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The graphite price has hit US$570/tonne this week, a promising sign for the emerging battery non-metal.
Investment bank UBS has also released an analysis highlighting its faith in a 50 per cent price rise for graphite.
Graphite is often referred to as the ‘forgotten battery material,’ given lithium batteries require large volumes of graphite.
In fact, up to half of a lithium-ion battery can be graphite.
Ultimately pushed onto global markets as foil products, the flattened non-metal is used to let electricity ‘flow’ through batteries. Typically, graphite will form an anode in a lithium battery.
Battery sizes to grow
Notably, UBS analysts expect the size of lithium batteries to get larger by 2030 – by 30 per cent, on average. They also predict lithium iron phosphate batteries to eventually supersede lithium-ion.
This bodes well for graphite prices, perhaps more than still-forecasted increases in global EV sales by fivefold.
The bank predicts EV sales to see fivefold growth by 2030; whereas graphite itself will see sixfold.
2025 deficit call
But the most bullish signal of all, adhering to the bank’s thesis, is the threat of a looming 2025 deficit.
It’s very easy to hype metals prices by forecasting supply deficits. In reality, countries can boost exports or ban them overnight, making predictions extremely difficult.
And it isn’t rare for widely accepted narratives to completely fail – just look at the Chinese reopening ‘boom’ we were all expecting for early 2023.
So how are the ASX’s graphite stocks doing?
Syrah Resources (ASX:SYR)
Syrah Resources is a graphite explorer and miner on the ASX which is undergoing a revival in interest.
UBS has begun coverage on the stock again, giving it a price target of $1.10. The share price is currently 50.5 cents at lunchtime on Tuesday.
The company’s principal project is in northern Mozambique, called the Balama graphite project. It also seeks to mine vanadium in the troubled jurisdiction.
The company’s one-year returns are down -68 per cent on a year-on-year (YoY) basis and down 75 per cent year to date (YTD). However, if a looming graphite deficit does eventuate – and Syrah is producing – the chance for upside is obvious.
Five brokers rate Syrah a “buy” while 2 rate it a “hold”. Attention from UBS appears to be boosting liquidity, with more than 4.9 million shares turnover at lunchtime on Tuesday.
Talga Group (ASX:TLG)
Talga Group is a graphite explorer and miner also receiving attention from UBS analysts.
The investment bank actually prefers Talga over Syrah, though both would clearly benefit from a global graphite shortage.
The company’s flagship project is the Vittangi Graphite Project, based in north Sweden. UBS has given the stock a price target of $1.195.
This reflects a downgrade from the current graphite stock price of $1.23 at lunchtime on Tuesday.
Five brokers rate Talga a “buy” with one broker recommending a “hold”. The stock is far less liquid than Syrah, with only 155,700 shares traded at lunchtime on Tuesday.
Sayona Mining (ASX:SYA)
Sayona Mining is the largest market cap graphite stock on the ASX at in excess of $1 billion.
The company is Australia-based and a polymetals explorer with its fingers in gold and lithium. But its graphite presence is interesting: the company is a domestic explorer.
Its Kimberley graphite project boasts a 25-kilometre-long strike target in an area known for mineral-rich acreage.
However, the bulk of its market cap comes from its activities in other metals. On the whole, the company is still a graphite explorer. This doesn’t mean a macro graphite deficit thematic wouldn’t push up prices.
Sayona’s share price was 10 cents at lunchtime on Tuesday. Six brokers rate the stock a “buy” and one broker recommends a “hold”. The stock is the most liquid on this list – share turnover on Tuesday reflected 16.6 million.
Novonix (ASX:NVX)
Novonix is by far the least popular stock with brokers on this list. Zero brokers say “buy”; three brokers say “hold”, and four say “sell”.
The company boasts a market cap of $388.3 million and the stock’s performance is down 54.18 per cent YoY. On a YTD basis, performance is down 45.9 per cent.
Liquidity in this stock was reduced on Tuesday, with 0.98 million shares turned over by lunchtime. That contrasts to a four-week average of 4.57 million.
The company’s main projects are in North America across Canada and the United States.
Of course, should UBS analysts be proven right in its thesis of a graphite deficit, the stock could very well turn the ship around – assuming favourable currency, geopolitical, and market conditions.
Triton Minerals (ASX:TON)
Aspiring to become East Africa’s next graphite producer, Triton holds world-class projects in the Cabo Delgado region of Northern Mozambique. This region is considered one of the world’s best graphite locations.
The company’s flagship project, Ancuabe, boasts a maiden JORC ore reserve of 24.9 million tonnes (Mt) at 6.2 per cent total graphitic carbon (TGC).
This ore reserve was included in a December 2017 definitive feasibility study, which the company initiated an update to in April this year, focused on refreshing key financial inputs such as graphite basket pricing, upfront capital expenditure, operating expenditure, and sustaining capital expenditure.
In August, Triton was also granted a 25-year mining concession for the Cobra Plains graphite deposit in Mozambique.
As a result, Triton’s portfolio encompasses two world-class graphite projects with a diversified mix of flake sizes.
In 2014, Triton reported an inferred mineral resource estimate for Cobra Plains comprising 103Mt at an average grade of 5.52 per cent graphitic carbon, containing 5.7 Mt of graphitic carbon. Cobra Plains is considered a globally significant graphite resource.
