Graphite exploration by Australian companies – both inside and outside the country – is heating up as the world grapples with China’s domination of this in-demand critical mineral. Australian miners are following the lead of Canadian juniors, who have stepped up graphite exploration in the past few years to ensure that reliable western sources of the mineral are available in the near future.
China, India, and Brazil produce nearly all of the world’s graphite. With China leading production with more than 70 percent of the world’s graphite, there are fears that it may impose a rare earth style export quota on the mineral. In Canada, Ontario Graphite is expected to be the first Canadian graphite producer as well as the first graphite producer in the western world in a long time. Northern Graphite (TSXV:NGC,OTCBB:NGPHF) is anticipated to follow.
Global demand for graphite slowly began rising during the second half of 2009 and continued increasing steadily throughout 2010 and into 2011, the US Geological Survey said in a report. “This increase resulted from the improvement of global economic conditions and its impact on industries that use graphite.”
Australian graphite juniors in early stages
Graphite exploration is gaining ground in Australia, but companies are still in early exploration and drilling stages, behind their Canadian counterparts. The exploration boom, which is leading to massive share gains, is being driven by expectations that graphite demand will surge and current supply will not be able to keep up.
Graphite prices exceeded $1,300 a tonne in the late 1980s, but crashed to $600 to $750 a tonne in the 1990s as Chinese producers dumped product on the market, Northern Graphite reported. Graphite prices, which are a function of flake size and purity, crossed $3,000 a tonne recently. Large-flake (+80 mesh), 94 percent carbon varieties command premium prices.
Globally, demand for graphite is about 1.14 million tonnes, split evenly between the large-flake variety and the amorphous graphite used for industrial purposes. Some estimates peg graphite demand at 1.6 million tonnes by 2020.
Economic and geopolitical concerns
Australia’s economy grew by 1.3 percent in the first quarter of this year, more than double the 0.5 percent forecast by analysts. The country’s estimated 2011 GDP was $1.5 trillion. While Australia’s services sector accounts for more than two-thirds of its GDP, the mining sector brings in about 10 percent.
The country has the 17th-largest economy in the world according to GDP, and has enjoyed uninterrupted financial growth for the past two decades. Even during the global financial crisis, which has nearly extinguished growth in the western world, Australia’s economy grew, thanks largely to growth in the resources sector and China becoming Australia’s largest export market in 2009.
The country has an east-west divide in that the eastern part of Australia houses the majority of its services and financial industry while the western part controls the country’s natural resources sector, which incoudes iron ore, gold, oil, and natural gas.
Graphite exploration advancing
Buxton Resources (ASX:BUX) became the latest company to step into graphite in Australia when it announced last month that it is set to acquire an 85 percent stake in Montezuma Mining Company’s (ASX:MZM) Yalbra graphite project in Western Australia. Buxton, which is a gold, base metals, and iron ore explorer, said it looks “forward to starting field activities as soon as possible” at Yalbra.
In the past few months, at least three Australian companies – Archer Exploration (ASX:AXE), Monax Mining (ASX:MOX), and Syrah Resources (ASX:SYR) – have reported positive results from graphite exploration activities.
Melbourne-based Syrah doubled its share price overnight last month after reporting results from a single drill hole at its Balama project in Mozambique. Monax said in mid-June that the latest surface sample at its Waddikee project “further enhances [the company's] belief that the … project has the potential to be a new graphite province.” In May, Monax reported geochemical assay results from four samples from the project.
Archer said this month that it wants to fast track its Campoona development to produce high-purity graphite. A sample from a hole in Campoona produced large-, medium-, and fine-flake graphite, with most in the medium-flake range.
Investigator Resources (ASX:IVR), which is primarily a silver explorer, added graphite to its mix recently. A preliminary review of the graphite potential within Investigator’s regional tenements identified several areas with good potential where graphitic schists were intersected in past drilling.
Kibaran Nickel (ASX:KNL) found graphite potential at its project in Tanzania. And Castle Minerals (ASX:CDT), a gold miner with projects in Africa, said in early May that carbon assays at its Wa project in Northwest Ghana confirmed extensive zones of high-grade graphite.
Securities Disclosure: I, Karan Kumar, hold no direct investment interest in any company mentioned in this article.