Battery grade graphite just as important as lithium
Lithium is taking centre stage in the electrification thematic, but the markets seem to be missing that in producing electric vehicle (EV) batteries, several other commodities are just as important.
One of those is graphite, which comprises over 50% of the raw materials in every lithium-ion battery (and over 95% of every battery anode).
As is the case for lithium, there is an abundance of graphite deposits all across the world. And again like lithium, despite the abundance of resources there just isn't enough graphite being produced (specifically battery grade graphite) to meet future demand.
The article from the South China Morning Post titled “Shortage of EV battery raw material graphite could delay global drive to go green” details this problem and is definitely worth a read.
With consultants Wood Mackenzie estimating that graphite demand is set to double by 2035, mainly due to the increase in demand by battery producers, there is a real risk that the graphite market becomes structurally short, just like the lithium market is right now.
This is why late last year we announced Evolution Energy Minerals (ASX: EV1) as our 2021 Wise-Owl Pick of the Year.
EV1’s project is shovel ready with a DFS already completed in Jan 2020 showing a low capex requirement of US$87M and an NPV of US$323M. EV1 is looking to make a final investment decision by the end of this year and will then look to get its project into construction.
EV1’s project differentiates itself with 31% of its resource in the extra large/jumbo category giving it the optionality to either sell it at high margins or use it in downstream opportunities in the battery manufacturing space.
On top of all of this EV1 is committed to achieving best in class ESG credentials which we think will be the key differentiator for its product when its product is being marketed to EV battery makers.
Below is a screenshot from our 2022 EV1 Investment Memo, which details why we invested, what we want to see the company achieve in 2022 and the key risks to our investment thesis.
To check the memo out, click on the image below.