In March 2016 I had the opportunity to visit a leading North American research and development company, focused on materials and components relating to energy-storage devices. I was invited to visit the facility by Alabama Graphite Corp (AGC) (TSX.V:ALP, OTCQX:ABGPF), to see how AGC’s development of coated spherical purified graphite (CSPG) is progressing, and to get a better understanding of the battery prototyping and production processes.

For competitiveness reasons, the invitation was issued with the proviso that I not identify the company that I visited, or the personnel that I interviewed, under the terms of a strict non-disclosure agreement. The company (which I will call EngineeringCo for the purposes of this article) assists a number of players in the critical-materials space with the development of value-added processes, with particular expertise in Li-ion batteries (LIBs). EngineeringCo was at pains to make sure that the only work that I saw during the visit, pertained to processes and components relating to and produced from, AGC natural-flake graphite.

I was able to take a number of photographs during my visit, which are included below (click on the thumbnails to enlarge the images). Also included is a separator / electrode cross-section schematic, and other images produced by EngineeringCo and AGC that were verified during my visit.

Nevertheless, I had the opportunity to discuss a number of topics of wider interest to the use of natural graphite in LIBs with a senior scientist at EngineeringCo (whom I will call Dr. X), who is well known by many in the graphite industry and beyond, for his experience and expertise in the processing of graphite, anode production for LIBs and LIB prototyping and validation.

Regardless of the ultimate application, the early stages of natural-graphite processing are generally the same. The graphite ore is mined or excavated, and then crushed so that the contained graphite flakes can then be concentrated, via flotation. The crushed ore is typically placed into water with an additive such as pine oil or kerosene, which creates a thin film on the surface of the water. Graphite flakes are hydrophobic and lighter-weight, and being repelled by the water they remain at the surface, while the heavier rock matter simply falls to the bottom of the flotation cell. The result of these and associated processes is run-of-mine (ROM) concentrate, and historically has been the goal of most graphite juniors, looking to produce a saleable material as a result of their endeavors.

More recently, companies like AGC have realized that the way to maximize the value of their graphite ores is to apply secondary processes to this ROM concentrate, with the goal of producing so-called battery-grade graphite for LIBs. These secondary processes include purification, micronizing, spheroidizing and coating, to produce CSPG, a high-value graphite product that can be used for the anodes in LIBs. Each of these steps requires careful optimization, with the process parameters being tailored to the unique characteristics of each specific ROM concentrate.

I asked Dr. X why companies choose a particular order for completing the secondary processes of purification, micronizing, spheroidizing and coating ROM concentrate, for battery-grade materials. Not unsurprisingly, he commented that it boils down to economics. In the past, graphite mines would generally categorize their ROM concentrate into two broad categories; coarse flakes (+80 mesh / +180 µm) would be sold into higher-end applications (such as graphite crucibles, extruded shapes and steelmaking), whereas the finer material was only given secondary consideration, for use in pencils and other applications (such as powdered metallurgy, composite brake pads, forensic dispersions, zinc-carbon ‘lantern’ batteries, dry lm and liquid lubricants, and the like).

When first commercialized over 25 years ago, LIBs utilized anode-active materials comprised of mesophase carbon microbeads (MCMBs), produced via an expensive process by a single Japanese company, Osaka Gas Co. Osaka Gas was not able to reduce the cost of MCMB synthesis, in the face of LIBs becoming commodity devices, requiring commodity pricing on all of the materials and sub-components used to manufacture them. MCMBs soon lost their dominant market share to graphitized chopped carbon fibers (GCCFs), produced by Toshiba, BP Amoco and other companies.

The increasing demand for LIBs put further pressure on the anode-material producers and GCCFs were in turn superseded by two materials: graphitized, surface-coated synthetic graphite, and surface-coated natural purified flake graphite. Today, battery manufacturers increasingly favor the replacement of synthetic graphite with natural graphite in anodes for LIBs, for a number of reasons:

• The carbon-based precursor materials for the synthetic route have to be graphitized through a costly heat-treatment process. Since natural graphite is already graphitic in nature, it is an inherently lower-cost material to produce;
• LIB anodes require high-purity, spheroidal particles with sizes in the range of 10-25 µm. Synthetic graphite, once graphitized, is generally brittle and more resistant to processing, in contrast to natural graphite, which is more lubricious and amenable to such processing. This means that natural graphite is significantly easier to spheroidize than synthetic graphite (with some observers arguing that synthetic graphite cannot actually be spheroidized at all). Spheroidal particles are preferred as they contribute to maximizing the overall energy density value of the battery (more on this, later in this article);
• Most premium-quality natural crystalline flake graphite exhibits superior performance to synthetic graphite. For example, CSPG produced from AGC’s Coosa graphite deposit, with a particle size of D50 = 18.3 µm has a reversible capacity (the energy capacity that can be consistently and reversibly achieved upon cycling) of 367.21 mAh/g, just shy of the theoretical maximum of 372 mAh/g. In contrast, one of the industry’s best commercial synthetic graphite products with a particle size of D50 = 15.8 µm, has a noticeably lower reversible capacity of 347.2 mAh/g. More on these values, later in this article;

Typically the larger the flake size, the higher the purity of the untreated graphite, which resulted in the initial recent industry emphasis on the proportion of large-flake graphite in any given deposit (the more, the better, went the mantra). What this focus missed, however, is the fact that the process of converting large flakes into smaller particles of a suitable size for anode production, is expensive because any additional grinding is energy intensive, adding additional cost to processing. Indeed, the larger the flake size, the more energy is required for this size-reduction process.

If instead, the process began with smaller flake sizes, and the purity of these materials could be improved through low-cost purification techniques, finer flake material would become particularly attractive for producing battery-grade graphite, and in fact more cost effective than starting with large-flake material. Deposits would not require significant proportions of large-flake graphite to be suitable for battery-grade graphite production; having larger proportions of finer flake material could in fact be an economic advantage.

This latter approach is the one that AGC has taken with its ROM concentrate. Dr. X pointed out that the flake sizes in AGC’s Coosa graphite deposit are fairly evenly distributed. Instead of trying to convert all of this material into battery-grade graphite, a simple screening filter could separate the ROM concentrate into -100 mesh / -150 µm flake, for battery applications, with the remaining +100 mesh / +150 µm particles for traditional higher-end applications. Further screening to produce +80 mesh / +180 µm, +50 mesh / +300 µm and +32 mesh / +500 µm fractions could be applied, to further differentiate the coarse-flake material for specific end-use applications.

