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Graphite - The Metal of the Future

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Graphite, which has both metallic and non-metallic properties, has been used by humans for thousands of years and as technology progresses, its importance is growing.  

An allotrope - or different physical form - of carbon, graphite is a very good conductor of electricity and heat with a temperature resistance above 3,500 degrees Celsius - the same temperature as the outer atmosphere of the sun. Unlike other metals, when heated it does not expand.

Graphite, like its sibling diamond, is one of the strongest and hardest materials in the natural world and is used in a wide range of products.

MORE THAN JUST PENCILS

Beyond its traditional role as the "lead" in pencils - graphite's name is based on the Greek word "to write" - graphite is critical in many alternative energy solutions such as batteries and hydrogen fuel cells, as well as being used to make electrodes and brushes on electric motors.

Due to its high heat resistance and ability to keep its shape, graphite is a key component in metallurgy and refractoriness and used as a release agent in mold, die and form linings when making metal parts and castings. 

As well as a dry industrial lubricant, graphite is employed as an additive in many polymer compounds. Other uses for graphite include in catalysts, synthetic diamonds and in ceramics.

NOT ALL GRAPHITE IS THE SAME

The grey metal can be sourced from open-pit or underground deposits as well as heating a petroleum coke feedstock in a special furnace to produce synthetic graphite.

Graphite fits into two primary classifications: natural graphite and synthetic graphite. Natural graphite exists in three forms, flake, amorphous, and vein or lump graphite.

Since 2008, consumption of flake graphite accounted for at least 50 percent of consumption in mature industrialized economies, but only 40% of worldwide production. As more and more economies require flake graphite, demand will increase significantly.

Global production of natural graphite reached a high of approximately one million tonnes in 2008, following five years of modest annual growth of 2.5 percent.

Flake graphite is made up of layers of grapheme, which is the minerals' base structural element.

Synthetic graphite is divided into many different types whose properties depend on the carbon used in its manufacture as well as the heat treatment the carbon underwent.

Flake graphite accounts for 40 percent of world production. The main applications for natural graphite have predominantly been within the iron and steel industries. Among natural graphite, flake material is preferred by most manufacturers of refractories, batteries, crucibles, pencils, powder metallurgy and lithium ion batteries.

In the medium and long term, flake will be the form of natural graphite required by the areas of growth in graphite demand such as batteries for electric vehicles.

There has been significant upward pressure on the price for high carbon grade, large flake graphite over the last 10 years with a notable increase since 2008.

The substantial growth in demand for graphite has been impacted by the fuel cell industry and its need for electrodes and conductive separators being developed for the automobile sector, magnesia and alumina refractories and secondary batteries such as lithium-ion and lithium polymer batteries.

It takes up to 30 times more graphite to make lithium ion batteries compared to just lithium, and their use in the electrical and hybrid vehicle market is expected to require significant increases in graphite production.

CHINA'S RESOURCE LOCKDOWN

As with rare earth elements, China is a major supplier of graphite. The nation accounts for approximately 80 percent of global graphite supply, but growth in its mine output has slowed. China is known to artificially increase prices through levies and by forcing the closure of some mines within its borders.

Significant mining output has come from nations such as Brazil, Sri Lanka and North Korea.

CANADIAN SUPPLY SOLUTIONS

With slowing output from the world's biggest producer, commercial graphite deposits can be found in the Grenville formation in Eastern Canada. Fine to coarse flake graphite deposits are located mainly in the provinces of Ontario and Quebec.

Amongst the Canadian juniors engaged in the graphite space are Northern Graphite Corp. (CVE:NGC), which owns the Bissett Creek graphite deposit found in eastern Ontario, said it expects to finish a bankable feasibility study for the project and permitting in the first half of 2012.

The company recently inked a deal with Ontario-based Panacis under which the companies will develop lithium ion batteries.

Focus Metals (CVE:FMS)(OTCQX:FCSMF) is an emerging mid-tier junior graphite company and is the 100 percent-owner of the highest-grade technology graphite resource in the world, Lac Knife in Quebec.

In February, Focus raised roughly $6.5 million that it plans to use to cover exploratory drilling costs in the coming year.

By the end of 2012, Focus Metals said it should be in a position to revise and upwardly re-state its technology graphite holdings.

DEMAND PROFILE

Consumption of flake graphite is growing as amorphous graphite consumption falls and accounts for at least 50 percent of consumption in mature industrialized economies.

Estimated global consumption of natural graphite in 2008 was approximately 1.1 million tonnes, of which 71 percent was in Asia, and 43 percent specifically in China.

In 2008, North America accounted for 4 percent of consumption with the United States importing 58,251 tonnes of graphite; the United States is the world's fourth largest importer.

Quick facts: Northern Graphite Corp

Price: 0.27 CAD

TSX-V:NGC
Market: TSX-V
Market Cap: $17.58 m
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