INTERVIEW: NextSource ramps up graphite plans in Madagascan output race

By Jon Stibbs
Published: Wednesday, 24 February 2021

NextSource Materials has ramped up its phased graphite production plans following requests from offtake partners, and following an investment from future chairman Mick Davis, NextSource Materials executive vice president Brent Nykoliation told Fastmarkets on Friday February 19.

NextSource, which is listed on the Toronto Stock Exchange, expects its Molo project in Madagascar to begin production from the second quarter of 2022 under the first phase of its planned development.

The first-phase production has been fully funded and will total 17,000 tonnes per year, with all material already committed to the company’s offtake partners.

The company has increased its planned production for the second phase in response to demand from its partners.

"For us to meet expected demand forecasts from our current offtake partners, we will need to expand to production levels to 100,000-150,000 tpy as early as 2023," Nykoliation said.

Production for phase two was originally planned for 45,000 tpy.

"We will need to raise more funding for this, however. We are now on the radar of several graphite consumers and have been fielding requests for material that could only be met once we expand," Nykoliation said.

NextSource has a modular development plan in place, which will be constructed offshore.

"It derisks the construction phase and provides us speed to market. Any future expansion is easy with the addition of modules, flotation tanks or crushers as required," Nykoliation said.

The company’s profile was boosted earlier this month when Davis’ new investment company, Vision Blue Resources, provided it with a $29.5-million investment.

"[Davis] has aggressive plans to accelerate the growth plans for our project and to be in line with the shift towards electrification, bringing up demand from original equipment manufacturers," Nykoliation said. "[Davis] is going to be chairman of NextSource and he sees us a strategic part of his portfolio."

Davis, former chief executive officer of Xstrata, has set up his new enterprise to bring opportunities in the battery material space to fruition.

"Our collective goal is to be a dominant global supplier of graphite throughout the entire value chain and, in particular, anode material for electric vehicle batteries," Nykoliation said.

Currently, around 25% of global graphite output of around 750,000 tpy goes into the lithium-ion battery sector, with 65% heading to refractories and 10% for expandable graphite applications, according to NextSource. Of these, the strongest growth is expected to come from the battery sector.

"The advent of the era of electrification means you have brand new demand for battery applications on top of the demand for traditional industrial applications for graphite," Nykoliation said. "The supply side will simply have to grow in order to meet the demand from both of these key consumption markets."

Existing offtake agreements

NextSource has two large offtake agreements in place, one is a major player in the European refractories sector and the second is a leading Japanese anode-material producer. But the company cannot be more public about them at this stage.

"We have an ideal deposit that will have half of production being the large and jumbo-sized flake and half being the medium and small sized. This is a fortuitous split as it meets the demand from the offtake agreements we have in place," Nykoliation said.

The large- and jumbo-sized material is appropriate for the refractory sector, along with the expandable graphite market.

Fastmarkets’ assessment for graphite flake 94% C, +80 mesh, cif Europe was $1,020 per tonne on February 18, unchanged since December 3 but up by 15.25% from $885 per tonne on November 5 due to tight supply in China - the major producer of the product - over the winter.

"Our +80 material expands nearly as well as our +50, which according to a significant manufacturer of graphite foils, is highly unusual. They described it as 'superflake,’ and we thought, what a great description, so we trademarked the name," Nykoliation said.

Medium-sized and fine flake graphite, meanwhile, are feedstock for the anode sector.

Fastmarkets’ assessment for graphite flake 94% C, -100 mesh, cif Europe, was $600 per tonne on February 18, unchanged from the previous week but up by 30.43% from $460 per tonne on November 5. Rising demand and reduced stocks over winter have been behind the price increase.

Downstream developments

Downstream, NextSource is also developing opportunities with its anode offtake partner in response to demand for the spheronized purified graphite (SPG) market, which is used in the lithium-ion battery anode sector.

"We have had very strong interest from buyers for SPG, so we are accelerating our downstream plans and have a letter of intent with one of our offtake partners to collaborate on building a battery anode facility outside of China to supply spheronized, purified graphite," Nykoliation said. "Our plan is build this facility in parallel with Phase 1 production, so we could begin supplying SPG in 2022 as well. Our partners are also working on introducing coating into our process as well."

All of the global commercial production of SPG is currently in China, and NextSource is among a cluster of producers seeking to enter the space.

Fastmarkets’ assessment for graphite spherical 99.95% C, 15 microns, fob China, was $2,500-2,750 per tonne on February 18, unchanged since January 28.

Among the emerging spherical graphite producers is Tirupati Resources, which also has a graphite mine in Madagascar.

Madagascar is developing as a focal point for graphite production, with global supply increasingly diversifying outside of China.

A third producer, Établissements Gallois, is also in the process of ramping up its existing output from the Indian Ocean island nation, which has a long history in the graphite sector.

"It is a race at the moment among the producers in Madagascar, as it is among all the graphite companies growing around the world - not everyone is going to succeed - and we expect to be in [the] top five to seven graphite projects in the world," Nykoliation said. "While others have been around for decades, ours is a brand-new discovery in the southern region of Madagascar."

While producers are racing to ramp up output, Nykoliation feels there could also be room for cooperation among the graphite companies in Madagascar.

"Due to the sheer size of our deposit, we will dwarf the other producers on the island, but there may be the potential for collaboration or consolidation in the future. The world is going to need a lot of flake graphite," he said.

NextSources also has a vanadium project - the Green Giant vanadium project - in Madagascar, which is separate from Molo.

"We also have a very large, stand-alone vanadium resource located only 11 km from our graphite project. As a result, we serendipitously have two of the primary raw materials [vanadium and graphite] that are needed in vanadium redox batteries," Nykoliation said. "Like graphite, vanadium already has an existing and significant industrial use over and above its requirement in batteries. This gives us great optionality of whom we can sell to."

Fastmarkets’ assessment for vanadium pentoxide 98% V2O5 min, in-whs Rotterdam, was at $7-7.55 per lb on February 19, up by 2.54% from $6.90-7.30 per lv the previous week. The market has soared by 34.81% since January 1, when the price was at $5.30-5.50 per lb, in response to strengthening demand.

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