Battery-grade graphite requires high purity for effective operation. Traditional purification processes include baking the graphite with sodium hydroxide, and the acid-leaching approach, widely used in China, to dissolve the impurities out of the graphite. In the acid-leaching process, the ROM concentrate is immersed in a mixture of hydrochloric and hydrofluoric acids. The hydrochloric acid removes oxides present as soluble chlorides, but does not react with the silica impurities that remain. Hydrofluoric acid is needed to remove the silica, in the form of soluble fluorosilicic acid. This results in large amounts of acid washings; in China these are typically not neutralized or treated but are often simply flushed into local waterways, causing damage and pollution to local aquifers and wells.

While chlorides are not noxious, the fluorides produced, at the concentrations resulting from this process, are particularly toxic. While the cost of the acids used in the acid-leach process are relatively cheap (USD 300-350 / t of graphite purified), such costs do not take into account the cost of the treatment of the waste streams that would be required of any processing plant located in a Western jurisdiction, which according to AGC may be as high as USD 5-7k / t of graphite treated, using reverse osmosis. Clearly then, the acid-leach process is unlikely to be a cost-effective approach for any environmentally responsible graphite purification plant.

Another method is a variation of the Acheson process (originally used to produce silicon carbide and synthetic graphite), which involves the placement of large quantities of ROM concentrate and coke into a pit in the ground, and running high electrical current through it via two electrodes. The high electrical resistance of the mixture causes it to heat up quickly, producing a chemical reaction that results in relatively pure graphite. Operating temperatures are in the range of 2,800-3,000 °C. The presence of fine-flaked material in such a process is potentially dangerous because of the risk of combustion. Thus the graphite has to be pelletized prior to purification, with these pellets being re-crushed afterwards, before being further processed. However, the smaller the starting flake size, the more difficult and expensive it is to pelletize the material.

Other methods include the use of fluidized-bed technology, where the graphite is continuously fed into a reaction chamber and subject to a stream of inert gas at high temperature, which causes the impurities to volatilize (convert into gaseous mists) and to be removed from the graphite, which eventually burns off (and partially settles) in the off-gas chamber / neutralization process. The removed impurities are captured via scrubbers and turned into benign products such as gypsum.

The aforementioned thermal process is typically run at 2,400-2,600 °C – higher than the volatilization temperature of the impurities found within the graphite. Such high temperatures require significant energy consumption and are thus relatively expensive.

Using a process that eliminates the need to pelletize, can be run at lower temperatures, and which avoids the pollution associated with acid leaching, is therefore essential to the cost-effective purification of finer-flake graphite.

Although EngineeringCo has access to lower-cost purification processes that are suitable for finer-flake materials, AGC had already turned to another North American company (which we’ll call PurificationCo here – again, their identity is confidential) to work on this challenge for their material. I have previously visited the facilities of PurificationCo, and had the opportunity to discuss the purification process developed for AGC, with senior staff at PurificationCo, after my visit to EngineeringCo.

According to PurificationCo, the purification process for AGC material is essentially a halogenation process, where chlorine gas is used to convert the impurities to volatile chlorides. With an appropriate system design, the chlorine gas can be recycled, resulting in a relatively inexpensive process. The process is the standard process for purification of titanium dioxide to make paint pigments, with production in 2015 of about 3 Mt of titanium dioxide. The process runs at significantly lower temperatures than those of fluidized-bed processing – resulting in significant energy cost savings.

The surface area of finer graphite flakes is higher than for coarse-flake material, and much higher than graphite pellets, and this is advantageous for a process of this type because it makes it easier for the chlorine to diffuse into the graphite particles, and to react with the impurities present.

Dr. X commented that the graphite purity obtained during the purification step must be higher than the minimum purification specification for the battery-grade graphite at 99.95 wt% C. This was confirmed by PurificationCo.

This is because there are a number of post-purification processing steps required to produce such materials. Despite efforts such as air purification and other measures, each processing step has the potential to cause minor contamination in the material, at the parts-per-million (ppm) level. For this reason, the purification process produces a 99.98%+ purity graphite, higher than the final purity specification of 99.95%+ for the finished products.

I asked Dr. X how graphite purity is actually measured. He said that a carefully measured sample of a given graphite product is placed into a low-profile ceramic crucible, loaded in a small muffle furnace, where it reacts with oxygen. This reaction produces carbon dioxide which evolves as a gas. What remains is a tiny quantity of ash which contains the non-carbon content of the graphite. This ash is then weighed and analyzed for content, to determine the purity of the original graphite.

Interestingly Dr. X commented that this process can be used to identify the source of the graphite being tested, since each deposit has a characteristic distribution of impurities. Image analysis of the ash under magnification, combined with computerized statistical analysis, allows EngineeringCo to compare a given sample with a large database of previous samples. This is a useful tool for verifying the source of materials, for buyers and end users. The company also uses atomic-absorption spectroscopy to check the elemental content of the ash, for the presence of some 19 specific elements that are particularly problematic for battery operation, if found at elevated levels in the graphite. Full-blown chemical analyses can also be conducted using standard ICP analysis.

After purification, the next process step for the AGC material is to micronize it – to reduce the average particle size to some value within the 10-25 µm range that is optimal for anodes (the specific value will depend on customer requirements). This is achieved using jet milling, where the graphite flakes are drawn into streams of high-velocity gases that cause the flakes to collide with each other and to break apart, reducing their size to the target value. The EngineeringCo folks showed me how the process is controlled by altering the duration, the gas pressure and velocity in the system, and the mass of flake material processed at any one time. Small test batches are always done before processing bulk materials, since different graphite sources can exhibit different properties during the jet-milling process. Note, micronization may also be performed before spheroidization – and, in some cases, may be required, depending on the graphite material.

Before and after milling, the particle-size distribution of the graphite powders needs to be measured, so that the appropriate set of parameters to achieve the target size value can be determined, and to ensure that the jet-milling process has been effective. This is determined using a device that passes a laser through the powder, mixed with water with the addition of a detergent. The laser light will scatter as a result of its interaction with the particles, and the distribution of particle sizes can thus be determined, via a histogram plot. Cumulative volumes are also plotted against particle diameter, on the same chart.

The cumulative volume allows the operator to determine the ‘D values’ for the sample – essentially the range of particles sizes, and an average value. The particles are modeled as equivalent spheres in the system. The D10 value corresponds to the diameter of the equivalent sphere, at which 10% of the sample consists of smaller particles. D50 is the median diameter – the diameter at which half the sample consists of smaller particles. D90 is the point at which 90% of the sample consists of smaller particles. The D10 and D90 values represent a particular range of diameter values, with the D50 value representing the average particle size. All three values are useful in specifying the characteristics of a given powder.

Once milling is complete, the resulting powder is then classified into precise particle-size-based fractions of the overall material.

The next step in the process is spheroidization – converting the graphite particles into rounded, potato-like shapes. The closer the particles are to being spherical in shape, the greater the performance of the anode in the battery. Why is this?

