Lithium-ion battery-related revenue will grow five-fold over the next 12 years, according to McKinsey Battery Insights, becoming a $400 billion market by 2035. While many investors are buying lithium miners for exposure, a little-known material which is the biggest component in an EV battery could be an even bigger bottleneck – especially because China controls 70% of the world’s supply. That material? Graphite.
Fortunately, one (and only one) company is building the only domestic graphite anode supply chain. And that could become key as the Biden administration shifts EV supply chains on-shore.
What’s Better than Lithium?
Lithium-ion batteries have a high power-to-weight ratio, high energy efficiency, good high-temperature performance, and low self-discharge, making them a natural choice for powering electric vehicles and countless other consumer electronics.
But it takes more than lithium to make an EV battery.
By weight, a typical lithium-ion battery contains only about 7% lithium carbonate. The rest of the battery is made up of anode and cathode materials, including 16% graphite, 15% aluminum, 10% copper, 5% manganese, 4% nickel, and 36% other materials.
The largest requirement – graphite – often flies under the radar.
Graphite’s reliability, low cost, and energy density make it a natural choice for the anode of lithium-ion batteries. And unlike cathode materials, there aren’t any reliable alternatives to graphite for anodes. It has always been a staple of lithium-ion batteries.
Like lithium and cobalt, rising demand for EVs led to soaring graphite prices between April 2021 and March 2022. And these prices continue to trend higher in many non-Chinese markets (China’s market suffered a blow after policymakers eliminated some incentives).
Why Domestic Supply Matters
The graphite supply may not be as constrained as lithium or some other raw materials, but the domestic supply is non-existent. And with President Biden’s efforts to build EV supply chain resilience – that could create a unique opportunity.
The U.S. has been 100% reliant on graphite imports since 1991 – and most imports come from China. Like lithium and other raw materials, many companies and policymakers want to shift the supply chain into the U.S. to avoid disruptions and create jobs.
For example, Biden’s “American Battery Materials Initiative” mobilizes the entire government to secure a reliable and sustainable supply of critical minerals used for power, electricity, and electric vehicles. And future EV credits may depend on a domestic supply to qualify.
The combination of zero domestic supply and a move to bring the entire battery supply chain into the U.S. could make graphite a unique opportunity.
How to Invest in a Domestic Supply
Graphite One Inc. (TSX-V: GPH) (OTCQB: GPHOF) is building a vertically integrated graphite mining, processing, and manufacturing enterprise focused on anode materials for electric vehicles. In addition to owning rights to the largest graphite deposit in the U.S., the company plans on processing graphite into a concentrate and developing value-added products.
The company is currently working on a feasibility study of its Graphite Creek Property, situated on the Seward Peninsula about 60 kilometers north of Nome, Alaska. According to a recent U.S. Geological Survey, the Graphite Creek graphite deposit is the “largest known flake graphite resource in the USA and is among the largest in the world.”
The company’s recently announced 2022 drilling program results confirm these sentiments, increasing Graphite Creek’s measured and indicated resource by 15.5%. Moreover, the company has only explored 26% of its graphite anomaly, and the new results didn’t include a hole that encountered 58 meters of 4.18% graphite due to distance constraints in the block model.
Looking Ahead
Lithium isn’t the only way to capitalize on rising demand for lithium-ion batteries from electric vehicles. In fact, as we’ve seen, graphite is the single largest component of the batteries by weight. As the U.S. continues to shift inward with its EV supply chain, investors may want to consider investing in graphite as a way to capitalize on rising EV demand.
Graphite One Inc. (TSX-V: GPH) (OTCQB: GPHOF) aims to become the country’s first domestic graphite producer with a vertically integrated mine-to-anode enterprise.
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