Graphite is an element with many uses, from pencils to steel, but its role in lithium-ion batteries, especially for electric vehicles, has been driving demand through the roof.
While many companies are exploring for and developing graphite projects, you can count the number of publicly traded Western companies producing graphite on one hand. Two of the four graphite producers are Europe-based multinationals for whom the element makes up only 10-20% of their revenue. France's Imerys SA (NK:PA), a €5.7 billion market cap company, mines graphite in Namibia and Canada. AMG Advanced Metallurgical Group N.V. (AMVMF:OTC), with a €1.47 billion market cap, produces graphite in Germany, the Czech Republic, Sri Lanka, China and Mozambique.
Two smaller, Australia-listed companies also produce graphite. One is Syrah Resources Ltd. (SYR:ASX), which began mining graphite in Mozambique in the last year at its Balama project. Syrah has a market cap of AU$942 million.
Bass Metals Ltd. (BSM:ASX) produces graphite in Madagascar at the Graphmada graphite mine, which has a production capacity of 6,000 tonnes per year. The company's market cap is AU$78 million.
"As a graphite stock with high grade graphite properties in graphite rich Madagascar, DNI Metals should be relatively immune to the vagaries of the commodity market generally." - Clive Maund
Most likely the next company to join the ranks of these graphite producers will be DNI Metals Inc. (DNI:CSE; DMNKF:OTC.MKT: DG7:FSE). The company, which has been advancing its 100%-owned graphite properties, Vohitsara and Marofody, in Madagascar, has received the Cahier des Charges Minières or 'Mining Specifications' for the two projects.
The Cahier des Charges Minières,according to DNI Metals, is "issued to companies that have completed and lodged an EIS/EIE. The document governs the totality of the Company's planned operations within its Mining Permit; inclusive of near-mine exploration, development, production throughput, community relations, environmental management and post-mining rehabilitation programs. It is the prerequisite to obtaining the Environmental License."
Dan Weir, DNI's CEO, noted, "We were attracted to Madagascar because it is known for its large flake, high quality graphite and because Madagascar has a modern and transparent Mining Code. Additionally, the area in which our projects are located contains excellent infrastructure and port facilities and the mineralisation itself is hosted within soft 'free-dig' material called saprolite, which greatly facilitates commercial extraction and processing."
"Having full commercial permitting for our primary project will give DNI a significant advantage to advance its graphite pilot plant / small-scale production plans," Weir added.
Vohitsara and the adjacent Marofody property are located within 50 kilometers of Madagascar's main seaport and less than 2 kilometers from the paved national highway.
The deposit features high-purity, large-flake graphite, which commands a higher price—up to double—than the small-flake variety. Bulk samples sent to India's leading graphite producer received high marks. In addition to this Indian producer, DNI is negotiating offtake agreements with Korean and American end-users.
The capex to take the project to production is $5 million, a small fraction of what most mining projects require.
CEO Weir told Streetwise Reports, "DNI has completed all the engineering for its processing plant, has made arrangements for its manufacture and expects to have it operating within six months of ordering it. We expect to be in production by the end of the year."
"We expect to begin graphite production at 6,000 tonnes per year, and increase to 50,000 tonnes per year," Weir noted.
Technical analyst Clive Maund commented late last year, "As a graphite stock with high grade graphite properties in graphite rich Madagascar, DNI Metals should be relatively immune to the vagaries of the commodity market generally, in large part because the demand for graphite for Lithium-ion batteries is expected to increase 65-fold by 2030."
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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.
Clive Maund: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None.