It has long been proven by mathematicians that the most effective way to randomly pack as many particles into a given volume as possible, is if the particles within that volume are perfect spheres. If arranged carefully, then in any given volume the maximum theoretical space that can be taken up by the spheres, is 74% of the overall volume. For randomly packed spheres, this maximum drops to just below 64%. The further away a particle is from being spherical in shape, the less efficient is the random packing of those particles into a given volume. Spiky or needle-shaped particles, for example, when packed randomly, have an efficiency of packing somewhere in the region of 30% – significantly less than that for spheres.

So why do we care? Because the anode density – the amount of actual graphite that can be packed into a given volume – directly affects the energy density of the battery. This is the amount of energy that can be stored in the battery, per unit volume of graphite (measured in Wh/l). The denser the graphite anode, the greater the energy density on a full cell level.

Dr. X commented that this is one reason why synthetic graphite for graphite anodes is so expensive, because as produced, the particles tend to be long and thin. Even the best efforts to produce spheroidized graphite from synthetic graphite result in lower capacities per unit of battery volume, because they are ultimately less spheroidal. The conversion of these needle-like shapes into spheroidal particles is more energy intensive than for natural-flake graphite, and with lower yields.

Synthetic graphite can also see lower graphitic carbon content than natural graphite. The latter affects that critical parameter of any battery anode, its reversible capacity.

As previously mentioned, the theoretical maximum reversible capacity for graphite anodes is 372 mAh / g. EngineeringCo has measured values of 367.21 mAh / g for anodes produced from AGC graphite. This compares to values of 290-330 mAh / g for typical synthetic graphite, and 340-350 mAh / g for the best anodes produced from premium-quality synthetic graphite.

Needle-like particles are also undesirable because they have a tendency to break into small pieces during processing, and if still present, those pieces may diffuse in the electrolyte during operation, to the cathode, potentially causing a short circuit. Even if this can be avoided, these pieces may absorb electrolyte, impairing the capacity of the battery because of first-cycle losses (chemical reactions at the interface of the anode during the first charge/ discharge cycle).

EngineeringCo uses a highly proprietary spheroidizing process for the AGC materials, causing the particles to smooth each other through collisions that eventually result in the desired spheroidal shape. Sharp edges present in the original flakes are broken off and are redeposited onto the surface of the spheroids. The subsequent yield of the process, according to Dr. X, is 75%+, compared to the typical yields of processes undertaken in China at 20-30%. The cost benefit of such yield improvements are self-evident, if they can be scaled.

Furthermore, the remaining 25% of non-spheroidized graphite, with a typical particle D50 of 3-10 µm, can be used as conductivity-enhancement additives in the battery cathodes. Dr. X commented that junior graphite companies generally have little appreciation for the opportunities relating to cathodes, in addition to battery anodes. Premium-performance conductivity-enhancement materials are typically worth in the region of USD 15-20k / t – significantly higher than the USD 12-14k / t that spheroidal graphite produced from natural graphite can command. These materials could also be used in the production of alkaline and zinc-air batteries, conductive paints and coatings, to name a few markets.

Ultimately the performance of the graphite, once produced, is related as previously stated, to its density in the anode. Tap density is frequently used to describe this parameter – calculated by mechanically tapping a graduated cylinder containing graphite material, until little further volume change is observed. EngineeringCo uses autotap machines to determine tap density, by recording the height of material in a container, and its mass.

Dr. X argues that a more useful parameter is the bulk density of the material, because when used to produce anodes, the graphite particles are free flowing, and are not tapped. The bulk density is the ratio of the sample mass to the volume that it occupies (including gaps between the particles), without being tapped. It is measured using a Scott volumeter. This uses a receptacle of known volume and mass, into which graphite is poured through a funnel that sits on a baffle assembly. As the graphite pours through the baffles, it fills the receptacle until it overflows. The powder is leveled off using a flat edge and then the cup is re-weighed, to determine the mass of graphite and thus the bulk density, since the volume is known.

The bulk density needs to be as high as possible because the battery anode is produced using a painting process, and is not pressed or otherwise ‘tapped’ – thus requiring particles to be as close to spherical as possible, as previously explained, for space-packing reasons. More on that process, later in this article.

Once spheroidized, the graphite particles need to be classified by size and then coated. There are a couple of important reasons for this. The first is to improve the safety of battery operation. As mentioned previously, if there are any sharp edges left at the surface of the graphite particles prior to anode formation, these may break off and diffuse to the cathode during operation, increasing the chances of a short circuit in the system at the cathode, leading to thermal runaway. ‘Smearing’ the particle surface during spheroidizing and then adding a coating reduces the probability of these sharp pieces breaking off the graphite particles in the anode, during operation.

The second reason is to reduce problems at the surface-electrolyte interface (SEI) in the anode, that result in first-cycle losses. During the first cycle in the battery, a foam layer can build up at the SEI which can reduce the reversible capacity of the battery during subsequent charge / discharge cycles. Again, the presence of small pieces of graphite can increase the thickness of this SEI layer and coating the particles helps to reduce it, by decreasing the Brunauer, Emmett, and Teller (BET) parameter for the particles. This is a measure of the effective surface area of the particles; the higher the BET surface area value, the greater the probability of sharp surfaces being present on the particles.

EngineeringCo uses a proprietary method for applying a 10 nm carbon-based coating on each of the particles, which is subsequently cured to polymerize the coating at the surface. The coating provides continuous coverage of each particle to reduce the BET surface area, while at the same time allowing the Li⁺ ions in the electrolyte to pass through small pores or channels, to contact the surface of the graphite particles in the anode. Larger molecules (such as the small pieces of graphite previously mentioned) are prevented from getting through. The ability to protect the surface of the anode without impeding the flow of Li⁺ ions is crucial for effective battery operation, and the proprietary coating allows this to happen.

The coating process is the final step in the production of the CSPG material, and the graphite is then ready to be used in the production of anodes for LIB testing.

All battery prototypes at EngineeringCo are individually produced, in either button (CR2016 or CR2032) or cylindrical (AA, 18650 or 32650) form factors, depending on the particular goals of the project. Putting together the batteries is undertaken in an argon glove box, because of the reactivity of the Li-ion electrolyte in the air. Dr. X indicated that in commercial facilities, the construction of batteries is undertaken in dry rooms which have a special atmosphere called ‘dry air’, which can be breathed by the workers in them, but which prevents the oxidation of the Li-ion electrolyte and other compounds used in battery construction.

