The following article is from Edition 23 (May 2024) of The Pick Magazine, Australasia’s premier investor-focused magazine covering the resources sector. The magazine is edited by experienced resources journalist Kristie Batten. Download your copy of the magazine today.
While graphite values have retreated alongside those of fellow battery material lithium, the supply and demand dynamics around the greyish lightweight material are no less compelling than before the price rot set in.
Last December China introduced graphite export controls – a response to the US Biden Administration’s move to restrict US battery makers from sourcing Chinese material.
Kingsland Minerals’ (ASX: KNG) chief executive Richard Maddocks says while the ban is yet to improve the graphite price, it alerted the world to the dangers of relying on Chinese supply.
The Middle Kingdom accounts for two-thirds of raw flake graphite production and almost all of the market for processed anode material.
“The world has its eggs in one basket when it comes to supply source,” Maddocks warns.
It’s natural that Beijing is unwilling to share the critical anode material, given China last year produced eight million of the world’s 14 million electric vehicles.
It’s also understandable that western EV and battery makers are baying for non-Chinese supply sources.
Currently the main alternative suppliers are in east Africa, including the ASX-listed Syrah Resources and its Balama mine in Mozambique.
Australia is also poised to be a key supplier– no more so than the ASX-listed Kingsland and its Leliyn project in the Northern Territory.
While classed only as inferred, the deposit lays claim to be Australia’s biggest graphite endowment.
Leliyn is in the Pine Creek region of the Northern Territory, a mere 250km from the Port of Darwin and close to the eponymous town which historically has been a goldmining hub.
Located on pastoral leases, the ground is also proximate to amenities including high voltage power lines, gas pipelines and the Stuart Highway.
“We like to think it’s a tier one location for a tier one project,” Maddocks says.
In March this year, Kingsland disclosed its inferred maiden resource estimate of 195million tonnes, averaging 7.3% total graphite content (TGC) for 14.2Mt of graphite.
Crucially, the flake appears to be ideal for anode battery material.
“While the resource is inferred, there’s significant upside to grow the resource and pick the eyes out of some of the quality material,” Maddocks says.
The resource resulted from last year’s drilling campaign, covering 5400m of reverse circulation drilling across 53 holes and 11diamond holes covering 2400m.
Best results included 285m at 6.1% TGC, including 79m at 10.5%.
Other highlight assays included 206m at10% TGC, including 46m at 12.2%; and132m at 8.7%.
Locally, the nearest exemplar is Renascor Resources’ more advanced Siviour project at Arno Bay in South Australia, which weighs in at about 8.5Mt of contained graphite at a 7% grade.
Maddocks says Leliyn looks to be big enough to wash its face as a commercial venture –but he concedes it is early days.
Graphite is not the only battery materials interest for Kingsland, which owns the Lake Johnston lithium project near Kalgoorlie.
Historically Lake Johnston showed tickles of nickel, but with evidence of pegmatites Kingsland’s attention turned to lithium.
Soil sampling to date has revealed separate zones of interest of 220 and 100 parts per million lithium oxide.
Maddocks says the company this year plans an air core campaign to tease out the Lake Johnston mineralogy.
“We are pretty hopeful we will get some joy,” Maddocks says.
Back at Leliyn, Kingsland’s focus turns to metallurgical test work.
“We will produce maybe 10 to 15 kilograms of concentrate and test for downstream processing to see whether we can make it into spherical [anode-grade] graphite,” Maddocks says.
“At this stage initial flotation work gives us good recoveries and good grades and will hopefully lead to the production of spherical graphite for EV batteries.”
As with lithium, graphite is not traded transparently on markets such as the London Metal Exchange, so it’s hard for investors to know what’s really going on.
Graphite also comes in various flake sizes and guises – with markedly different pricing for each grade.
“If you produce gold, you sell it at the Perth Mint and everyone knows what you get for it,” Maddocks says.
“The graphite market is a bit opaque at this stage, but hopefully as demand increases... an open market will give people more confidence in forward pricing.”
Trading under the ticker KNG, Kingsland bears a modest A$12 million market capitalisation backed by A$2.3 million of cash (as of December 2023).
Despite the gnarly conditions for resources small caps, Kingsland shares are trading above their A20c issue price.
Maddocks acknowledges EV sales have slowed but believes the market will be spurred by technical advancements resulting in improved battery range and charging times.
“It’s in a state of flux, but ... everyone agrees the demand for graphite will increase incoming years and there will be a supply shortfall,” he says.
“That means the price will have to rise.”
