which have promising reserves of copper, bauxite, and other minerals.
Largo Resources (TSX:LTO) is another company to watch. They are focused on the production of vanadium flake, high purity vanadium flake, and high purity vanadium powder at the Maracas Menchen Mine in Bahia State, Brazil.
Emerita Resources (TSXV:EMO) has made a deal to earn 100 percent interest in the Salobro Zinc Project in Minas Gerais State, a well-serviced project with a high potential for quality zinc deposits.
Graphite production in Brazil
While China has historically dominated the graphite market, this increasing demand for the metal is boosting non-Chinese graphite projects around the world. Brazil is by far the largest producer of graphite in the Americas, nearly doubling the production of Canada, Mexico, and the United States combined.
Brazil is also home to the second largest flake graphite-producing district in the world. Flake graphite is natural graphite found when carbon material is subjected to high temperature and pressure. Almost every eco-friendly car or truck requires flake graphite to run, and it’s also found in fuel cells.
While private companies such as Extrativa Metalquimica and Nacional de Grafite have dominated the market until recently, the licensing and exploration of South Star’s Santa Cruz
Project means that investors can finally get a piece of the valuable Brazilian graphite market.
As 100 percent owner of the Santa Cruz Graphite Project, South Star Battery Metals has an excellent opportunity to be a major player in the global graphite industry.
Lithium-ion batteries are a cornerstone of our increasingly technological society, and without graphite the production of these rechargeable batteries is impossible. As a result, the demand for graphite is expected to increase significantly in the coming years. While China dominates the graphite production market, increased demand is boosting non-Chinese projects around the globe. Brazil, the largest graphite producer in the Americas, is one market for investors to watch closely as it is well primed to capitalize on the surging demand for graphite.
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