For the cylindrical batteries, the anode, separator, and cathode components are wound together in a spiral, before being placed inside a cylinder. The anode is produced from a long strip of copper foil, typically 10 µm thick, which is coated on both sides with a paint of CSPG particles, each layer being approximately 45 µm thick. The cathode is produced from a long strip of aluminum foil, typically 20 µm thick, which is coated on both sides with a paint of one of several metal-oxide compounds, such as lithium cobalt oxide, lithium iron phosphate, lithium manganate, or lithium nickel manganese cobalt, depending on the battery configuration to be tested. These cathode layers are approximately 90 µn;m thick.

Mixed in with this cathode metal-oxide powder is approximately 8 wt% of the conductivity-enhancement additives previously mentioned, that is typically equal parts carbon black and graphite. Such additives are always included in the cathode formulations. Typically, synthetic graphite is used, though as Dr. X commented previously, there is an opportunity to use the natural graphite that remains after spheroidizing, in this additive. The additive is required to improve the conductivity of the cathode during operation, as well as to control the viscosity of the paint when it is being applied to the foil. The graphite here therefore has a different function that the graphite being used in the anode. The aluminum foil used in the commercial production of cathodes may also be coated with carbon.

In between the anode and cathode strips is a 20-25 µm thick separator strip, typically produced from an ultra-high-molecular-weight polypropylene or polyethylene film, which has a controlled level of porosity. This gives some ‘space’ for the electrolyte between the two electrodes. The overall thickness of the anode component is approximately 100 µm, whereas the cathode strip is typically 190-200 µm thick. The difference in thickness is a result of the different reversible capacities of the materials used in the anodes, with the best cathode materials having values that are less than half that for natural-graphite anodes. Therefore, the cathode thickness is approximately double that of the anode, to balance the electrochemistry of the system, during operation. The diagram included in the images below shows a schematic of the anode / cathode / separator arrangement inside the battery.

Once the spiral has been wound and placed in the cylinder, the electrolyte is added, and the cylinder is sealed via either crimping or laser welding. Button-shaped battery prototypes use disks instead of spirals inside the container, though the configuration is effectively the same as for the spiral systems. The batteries are then ready to undergo proprietary formation, followed by testing, which involves repeated charging and discharging of the batteries, to determine the first-cycle losses, reversible capacity, and any changes in characteristics over time.

By the time of my visit, EngineeringCo had previously processed over 10 kg of AGC graphite material into CSPG material, and produced at least 50 batteries from it. Multiple prototypes and tests are required to establish representative performance metrics for the batteries, and the graphite contained within them.

The visit to EngineeringCo was very enlightening and it was a great opportunity to see the operations used to produce CSPG materials from AGC’s graphite, and the process of testing and evaluating such materials in actual battery prototypes. My thanks go to EngineeringCo, Dr. X and his colleagues for hosting me, PurificationCo and to Alabama Graphite Corp. for the invitation to see these processes in action.

Disclosure: at the time of writing, Gareth Hatch is neither a shareholder of, nor a consultant to, Alabama Graphite Corp. (“AGC”). Neither he nor Technology Metals Research, LLC received compensation from AGC or from anyone else, in return for the writing of this article.

It’s no secret that there is a surplus of cerium (Ce) supply within the rare-earth-element (REE) market. More recently I’ve been hearing folks grumbling that we will soon be awash with yttrium (Y) too, with more than one junior-mining executive referring to Y as “the Ce of the heavy REE world”…

While I do not agree with this sentiment when it comes to future Y supply, I am always interested to learn about potential new applications for this element, given the greater potential for availability in coming years. So when Ryan Castilloux, author of the recent Adamas Intelligence report “Rare Earth Market Outlook: Supply, Demand and Pricing from 2014-2020” told me about an emerging application that could dramatically increase demand for Y, I was intrigued. When he started talking about another application that could also significantly increase demand for Ce as well, I naturally started to pay close attention.

As part of his recent 12-month study of the rare-earth sector, Ryan uncovered these and numerous other potential new uses for REEs that could significantly impact demand before 2020. Not all of them have the same chances of penetrating the market, and the actual impact on demand will vary, but being aware of these new uses is vital to understanding the medium- and long-term prospects for the sector.

Following our recent discussion on his new report, I got together with Ryan again recently and persuaded him to discuss some of these emerging end uses in more detail. We put together a 40-minute video of the discussion, which I think you’ll find to be very interesting.

You can access the free video by clicking here or by clicking the image above. Get in touch with us if you have any questions on the discussion.

You can also get more details on Ryan’s 573-page report by visiting http://www.REEreport.com. – if you order an electronic copy of the report by the end of December 5, 2014, TMR will send you a free printed hard copy, as well as a copy of our forthcoming report on recent global rare-earth import & export statistics, covering dozens of individual rare-earth products and product groups.

You hardly need me to point out that the rare-earth junior mining sector is in a challenging place right now. The current state of rare-earth prices and their impact on the market cap of pretty much every company in the sector, has everyone concerned.

Are things going to get better? Are future rare-earth prices going to reach the numbers predicted in recent scoping and pre-feasibility studies? What will be the effects of the ongoing crackdown on illegal mining in China? What will the demand profile for individual rare earths really be, in the not-too-distant future?

These questions and more like them, were the basis of a 12-month-long ‘deep-dive’ study of the rare-earth sector by Adamas Intelligence. Adamas recently concluded that study and has published its findings in a 573-page report, titled “Rare Earth Market Outlook: Supply, Demand and Pricing from 2014-2020“.

I recently got together with Ryan Castilloux, founder of Adamas and the lead author on the report (which also looks at the period 2008-2013), to discuss some of its major findings.

We put together a 30-minute video of the discussion, which gets into the structure and content of the report, as well as featuring key data and charts to describe top-level data.


The good news? The market and prices are set to bounce back, particularly in the face of growing demand for individual rare earths, for specific applications.

Ryan has done a masterful job with this report, which is just about the most comprehensive review of the rare-earth sector that I’ve ever seen.

You can access the free video by clicking here or by clicking the image above. Get in touch with us if you have any questions on the discussion, or the report itself; and look out for details of a second video that we’re working on, discussing some exciting emerging end-use applications for rare earths, which could have a further positive impact on rare-earth demand before 2020.

Last month I paid a visit to the Miller graphite project in Canada, under development by Canada Carbon Inc. (TSX.V:CCB) in Grenville Township, Quebec. The Miller property was the home of a historical graphite mine in the latter half of the 19th century.

Grenville is situated 50 miles west of Montreal, approximately half way between that city and Ottawa. The journey from Montreal took about 75 minutes via Highway 50. Grenville is close to the town of Hawkesbury in Ontario, with the two sitting on opposite sides of the Ottawa River, which forms much of the boundary between the two provinces.

