Canadian Graphite Sector Soars as China Puts Stricter Controls on Graphite Exports
Toronto, 20 October 2023
Today's news that China has imposed more stringent controls on the export of certain categories of graphite, in particular those types that are used for the production of anode material for lithium ion batteries ("LIBs"), has sent the Canadian graphite sector soaring. Table 1 below provides an overview on how the news impacted three of the most prominent Canadian graphite stocks.
From the above, it is clear that the news is a catalyst that has sent the sector soaring. The reasons why are easy to understand:
Today's news very clearly illustrated the rationale for the billions of dollars being invested in North American battery plant capacity. The market response reflects people's understanding of the importance to secure supply of critical minerals, such as graphite, from domestic sources and other 'friendly' jurisdictions. This is not news, as shown by the Inflation Reduction Act ("IRA") in the U.S., and Canada's clean energy plan. The IRA stipulates that 40% of critical minerals in US-made EV batteries must come US miners or recycling plants, or mines in countries with free trade deals with the US (increasing by 10% per year, to a maximum of 80% in 2027). The Canadian government announced $80 billion in its budget earmarked for the transition to clean energy, including tax credits and other incentives for the establishment of EV plants and their supply chain.
Until today, most capital markets attention for critical minerals was focused on lithium. Today's news shows that action is needed to secure supply across a host of other minerals. As figure 2 below shows, there is a very significant imbalance forecast for the supply of critical minerals such as graphite, and that is why it is so important that new capacity is developed.
领英推荐
The three companies mentioned above are all working to contribute to the supply of anode-quality graphite. While in different stages of development, and therefore all providing a slightly different investment thesis, all three companies are exceptionally well positioned to capitalize on the demand/supply imbalance projected for the graphite sector.
This is illustrated by a marked increase in commercial activity. The capital markets, on the other hand, recently have focused largely on lithium projects. It is clear, however, that to enable the EV revolution, we need more than lithium alone, we need to secure the supply of a whole host of critical minerals, including graphite.
Today's significant trading volumes may indicate that the capital markets are finally waking up to the opportunities beyond lithium, represented by companies such as $GEM, $NOU and $NGC.
As Table 1 shows, and considering NOU's ~$3.6 billion NPV, valuation levels appear exceptionally low. With all companies progressing towards becoming meaningful producers of anode-quality graphite for the North American EV space, we see great upside and believe we may be moving towards the sector breakout many insiders have been predicting for some time.
#criticalminerals #graphite #anodegraphite #investingraphite #graphitestocks #investincritialminerals #EVrevolution #lib #EVbatterymaterials
Marc Lakmaaker is the CEO of AdvanceCap Inc, a strategic capital markets agency focused on communications, corporate development and finance. AdvanceCap is working with multiple critical mineral companies and, through its network of banks, EMDs, industry insiders and investors, helping clients generate value. AdvanceCap is embedded within the clean-tech eco-system through its network in general, and its close ties to #Changeblock in particular, a critical infrastructure company focused on the origination and trading of environmental assets, such as carbon credits.
Disclosure: AdvanceCap owns securities in $GEM and is working with the Company on a number of capital markets related initiatives. AdvanceCap does not own any securities in and does not work with $NOU or $NGC. AdvanceCap principals also own securities in Changeblock.