Tesla battery plan could fire up graphite hopes

There has long been a feeling around, shared by your correspondent, that the graphite space was becoming seriously overpopulated, that the market would at some future time be groaning under mountains of surplus graphite, that the graphite enthusiasm was redolent of the uranium frenzy of 2007 (more than 260 ASX-listed companies claimed to have yellowcake projects) or the 2011 rare-earths madness.

There has been much hype about the new super-strong ­material derived from graphite, graphene, which is only one-atom thick but 200 times stronger than steel. Graphene will transform everything from concrete-making to military equipment.

But two more recent developments suggest graphite’s potential market could be expanding. First, it looks as if graphite could become an integral part of aluminium refining (by replacing petroleum, coke and anthracite in the process) and thus absorb a good deal of the potential new production. Second, there is the gigafactory phenomenon.

The first gigafactory — essentially it’s a giant battery-making plant — is being planned by US electric car maker Tesla. That will produce enough batteries to equip 500,000 new electric vehicles a year, but Tesla’s chief executive has caused a stir by predicting the global auto industry will need 200 such plants by 2040. These will be making lithium-ion batteries; good news for lithium, much better for graphite, for such batteries have at least 10 times more graphite than lithium.

In his Friday client note, Warwick Grigor of Canaccord Genuity says the graphite market is poorly understood by the market, “and even by the participating companies”. He says in many cases it is the blind leading the blind. “There are inconsistent messages out there as to what are the best-sized flakes and about the metallurgy and about the markets,” says Grigor. Amen to that.

But there are signs money is starting to sniff around graphite. Talga Resources (TLG) has raised $3.1 million. Its selling point is the Nunasvaara project in Sweden; Talga says not only is Nunasvaara the world’s highest-grade graphite deposit, it has become the first in the world where high-quality graphene can be produced directly from raw uncrushed graphite ore, something Talga says gives the junior “unique economic advantages” by avoiding the expensive process that most producers face when it comes to extracting graphene.