Generally I don’t visit a mineral project under development, until it has an associated mineral resource estimate that conforms to guidelines such as NI 43-101 or the JORC code. It’s the same criterion that I use for including projects on the TMR indices for rare earths and for graphite. A mineral resource estimate is a useful initial filter for discerning the evolution of technical knowledge associated with a given project. Miller does not have a mineral resource estimate yet; I had, however, heard about the unusual nature of the Miller project (which we’ll get into later) from a number of sources. I therefore decided to accept an invitation to come visit the property, to see for myself. Canada Carbon published a technical report on Miller in May 2014, which follows the NI 43-101 guidelines, in addition to other data associated with work on the project. This report did not include a mineral resource estimate.

I was hosted on my visit by Bruce Duncan, Executive Chairman and CEO of Canada Carbon. Also joining us were Steven Lauzier, the project geologist, and Rémi Charbonneau, a consulting geologist who is the Independent Qualified Person for the project.

The initial exploration work at the Miller property started in February 2013, with a ground survey to locate the original Miller Mine, and to confirm the presence of graphite veins and pods. Subsequent work consisted of additional ground and airborne prospecting work, identifying a series of anomalies via geophysical techniques such as small-loop frequency-domain electromagnetic (MaxMin), very-low frequency (VLF), induced polarization (IP) and versatile time-domain electromagnetic (VTEM) surveying. Significant anomalies of interest were then targeted for ground trenching, accompanied by core drilling.

The trenching work identified a number of graphite veins and pods throughout the property. The graphite can be found alone or associated with minerals such as wollastonite and pyroxene. It has also been found in disseminated form in marble and sulphide-bearing paragneiss, but the veins and pods are of primary interest because of their high grade and potential purity. Mr. Lauzier indicated that veins with grades of 40-80% carbon as graphite (Cg) and pods with grades of 10-15% Cg are common on the property.

Through the trenching work, the company identified three significant showings, designated VN1, VN2 and VN3, and which we visited in turn. The first of these, VN1, contains an irregular vein of semi-massive, coarse graphite, originally under 1-3 m of glacial till, along with pods of graphite mixed with wollastonite. The rocks here consist of banded paragneiss and marble units. The primary vein is exposed along a strike length of 12.8 m, with widths ranging from 10 cm to 1.7 m. Numerous secondary veins can be seen.

VN2 has a massive graphite vein up to 1.5 m thick, and numerous secondary veins and pods which follow the contact between the local marble and paragneiss rocks. Core drilling at this showing indicates that this contact is at least 39 m deep below the surface. VN3 is another massive graphite vein, some 2 m thick and 5 m long, hosted in unaltered marble. Six shallow cores were drilled at this site and the graphitic horizons were encountered below surface, confirming the initial event of the anomalies. You can see these showings in the images below.

Mr. Lauzier indicated that there are numerous additional graphite-wollastonite pods on the Miller property that have been exposed during trenching. The pods are pegmatitic in nature and generally occur in the contact zone between the paragneiss and marble. Numerous graphite veins have also been discovered as well. Mr. Lauzier commented that the graphite veins are likely the result of the transportation of carbon in hydrothermal fluids, which were channeled up through fractures in the rock over time. As the fluids cooled to 700-800 °C, the graphite was precipitated in large, highly crystalline flakes.

During my visit, on-ground grids for additional IP surveying were being prepared across the property.

So what is the big deal about this type of graphite? The formation of hydrothermal veins leads to the presence of very high-purity graphite and such occurrences are rare. The only current source in commercial quantities is the island of Sri Lanka. Once extracted, the graphite is relatively easy to process. The high degree of crystallinity in vein graphite (as a result of the way that it was formed), leads to thermal and electrical properties that are superior to the more typical natural-flake graphite, which forms from carbonaceous sedimentary deposits under heat and pressure. The most interesting and potentially lucrative applications for hydrothermal graphite materials, however, are in the nuclear industry.

So-called nuclear- or reactor-grade graphite is high-purity graphite that is used as a moderator material in thermal nuclear reactors that utilize uranium. Moderator materials are used to convert so-called fast neutrons into thermal neutrons during the fission process, which leads to a sustained (and controlled) chain reaction, and the liberation of significant quantities of energy. Reactor-grade graphite can also be used as a neutron reflector, which can be used to generate a chain reaction from a mass of fissile material that would normally not ‘go critical’ without the presence of the reactor material. In essence, it reduces the amount of uranium or other fissile material required, to sustain a chain reaction.

Because of the interaction of the graphite with neutrons during the nuclear process, it is vital that the material be free of impurities that will absorb neutrons. Boron is the most problematic impurity in this regard; reactor-grade graphite must have a boron, or equivalent-boron content (EBC), of less than 5 ppm. EBC is a measure of the collective effects that all impurities present have, on neutron absorption.

In June 2014, Canada Carbon announced the completion of purity testing on lump / vein graphite samples taken from the Miller property, indicating that a simple flotation process alone could produce graphite with purities of 99.8-99.9% total carbon (C(t)). With an additional simple thermal process, exceptional purities of 99.98-99.998% C(t) were achieved. Significantly, the EBC of the material after flotation concentration alone was 1-3 ppm, confirming that the material is nuclear-purity graphite, without needing hydrometallurgical treatment of any kind. Such material commands significant price premiums over more conventional natural graphite. Test results showed particularly low levels of sulfur in the graphite. The ease of upgrading via flotation would indicate that the impurities present are found at the surface of the graphite flakes, and not significantly intercalated or embedded in the material as is common with more conventional natural flake graphite. The company has published its assays on its website, so that calculated values such as EBC can be reviewed.

Miller is located on private land, whose owners entered into a surface-access agreement with Canada Carbon. Relations between the company and the land owners are apparently cordial; during the visit we met one of the owners, who is supervising the excavation of bulk sample materials from the site, on behalf of the company. Canada Carbon has permission to remove up to 480 t of materials from the property for processing in a pilot plant, to be built by SGS Canada Lakefield (SGS), and based on the aforementioned initial bench-scale flotation process, previously developed by SGS. The company is in the process of crushing and shipping the first 100 t of material from the site, and has until February 2015 to complete the rest of the sampling.

The property is well serviced logistically; In addition to Highway 50 and a power line which both cross the property, there is a rail line less than half a mile south of the highway and access to water via a river which also passes through the property.

The graphite veins and pods that are present at the Miller property make it highly prospective for the production of nuclear-grade graphite – but they also make it a real challenge to be able to produce a traditional mineral-resource estimate. Such estimates are typically derived from drilled samples taken across a project, with the mineral content found within the cores used to establish a 3D model of the geology of the deposit. This is fine in a deposit where the graphite or mineral of interest is disseminated spatially in the host rock; but when graphite occurs in highly concentrated veins and pods, drill results are likely to be ‘hit or miss’, with mostly ‘miss’.

