I was pleased to hear that…

I was pleased to hear that Ontario is moving ahead with a critical minerals strategy. As someone in the private sector, my initial concern is that political considerations will supersede the business case in decision-making.

AMECA Mining has an interest in the strategy as we have discovered a world class graphite deposit in North-Eastern Sri Lanka and are working towards capturing a portion of the battery anode materials (BAM) market.

According to Benchmark Mineral Intelligence, the annual production of graphite anode material was 2.7 million tonnes last year. This is projected to increase at a 5.7% CAGR for the next decade due demand from the EV market.

The market is currently dominated by Asian players, particularly from China. Synthetic graphite has been favoured for a few reasons - including the lack of reliable supplies of natural graphite of sufficient quality and consistency.

Recognizing the future demand, several projects are currently underway to provide EV battery manufacturers with non-Chinese BAM - including Nouveau Monde, Syrah Resources, Talga Resources, Renascor Resources, Next Source, Magnis Energy Technologies.

Most Canadian graphite projects have historically not been successful. Even though the graphite is of a very high natural purity, the high capital and operational costs of mining and processing have proven prohibitive. Given the value of the industrial material/tonne has been relatively low, it has been difficult to make the economic case for sustained financing.

Most of the value of BAM is created from additional processing after it leaves the mill (i.e. coatings, further heat treatment, additives, mixing) – which is under-developed in Canada.

The wildcard for future graphite BAM demand is technological change in battery design. There is a lot of research being undertaken looking for alternatives to graphite anodes - including solid state batteries and silicon. However, despite the hype from various self-promoters the current consensus is that graphite will remain a predominant BAM for the next 5-10 years.

After 5-10 years it is too difficult to project what technological breakthroughs could occur and, just as importantly, how quickly they could be adopted.

Historically, the natural graphite BAM supply chain has consisted of 5 steps, i) mining, ii) further processing, iii) battery anode production, iv) battery cell manufacturing, v) EV company. EV car companies have recognized the vulnerabilities inherent in a long supply chain and are making efforts to secure it.

Accordingly, there is currently a short-term opportunity to secure a strong position within that supply chain. AMECA thinks that the next 6-24 months is the most opportune time to capture a lucrative market share – keeping in mind that the supplier qualification process for a major auto manufacturer can take over a year. Depending upon technological developments, the historical opportunity for graphite as BAM may last for another 3-8 years.

Speed to market is therefore going to be one of the most important determinants of success in catching this wave. If the graphite hasn’t already been discovered and/or will take 4-5 years to develop, the project will likely have missed the boat.

Therefore the focus, particularly on Canadian graphite, should not be on new discoveries because the profit margins for powder are likely to remain marginal (given the previously mentioned cost structures) and time lags. Rather, the focus should be on supporting secondary value-added processes. Initially this would bring the graphite up to BAM requirements. The longer-term play is graphene and its downstream applications.