There is little doubt that the lithium-ion battery — Li-ion for short — is a mainstay of the new technology-based world we live in. From smartphones, to electric vehicles, to home power storage and electrical-grid storage applications, Li-ion batteries are becoming ubiquitous.
“Unfortunately,” says Tyler Dinwoodie, Executive Vice President of Alabama Graphite Corp., (TSX-V: ALP) “the pervasiveness of Li-ion batteries has not yet served to enlighten investors about the Li-ion battery supply chain. In particular, there is a lot of misinformation and misunderstanding about natural battery-ready graphite”.
“The market hasn’t recognized the value of battery-ready graphite even though there is significantly more (more than 10 times, in fact) graphite in a Li-ion battery than there is lithium. Battery-ready graphite or more technically, natural coated spherical purified graphite (CSPG), is graphite concentrate that is purified to ≥ 99.95% Cg, micronized (sized), spheronized (shaped), and surface treated (carbon coated). CSPG comprises the anode in a Li-ion battery.”
“However, lithium has garnered a lot of attention, especially since Q4 2015, and many lithium junior exploration companies worldwide have experienced astounding (and in some cases, baseless) appreciation in their market capitalizations. The disproportionate emphasis on lithium may stem from something as simple as its namesake technology: the lithium-ion battery. This past summer, Elon Musk stated that Tesla’s lithium-ion batteries should be called ‘Nickel-graphite.’ More recently, the market’s focus appears to be shifting to cobalt — a byproduct of nickel and copper mining and smelting — and a minor but essential material in Li-ion battery cathodes. Many believe that as demand for nickel and copper continues to shrink, the production of cobalt will shrink as well. This is expected to cause a shortage of cobalt, which in turn, will cause prices to increase. But graphite, as it pertains to li-ion batteries, has been overlooked because it is largely misunderstood,” explained Dinwoodie.
“There’s more than 180 applications that call for natural flake graphite, but only one that really matters… and that’s lithium-ion batteries. To appreciate graphite and its role in the green-energy/Li-ion supply chain, one must understand that the CSPG graphite that goes into batteries is very different from primary-processed graphite concentrate, which is typically what a graphite mining operation produces. CSPG is a consistently high-priced, highly specialized finished material with significant enduring demand, critical to Li-ion batteries. Graphite concentrate is an unfinished industrial mineral in oversupply with depressed pricing. Other than the fact that one is derived from the other, the two types of graphite couldn’t be more opposite. Battery makers don’t want (or need) ‘run-of-mine’ graphite concentrate. They want battery-ready CSPG. And, perhaps more importantly, they want CSPG manufactured to exacting sizes and a variety of other very specific parameters,” said Dinwoodie.
Mr. Dinwoodie also points out that all graphite development companies are “flawed” in his opinion, in that their business models are predicated on producing massive, unsellable quantities of graphite concentrate at completely unrealistic selling prices. “Numerous companies in the graphite space have Preliminary Economic Assessments (PEAs) and/or Feasibility Studies which assume a US$1,400 to $2,000 per tonne selling price for graphite concentrate, utilizing 60-month historic average pricing (in order to capture the price spike of 2012). The current price for concentrate is closer to US$800 to $850 per tonne, which makes a massive difference to the actual economic viability of most graphite projects. What is even more unrealistic than selling prices,” according to Dinwoodie, “is stated production targets — normally in the tens upon tens of thousands of metric tonnes per annum — graphite companies use in their technical reports. Do any of these companies’ CEOs truly believe they can place 50,000 tonnes of concentrate in a market that globally is estimated at 375,000 tonnes? And, even if that was possible, what would that do to concentrate prices?”
“One need not wonder why there has not been one legitimate offtake agreement — meaning, a legally binding, take-or-pay supply agreement with a non-pre-revenue arm’s-length entity — executed in the junior graphite space and, further, why not one of the many graphite companies with a completed Feasibility Study has received CAPEX financing (except for ASX-listed Syrah Resources Limited, which curiously parted ways with its Managing Director last October). With no offtake agreements and no project financing, the market has spoken loud and clear… the current business model of all graphite development companies is fundamentally broken. And, quite frankly, any need for rest-of-world supply outside of China will be (easily) managed by Syrah Resources, the world’s largest and lowest-cost producer of graphite concentrate, when it commences production in 2017. The race to cross the finish line for emerging graphite concentrate producers worldwide is over. It’s done.”
“And while all graphite development companies talk about being able to supply Tesla (or any other major battery manufacturer for that matter), the truth is that in the absence of a standalone PEA and/or Feasibility Study based on specialty, value-added secondary production, a graphite development company is precluded from discussing the technical feasibility or economic viability of battery-ready graphite. That is the primary difference between Alabama Graphite Corp. and all other graphite development companies — Alabama Graphite will only produce battery-ready CSPG. We will not sell any graphite concentrate whatsoever. Our PEA — one of the most unique, efficient and economically robust ever produced in the space — was based entirely on producing secondary-processed battery-ready graphite. A potential bottom-quartile cost producer, our production targets are small, capacity scalable, and pricing assumptions conservative. Further, we demonstrated our CSPG’s performance — trademarked as ULTRACSPG™ — in preliminary independent electrochemical testing, outperforming costlier commercial-grade synthetic graphite.”
But being able to produce battery-ready graphite is just part of the equation. According to Dinwoodie, “Consistency in electrochemical performance is paramount, even more important than price, according to end users. One must be able to manufacture CSPG to suit an end user’s precise specifications (generally between 10 and 25 microns), but also must be able to do so in an environmentally responsible and sustainable manner (meaning, without the use of environmentally harmful hydrofluoric acid, as is the case with Chinese-sourced graphite) and without the use of costly high-temperature thermal upgrading or caustic bake (sodium hydroxide), for purification. “CEO Don Baxter and I have met with some of the biggest companies in the world and one of our major takeaways is that battery manufacturers’ CSR executives now demand complete supply-chain traceability and transparency. Manufacturers are proactively investigating where they source their critical input materials and, as importantly, how said input materials are produced. Environmental considerations are now more vital than ever when sourcing input materials for green-energy-based applications, such as Li-ion batteries.”
“All of us at Alabama Graphite are incredibly pleased with our progress and, in particular, with the support we have received from all levels of government from the state of Alabama. Recently, Mr. Baxter and I had exceptionally positive meetings in Washington DC with the offices of Senator (and nominee for U.S. Attorney General) Jeff Sessions, Senator Richard Shelby and Congressman Gary Palmer (Representative of Alabama’s 6th District, where our flagship Coosa Graphite Project is located). Even some of the largest stakeholders in the state of Alabama have approached us in an effort to advance Alabama Graphite and the state as not only a major U.S. hub for industry, but a center for li-ion battery production.”
“However, it is the response we’ve received from the U.S. Department of Defense (DoD) Li-ion battery manufacturers that has been the most exciting. Although the Company still must raise capital to complete a Feasibility Study and other required milestones, Dinwoodie is tremendously optimistic about Alabama Graphite’s future. “Our CSPG electrochemical performance and cost aside, it is the ‘Sourced-in-America’ benefits, in addition to the ‘Manufactured-in-America’ benefits that Alabama Graphite (once in production) could potentially afford end users that is of particular interest. Made-in-USA claims can be quite misleading. Sourcing claims, however, are very straightforward. Something either is or it isn’t. DoD contractors have been instructed to source American whenever possible, which is amazing news for Alabama Graphite.”
At time of writing Alabama Graphite was trading at $0.145 with 131.5 million shares outstanding a market cap of more than $19 million.