This is one reason why the identification of graphite occurrences starts with electromagnetic and other geophysical surveying tools, followed by on-the-ground trenching; given the thickness of the initial veins and pods trenched, there should be little trouble in finding significant quantities of graphite on the project. Without a way to properly quantify that graphite however, within the wider project space, how does one move the project forward into a preliminary economic assessment or pre-feasibility study, which will comply with the requirements of NI 43-101? Just as important, how do potential future off-take partners develop a comfort level that the graphite will be there, in the years to come?

I put these questions to Mr. Duncan, who acknowledged the challenges right away. He commented that the unique nature of the deposit has already generated significant interested from end users, who are not only interested in the graphite for its potential nuclear applications, but also for other end uses where very high purity and / or crystallinity is an absolute requirement. He said that such end users are used to acquiring materials from Sri Lanka, where mining is conducting on a rolling basis; resources are identified and then put into a mining campaign with a one-to-two year horizon. As the known occurrences are depleted, new resources are identified by drilling and put into the queue for subsequent mining. Many airborne EM anomalies were found out over the Miller Property. An IP survey on anomaly E1 revealed many different conductive and chargeability anomalies. It appears that the Miller Property could contain sufficient newly discovered graphite occurrences to develop a model based on exploring and mining the discoveries as they are made, without developing a resource model for the property as a whole.

This approach does not necessarily lend itself well to traditional mine financing of course, but Mr. Duncan indicated confidence that the project could be bootstrapped into operation, with a combination of advances on future off-takes from strategic partners, and other non-traditional sources of financing, that do not necessarily require placements in the open market (and which would require greater detail in terms of mineral resource estimates and the like).

While SGS continues to process the initial 480 t of material from the Miller stockpile, Mr. Duncan said that the company will also continue with characterization and purity tests of the graphite material, provide samples for potential end users as well as advancing further exploration of the Miller property. Although he would not comment on capital expenditure estimates – due to regulatory compliance – the cost of mining graphite at the Miller property holds the potential to be comparatively low, versus a conventional open-pit graphite mine in a more remote location. Given the accessibility of the graphite veins, and their apparent thickness and shallow depth (and, in many instances, their location at surface), Canada Carbon’s extraction costs may be particularly low. If the thickness of the initial veins and pods trenched to date, is found elsewhere on the property, then significant quantities of graphite may be present.

Since my visit to the project, Canada Carbon has released additional test results that indicate that certain properties of the Miller lump / vein graphite match or even exceed those found in synthetic graphite. Both tap (bulk / unprocessed) and skeletal (actual) densities were shown to be close to that of synthetic graphite; the specific surface area and porosity levels of the Miller graphite were found to be significantly lower than for synthetic graphite, which is particularly desirable in the production of anodes for lithium-ion batteries. This combination of properties means that once commercially available, graphite produced from the Miller property may be able to command prices as high as $10,000-20,000 / tonne, based on recent cost estimates from the likes of Industrial Minerals and others for synthetic graphite.

The Miller property is clearly an unusual and possibly unique graphite project; and given the indications that lump / vein graphite sources in Sri Lanka are diminishing, a hydrothermal lump / vein deposit in North America would be highly attractive to numerous end users. The key challenge for the project will be to be able to put in place a financing structure that will allow the project to go into commercialization, without the benefit of establishing a minimum level of confidence in the size of the resource present, using the usual means of reporting. Nevertheless, if strategic and other partners can be persuaded to work with Canada Carbon on the basis of the excellent metallurgical results obtained to date, the project has a good chance of going into operation.

My thanks go to Mr. Duncan, Mr. Lauzier and Mr. Charbonneau for hosting my visit, and for numerous useful discussions.

Disclosure: at the time of writing, Gareth Hatch is neither a shareholder of, nor a consultant to, Canada Carbon Inc. He did not receive compensation from Canada Carbon or from anyone else, in return for the writing of this article.

On February 26, 2014, Tesla Motors Inc. (NDQ:TSLA) announced details of its long-awaited “gigafactory”, an ambitious plan to build a facility to manufacture lithium-ion batteries in large-enough quantities to meet the needs of the 500,000 electric vehicles (EVs) that the company plans to produce in 2020. Tesla proposes to build this facility somewhere in the southwest United States, in reasonable proximity to its California-based vehicle assembly plant.

Tesla’s plans call for the creation of 35 GWh/year of production capacity for its third-generation Model E vehicle, implying an average 70 kWh of storage capacity per vehicle. The plan calls for an additional 15 GWh/year of production capacity, presumably to meet the needs of additional ventures with which Tesla founder and CEO Elon Musk is involved.

In addition to the significant quantities of lithium, cobalt and other metals that the batteries from this proposed facility will require, even greater quantities of graphite will be needed to produce the anodes that are used in these batteries.

It is obviously early days for the gigafactory initiative, and a number of important details have yet to emerge. There is certainly no guarantee that Tesla will actually move forward with the project, or that it might not morph into some other form. Nonetheless, it is important that the supply chain gets itself ready to participate.

Bloomberg picked up on the use of graphite in lithium-ion batteries in a March 14, 2014 article. Titled “Teslas in California Help Bring Dirty Rain to China“, Bloomberg linked the future Tesla facility to the significant pollution generated by China’s natural-graphite industry, which has “fouled air and water, damaged crops and raised health concerns“. Of particular concern is the use of acids by the Chinese industry to purify mined graphite so that it can be used in battery anodes.

Tesla’s battery supplier is Panasonic Corporation (TYO:6752), providing battery packs for the Tesla Model S vehicle that contain more than 7,100 individual 18650-model cells. It is unclear if Panasonic uses synthetic or natural graphite in these batteries, or how such materials are processed. Mr. Musk did use his Twitter account on the same day that the Bloomberg article was published, to describe the accusations as “[b]eyond ridiculous“.

Nonetheless, 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.

The present flake-graphite market is dominated by China; aside from the issues of pollution, there is increasing evidence that the country’s flake-graphite resources are becoming depleted. Fortunately, there are a number of promising flake-graphite projects under development outside of China.

Producing battery-grade flake graphite
As with any natural resource, the quantity and grade of any given graphite deposit is important, but the type and distribution of the flake size, their purity and their amenability to processing dictate the quality of any given project.

The graphite ore is mined from the deposit and is subject to standard beneficiation processes, such as crushing, milling and flotation. The higher the initial head grade, the cheaper this process will generally be, all other things being equal. The resulting graphite concentrate, known as run-of-mine, or ROM concentrate, is typically sold directly to end-users in a number of sectors. Some junior mining companies are planning to upgrade a portion of that ROM concentrate internally for specific applications, such as the high-purity graphite used in the production of battery anodes.

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.

