AUS
NZ
UK
CA
USA
IND
Graphite, a battery mineral, is witnessing an uptick in demand thanks to the growing popularity of electric vehicles. Traditionally graphite was used to produce pencils, lubricants, steel and glass, these days its most important use is in batteries and energy storage systems. With growing EV demand many are looking at battery metals from a strategic point of view, be it private players or governments. Here we discuss an ASX listed graphite player which is the only company providing exposure to both Li-ion and deep energy storage batteries. The share price of this company has seen a 200% jump in the last one year.
This company explores, mines and processes natural flake graphite alongside other flake graphite products. Flake graphite has a full spectrum of applications. The largest buyer of type of graphite is the auto industry, especially electric, hybrid and fuel cell vehicle have pushed the flake graphite demand over past few years. Almost all eco-friendly cars and trucks require flake graphite. Even fuel cells use flake graphite, in fact the quantity needed is more than that of lithium-ion batteries. The company in discussion is Quantum Graphite Limited (ASX:QGL).
Earlier Quantum Graphite Limited used to get its supply from its own Uley1 mine, near port Lincoln in South Australia. The produce would mostly go to meet demand stemming from North Asia and Europe. However, the company is now focusing on developing the Uley2 mine operation. The Uley 2 project is claimed to be the next stage of development of old Uley mine.
Quantum graphite’s investments in proprietary advanced processing technologies has positioned it to expand its reach to a broader customer market.
How is QGL share price performing on the ASX?
On Wednesday (29 June) Quantum Graphite Limited’s share price was quoted at AU$0.445 apiece, trading within the 52-week price range of AU$0.115 to 0.52 a share. While QGL share price has appreciated over 200% in a year (as of 28 June 2022 prices), major price spikes were seen in March and May 2022.
QGL’s Share price history
Image Source-© 2022 Kalkine Media®, Data Source- EODHD/Others as of 28 June 2022
In a year, the gain on QGL shares is much more than the Australian benchmark index, ASX200 (XJO) and the Materials sector index, ASX200 (XMJ).
AR1 Price chart in comparison to ASX 200 and ASX 200 Materials Index (XMJ), as of 28 June 2022 closing
Image Source- EODHD/Others
- In March the company had released its interim financial statements on the ASX. Quantum Graphite had declared a 70% drop in its revenue from ordinary activities and a 181% higher net loss. It also did not declare or pay any dividends.
- In May 2022, QGL signed the binding offtake agreement for 100% of Uley 2’s stage one production. The agreement was inked with a Switzerland based, global metal and minerals trader- MRI Trading AG. The agreement is effective for a term of five years from first delivery of flake graphite production from Uley 2. The due diligence conducted by MRI has also shown synergies for key markets and customers. To add on, MRI’s freight capabilities expand QGL’s reach in Australia and Asia-Pacific while delivering a clear competitive advantage. The deal appears to have cheered investors, giving QGL share price the needed boost.
What else strengthens QGL’s business?
- QGL is using its advanced processing capabilities, to process and supply flake graphite based thermal storage media to emerging thermal battery manufacturer- Sunlands Co. For this QGL has also created a joint venture with Sunlands Co. The coarse flakes are exclusively sourced from the Company’s Uley mine. The finished media is fitted within Sunlands Co.’s long duration energy storage cells.
- The Company’s exploration requirements are fully funded, and it has already applied for a Commonwealth grant to help in funding of its further R&D programs.
Graphite market macros and QGL’s future
Many commodity analysts are of the view that the Graphite demand is set to surge in the next few years. Most of it stemming from the energy storage device manufacturers. Also, most production of Graphite currently comes from China, with many processing facilities concentrated in China. However, there is certain unreliability on supply of coarse graphite flakes from China. Further the global supply chain disruptions also add to the uncertainty. These facts put forward the need for users to create supply channel backups.
Quantum Graphite Limited claims to have advanced processing technologies. It also owns the Uley 1 and 2 mine for graphite sourcing. Its recent offtake agreements are also said to have expanded its capacities.
Risks
However, research shows that natural graphite mining causes emissions as the process utilizes coal. A few analysts believe, the true climate change impacts of producing battery graphite are much higher. So ESG risks are always looming on Graphite producers like Quantum.
