February 27

Global scramble is on for graphite, key high-tech ingredient

Experts say the expanded use of lithium-ion batteries as well as a decrease in supply from China has helped touch off the largest wave of mining projects in decades.

By Dan Joling
The Associated Press

ANCHORAGE, Alaska — Tear apart an electric car’s rechargeable battery and you’ll find a mineral normally associated with No. 2 pencils.

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A technician holds a graphite core sample drilled near Graphite Creek, a mineral claim being explored by Graphite One Resources north of Nome, Alaska.

The Associated Press / Graphite One Resources

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Graphite Creek, a mineral claim being explored by Graphite One Resources, runs along the Kigluaik Mountains north of Nome, Alaska.

The Associated Press / Graphite One Resources

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It’s graphite.

And experts say the promise of expanded uses for “pencil lead” in lithium-ion batteries — used in cars, cellphones and tablet computers — as well as a decrease in supply from China has helped touch off the largest wave of mining projects in decades.

“There’s an awful lot of exploration. Lots of companies looking for graphite,” said Don Hains, an expert in industrial minerals.

The U.S. imports all of its natural graphite, but mining companies are searching locations from Alaska to Alabama, optimistic about future demand.

From technological to industrial, the mineral’s products comprise a $13 billion industry, and firms see opportunity in producing high-purity, large-flake graphite for “lithium-ion batteries and other new renewable energy forms,” said Hains, a specialist with Watts, Griffis and McOuat Limited, a geological and mining consultant firm in Toronto.

China, meanwhile, appears to have eased its grip on world production, creating an opening that hasn’t existed since the mid-’90s, mining companies say.

China accounted for 750 million metric tons out of a global total of 1.1 billion metric tons in 2012, the most recent year records were available, according to the U.S. Geological Survey. But Chinese output that year was down 50 million metric tons from 2011 as the government closed mines for environmental issues and resource protection, according to the USGS.

Also, the growth of China’s steel industry has boosted its domestic demand for industrial-grade graphite, used in foundries for its heat-resistant proprieties, leading to a new graphite export tax, experts say.

The developments contributed to a sharp rise in the price of large-flake graphite, peaking at $3,000 per ton in early 2012. The price has since dropped back to about $1,300 per ton, but economic optimism has remained.

“There’s certainly more than 200, and at one point there were over 300 companies, or individual projects, being looked at around the world,” Hains said.

In Alaska, a claim north of Nome on the slopes of the Kiglauik Mountains is being explored by Vancouver, British Columbia-based Graphite One Resources.

The site, Graphite Creek, “is definitely a world-class deposit,” said Dean Besserer, vice president of exploration.

A recent development has company officials particularly hopeful. Last month, they announced an increase in the amount of high-grade graphite they expect to be able to pull from the site. There are 285 million metric tons in a continuous 3-mile stretch near the surface of the mountain, officials said. They expect an active mine would be sustainable for the next 20 years.

Several other companies are searching in the U.S. USA Graphite is exploring properties in Nevada. Graphite Corp. and Alabama Graphite Corp. are exploring in Alabama. And Graphite Corp. also has a prospect in Montana. Far more firms are searching in Canada.

The last time the industry saw this much activity in North America was two decades ago, during a perceived supply shortage. Exploration also increased in Australia and Africa, but China responded by supplying a flood of graphite without increasing the price. “Basically, the Chinese bought the market,” Hains said.

This time around, explorers such as Graphite One are confident they can find a niche supplying battery makers — especially if China continues to take measures that restrict exports.

Mining companies see potential for growth in electric cars. Nissan spokesman Brian Brockman has said there are 57 pounds of graphite in the lithium-ion battery of each Leaf.

Hains, however, remains skeptical of a surge solely from such vehicles. Automakers sold about 97,000 battery electric vehicles in 2013, less than 1 percent of the 15.5 million vehicles sold in the U.S., according to the Electric Drive Transportation Association.

(Continued on page 2)

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