One other important factor in the production of battery-grade materials is that of wastage. The standard spheroidizing and micronizing processes used in China waste up to 60-70% of the mass of total graphite flakes present during processing. Therefore, for every one tonne of spheroidal graphite produced in China, approximately three tonnes of feedstock materials might be required (though the waste materials can be used for other purposes).

The graphite may be purified before or after spheroidizing and micronizing, depending on the manufacturer. As mentioned earlier, the low-cost approach typically used in China is to leach the impurities from the graphite with acid, with the associated environmental concerns that that brings. Alternatively (and far more acceptable in Western jurisdictions), a thermal process can be applied. This typically involves the use of halogen gases to cause chemical reactions at high temperatures with the impurities, which covert the resulting compounds into gases too and eliminate them from the bulk graphite material. The higher the starting purity levels of the graphite after initial concentration at the mine site, the lower the cost will be for purification, and this can make a substantial difference when comparing concentrate feedstocks with different starting purity levels. TMR estimates that the cost difference in purifying a 95% Cg concentrate to >99.9% Cg, versus taking a 98% Cg concentrate to >99.9% Cg could be as much as $2-3,000/t of concentrate, using thermal processes.

The final step for preparing spheroidal graphite for anode production is the application of a coating to the particles to reduce their specific surface area. This is important, as reducing the specific surface area will increase the long-term capacity of the battery cell. Intercalation of the electrolyte solvent into the graphite and its reaction with it causes expansion of the graphite, with the potential for delamination and a lowering of the life expectancy.

During the first charge of the battery cell, an initial, irreversible chemical reaction occurs between the electrolyte and the graphite in the anode, resulting in the formation of a so-called surface electrolyte interphase (SEI) layer. Once formed, this layer reduces further decomposition of the electrolyte and actually protects the graphite anode from exfoliating.

With too large a specific surface area, the formation of the SEI layer can reduce the graphite’s ability to subsequently hold and to release the lithium ions in the electrolyte, thus reducing lifetime capacity for the battery. Coating the graphite prior to anode production reduces this effect and helps to maintain the maximum capacity possible for the battery. The coating can also reduce the chances of a runaway chemical reaction in the battery.

Such coatings are typically carbon- (not graphite-) based; uncoated spheroidal graphite typically sells for $3-4,000/metric tonne (t); coated spheroidal graphite sells for $9-10,000/t. The battery manufacturers typically apply these coatings, though some traders will buy uncoated materials and apply coatings before selling the finished product to the battery manufacturers.

How much battery-grade graphite will Tesla need?
Let’s return now to Tesla and its proposed gigafactory. We know that the 500,000 EVs that Tesla has planned for 2020 will require a total of 35 GWh of energy storage. We now need to determine how much graphite will be contained in those batteries.

The Department of Energy estimates that graphite constitutes approximately 16% by weight of a typical lithium-ion battery. The Panasonic spec sheet for its 18650 batteries indicates that each cell weighs 45 g, which means that the 7,104 cells in the 85 kWh battery pack for the 2013 Tesla Model S weigh approximately 320 kg. We can therefore estimate that these batteries use approximately 0.62 kg of graphite/kWh storage capacity – over 54 kg of graphite per 85 kWh vehicle. Note that the battery pack for a Tesla Model S is approximately four times the capacity of a “standard” battery EV.

This translates into approximately 21,600 t of graphite required for the 500,000 batteries (each with 70 kWh capacity) needed in 2020. However, we need to account for the relatively low (30%) yield of battery-grade graphite, using current processing methods. This means that some 72,050 t of graphite feedstock would actually be required for these batteries at those yields.

Using today’s prices for synthetic (~$20,000/t) and coated spheroidal natural graphite (~$10,000/t), all other things being equal, a switch from all-synthetic to all-natural-graphite anodes for those 500,000 EVs/year would save $216M in material costs, which translates to over $6/kWh, or over $430 per vehicle. Not a bad start.

On top of the batteries for its EVs, Tesla will need a further 9,250 t of graphite for the additional 15 GWh/year of non-EV capacity at the gigafactory, which in turn, would require 30,900 t of graphite feedstocks for the production of battery-grade materials, at current yield levels.

This is a total of just under 30,900 t of graphite in the batteries, requiring 102,900 t of feedstocks using current processing methods and yields. This is over 125% of the global natural flake graphite market, currently at 80-85,000 t/year!

Who can supply this battery-grade graphite?
Clearly, there is a potential significant imbalance between current levels of supply and the projected future demand for graphite, if the Tesla gigafactory comes on-stream.

TMR tracks graphite projects under development via the TMR Advanced Graphite Projects Index. The minimum requirement for a project’s inclusion on the Index is for it to have an NI 43-101- or JORC Code-compliant mineral resource estimate. At present, there are 23 such mineral resources on the Index associated with 20 graphite projects being developed by 16 different companies in 8 countries. Those resources are:

Projects on the TMR Advanced Graphite Projects Index (March 2014)

Project	Location	Owner	Ticker Symbol(s)	Resource
Albany	CAN	Zenyatta Ventures Ltd.	TSX.V:ZEN	NI 43-101
Balama East	MOZ	Syrah Resources Ltd.	ASX:SYR	JORC
Balama West	MOZ	Syrah Resources Ltd.	ASX:SYR	JORC
Bissett Creek	CAN	Northern Graphite Corporation	TSX.V:NGC, OTCBB:NGPHF	NI 43-101
Campoona	AUS	Archer Exploration Ltd.	ASX:AXE	JORC
Epanko	TZA	Kibaran Resources Limited	ASX:KNL	JORC
Geuman	KOR	Lamboo Resources Ltd.	ASX:LMB	JORC
Graphite Creek	USA	Graphite One Resources, Inc.	TSX.V:GPH, OTCQX:GPHOF	NI 43-101
Kearney	CAN	Ontario Graphite Co.	N/A	NI 43-101
Kookaburra Gully	AUS	Lincoln Minerals Limited	ASX:LML	JORC
Koppio	AUS	Lincoln Minerals Limited	ASX:LML	JORC
Kringel	SWE	Flinders Resources Ltd.	TSX.V:FDR	NI 43-101
Lac Guéret	CAN	Mason Graphite Corp	TSX.V:LLG	NI 43-101
Lac Knife	CAN	Focus Graphite Inc.	TSX.V:FMS, OTXQX:FCSMF, F:FKC	NI 43-101
McIntosh	AUS	Lamboo Resources Ltd.	ASX.LMB	JORC
Mousseau West	CAN	Graniz Mondal Inc.	TSX.V:GRA.H	NI 43-101
Molo	MDG	Energizer Resources Inc.	TSX:EGZ, OTCBB:ENZR	NI 43-101
Nunasvaara	SWE	Talga Resources Limited	ASX:TLG	JORC
Raitajärvi	SWE	Talga Resources Limited	ASX:TLG	JORC
Samcheok	KOR	Lamboo Resources Ltd.	ASX:LMB	JORC
Taehwa	KOR	Lamboo Resources Ltd.	ASX:LMB	JORC
Uley Main Road	AUS	Valence Industries Limited	ASX:VXL	JORC

