Graphite

“CONFIRMS TO US THAT THE WORLD’S LARGEST GRAPHITE PRODUCER IS RUNNING OUT OF GRAPHITE RESERVES AT A TIME WHEN DEMAND FOR GRAPHITE APPEARS CERTAIN TO GROW STRONGLY.” – CREDIT SUISSE. Syrah Resources, an Australian-listed graphite company focused on its Balama deposit in Mozambique, announced that it has signed a three-year binding off-take agreement with Chinese SOE Chalieco (ACH). Under the terms of the agreement, Chalieco will have exclusive distribution rights over the People's Republic of China and Hong Kong for the purchase of 80ktpa (+/- 10%) of graphite concentrate. Canaccord Genuity Mining Analyst Luke Smith expects the commencement of first production at Balama to be SepQ 2016. Importantly for the graphite sector as a whole, an analyst at Credit Suisse highlighted that the fact that Syrah had signed up a Chinese customer for Balama “confirms to us that the world’s largest graphite producer (China) is running out of graphite reserves at a time when demand for graphite appears certain to grow strongly,’’ adding, “This Chinese customer appears no longer able to rely on Chinese domestic supply, but is seeking large tonnage of supply from outside China.” Production from the world’s largest supplier of natural graphite dropped to a record low in 2014, according to Benchmark Mineral Intelligence. After hitting a high of 85% of global supply in 2013, China fell to 70% by the end of 2014. Benchmark Mineral Intelligence believes that over the next three to five years the country’s output, which is high-cost and environmentally challenged, will continue falling to about 50% or 60% of world production, and that “we have likely seen peak graphite supply in China.” The Australian highlights that the market for natural graphite is expected to enter a high growth period as the demand for lithium-ion batteries will be driven by consumer electronics, electric cars and battery storage in energy markets. Earlier this month, Deutsche Bank stated that the world was entering the age of the lithium-ion batteries, and that the electrification of the global car fleet will arrive quicker than expected.