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Flake Graphite's Place In The Battery Market

|Includes: Callinex Mines Inc. (CLLXF)

Following the completion of a successful exploration program at their wholly owned Neuron graphite property in Northern Manitoba near Thompson, Callinex continues to release high grade graphite drill intersections. Recently reported results from NEU003 intersected 4.1 meters grading 60.38% carbon graphite.

Flake Graphite Battery

Callinex contracted SGS labs to do a preliminary analysis of the structure of the intersections from the Neuron property, which has determined that the graphite mineralization occurs in coarse, polycrystalline aggregates and layers. SGS went on to say that, "The graphite forms fine to coarse flakes ranging from 100 μm (micrometres) to 2 millimetres as individual grains." And that it "is well crystalline and it might liberate well at around 1 mm grind." Callinex has further contracted the Lakefield, ON, analytical company to conduct a liberation test, which is underway.

Natural, flake graphite has been used in American industry for quite some time. Throughout the 1990s, the price of graphite was low, as Chinese graphite mines kept inexpensive flake graphite widely available. During that period, North American exploration for this industrial material ebbed.

Today, the Chinese continue to control most of the world's available graphite reserves, but a focus on building a value chain (producing finished products instead of raw materials) has cut off Chinese exports. Moreover, we've seen Chinese firms become importers of flake graphite. Canadian Graphite developer Focus Graphite recently signed a 10 year, minimum 20,000 ton/year offtake agreement with a Chinese industrial conglomerate.

Up and coming American car manufacturer Tesla Motors has designs on creating their own value chain, having expressed a plan to source all materials for their coming battery factory in North America. Tesla has taken the concept of electric cars from dream to reality, recently announcing their 100th Supercharging Station in the US. With the availability of cheap "fueling" extending the range of their vehicles, Tesla's target of selling 500,000 units per year in 2020 starts to look more and more realistic.

The rapid growth of the electric car market, an addition to the consumer electronics market, has led to increasing investor interest in the market for flake graphite. Gareth Hatch of Technology Metals Research explains how and why natural flake graphite is so important to the battery industry:

[…] synthetic graphite is twice the cost of battery-grade natural-flake graphite, and is typically derived from petroleum coke, which relies on crude oil as its source. Tesla has a stated goal of reducing the unit cost of battery production by a minimum of 30% between now and the initial ramp-up of the Model E in 2017. Natural flake graphite stands to play a significant role in reducing the unit costs of battery production and in reducing the environmental footprint associated with production, if acid-based purification steps can be avoided.

Hatch goes on to comment on the reasons behind the importance of flake size and purity in natural graphite concentrates:

Battery-grade graphite requires very high purity levels, typically >99.9% carbon-as-graphite (Cg). This material also needs to be spheroidized using careful processes that convert the flat graphite flakes into potato-like shapes, which pack much more efficiently into a given space. The high purity levels and the enhanced "tapping" density (to >0.9 kg/m3) are important for producing the high electrical conductivity that is required during anode operation.

Spheroidizing the graphite flakes also reduces their size, a process known as micronization. Standard battery-grade materials require an average diameter of approximately 10-30 μm, so in theory, feedstock materials with flake sizes greater than 30 μm (+400 mesh) could be used. However, starting purity levels tend to decrease with flake size, so flake material with an average diameter of 150 μm (+150 mesh) or greater is typically used. This is, of course, a double-edged sword, since the larger the flakes used, the more energy will be required to reduce the average size of the flakes to the desired 10-30 μm. Smaller particles are preferred, as this makes it easier for the lithium ions in the electrolyte to diffuse between graphite particles.

It should be noted that it is the tendency for purity levels to increase with flake size that is the real reason for the common 'mantra' that for battery-grade materials, the bigger the flake size, the better. In fact, the ideal precursor material would have small flake size if it had sufficient purity levels for the subsequent processing to be cost-effective.

The Hatch piece is a great overview of the graphite market, and well worth the read.

The purity of Callinex' recent discovery at Neuron is evident in the assays of all 3 holes the company released last week.

Callinex' focus on its Neuron graphite property is designed to bring its shareholders exposure to a materials market with exceptional growth prospects. The 43,000 hectare property was acquired by staking after a careful examination of archived reports showed that previous exploration had encountered graphite mineralization in multiple locations west of the Thompson Nickel Belt. This recent exploration program is only the first modern drilling that has been done on what the company believes could be an emerging graphite district.

As laboratory results continue to surface from the Neuron property in the coming weeks and months, Callinex is looking forward to learning more about their recent discovery and its place in the North American graphite market.

Disclosure: I am long CLLXF.

Additional disclosure: I am the Investor Relations Manager at Callinex Mines.