Graphite developers told to weigh market demand

PERTH (miningweekly.com) – Graphite hopefuls have been advised to focus on determining the suitability of their potential product to market demand, rather than focusing solely on grade and size.

Patterson Securities resource analyst Jason Chesters told the Paydirt Graphite conference, in Perth, that the global graphite market was currently in a period of transition, as demand from traditional industrial applications was slowing while the prospect of rapid growth in newer high-tech applications offered promise.

“There are a growing number of graphite hopefuls chasing the perceived opportunity and hoping to land a lucrative sales contract in a total graphite market of approximately two-million tonnes per annum,” Chesters said.

“However, the reality is that expectations of a required supply response to meet the additional demand may fall short of expectations and almost certainly not be sufficient to accommodate all newcomers.”

Chesters said that the rapid growth of graphite hopefuls, therefore, was likely to result in a significant number of disappointments.

“The recent project and corporate failures in the graphite sector have given investors pause as the market comes to better understand the added complexity and additional attributes required in a good graphite project.

“Customer relationships and product qualification is essential.”

He noted that ultimately, the opportunity existed for a number of new graphite projects producing a required range of products, to be successfully developed to fill future demand growth.

Chesters said a successful new graphite project was less about size and grade, and more about flake graphite deposit, flake size distribution, product purity, deposit location and infrastructure, timeframe to production and above all, customer relationships.

“There is just one real question and that is, can you sell what you produce?” he said.

“Can your project actually produce a range of graphite products to a required specification and sell these to long-term quality customers for a reasonable market price?”

Simultaneously, project owners had to achieve a cost of production lower than most other competitors; however, Chesters said that the critical focus needed to be on end-use.

“Graphite project owners must, at their earliest feasible time, conduct testwork on the graphite product samples produced to determine its suitability of use and potential value for end-users.

“Graphite projects require a slightly different approach to advancing a project compared to other nonindustrial mineral projects. Additional considerations, skills and market intelligence are required to be successful, particularly as investor interest and understanding in the sector is low.”