Any number of these projects potentially has what it takes to become successful graphite mines, especially given the pressure that demand from lithium-ion batteries and other applications might put on the overall supply chain. However, to be in a position to be able to produce battery-grade graphite by 2017, when Tesla says that it will commence production ramp up of the Model E, only projects that are far enough along are likely to have the opportunity to capitalize on the demand from the gigafactory. One can argue as to how to define “far enough along,” but my suggested requirements would include:

• The project should have as a minimum, Demonstrated mineral resources (i.e. Measured + Indicated);
• The project should have a completed Feasibility Study *FS), or have one underway;
• A purification process for getting to battery-grade (>99.9% Cg) should have been defined and successfully tested (preferably without using the wet acid method); and
• A spheroidization and micronization process should have been defined and tested.

Additional considerations relate specifically to potential costs of production, and include:

• Initial grade of in-situ graphite (relates to beneficiation costs);
• The resulting purity levels of the resulting run-of-mine (ROM) concentrates after beneficiation (relates to subsequent purification costs);
• The proportion of smaller flake materials with higher purity levels after beneficiation (related to subsequent spheroidization and micronization costs and yield levels);
• Whether or not a coating process has been developed and tested for the spheroidal graphite; and
• Proximity of the project to the southwest US, proposed home of the Tesla gigafactory.

I acknowledge that there can be no ‘definitive’ list of criteria for assessing projects for this exercise, but nevertheless, the above are what I’ve chosen to use. I re-iterate that I am looking here only at the potential ability of graphite projects to service the needs of the Tesla gigafactory within the announced time frame for its development. There are plenty of other future opportunities for companies and projects that might not quite be ready for the gigafactory.

Applying the initial set of criteria to the projects on the TMR Index results in the following three companies (in alphabetical order) and their projects:

• Focus Graphite Inc. with the Lac Knife project in Quebec, Canada;
• Northern Graphite Corp. with the Bissett Creek project in Ontario, Canada; and
• Syrah Resources Ltd. with the Balama project in Mozambique.

It should be noted that additional companies may be developing high-purity, spheroidized and micronized battery-grade graphite, but to my knowledge, these are the only three that have discussed such developments and their achievements in the public domain, and which meet the other primary criteria.

Focus Graphite Inc.
Focus announced the completion of a Preliminary Economic Assessment (PEA) in October 2012 on its Lac Knife project in Quebec, Canada. In November 2013, the company updated the economics for the PEA, which put the capex requirement for going into production at $126M (including a $24M contingency). It also announced commencement of a definitive FS for Lac Knife, which is slated for completion by late spring or early summer this year.

Lac Knife has total Demonstrated mineral resources of 9.6 Mt @ an average 14.8% Cg. Focus plans to produce 44,300 t/year of graphite from the future mine, with a mine life of 20 years. Metallurgical work to date indicates that the ROM concentrate will have a purity level of >96.6% Cg and will cost a total of $458/t to produce.

The flake graphite in the Lac Knife ROM concentrate is distributed as follows:

The >98% Cg purity levels of the Lac Knife flake above 75 μm (constituting almost 80% of the content) is particularly high. The company recently indicated that this is a result of most of the impurities being found at the surface of the flakes, instead of being “ingrained” in the layers.

In November 2013, Focus announced that it was working on the production of spheroidal graphite from Lac Knife concentrates and the development of purification processes for producing battery-grade graphite. During this month’s PDAC Convention in Toronto, Focus showed samples of 99.95% Cg battery-grade, spheroidal graphite. Company management has subsequently indicated that coatings for this battery-grade material are currently being tested, the results of which should be announced in the near future.

In an industry first, Focus announced a significant off-take agreement in December 2013 with a Chinese industrial conglomerate for up to 40,000 t/year of its concentrates. A clarification earlier this month indicated that this agreement calls for a minimum purchase of 20,000 t/year by this Chinese group.

Northern Graphite Corp.
Northern announced the completion of a definitive FS in July 2012 on its Bissett Creek project in Ontario, Canada. In August 2013, the company received final approval for the project and was granted a mining lease, allowing it to begin construction subject to financing. In September 2013, the company updated the economics for the FS, which put the capex requirement for producing 20,800 t/year, with a mine life of 28 years, at $101.6M (including a $9.3M contingency). Operating costs were estimated at $795/t ROM concentrate.

In October 2013, Northern announced the completion of an “Expansion Case” PEA for the Bissett Creek project, which would see an increase in the production rate to 33,183 t, an initial capex of 146.8M and reduced operating costs of $695/t.

Bissett Creek has Probable mineral reserves of 28.3 Mt @ 2.1% Cg. Total Demonstrated mineral resources are an estimated 69.8 Mt @ an average 1.7% Cg. Metallurgical work to date indicates that the ROM concentrate will have a purity level of >96% Cg.

The flake graphite in the Bissett Creek ROM concentrate is distributed as follows:

In October 2012, Northern announced that it had successfully produced spheroidal graphite from Bissett Creek concentrates, with up to 70% yields when starting with so-called large (180-300 μm or -50 / +80 mesh) flake. In September 2013, the company announced the development of a proprietary method for the purification of concentrates and spheroidized graphite to 99.95% Cg. The company claims that the cost of this purification process will be less than $1,000/t. Company management indicates that this is a “low-temperature thermal process” that uses no acids, in which a mixture of gases, tailored to the impurities and mineralogy of the Bissett Creek deposit, is used.

In November 2013, Northern announced that it had partnered with Coulometrics to develop coatings for their spheroidal graphite, and earlier this month, the company announced the completion and successful testing of this work.

Syrah Resources Ltd.
Syrah announced the completion of a Scoping Study (SS) for its Balama West deposit in June 2013, one of a number of endeavors associated with its Balama project. However, because the study was based on an Inferred mineral resource only, the company was required to clarify that the SS did not demonstrate economic viability. I have been unable to find many more details or numbers in an announcement on the SS itself. Balama West was subsequently upgraded, with reported total Demonstrated mineral resources of 13.6Mt @ 19.8% Cg.

A statement in December 2013 indicated that the company was in the process of undertaking an FS to be completed by Q1 2014.

In January 2014, Syrah announced that it had purified ROM concentrate to >99.9% Cg using a “chemical wash” containing acids. Earlier this month, the company announced that it had produced spheroidal graphite with an average diameter of 4.7 μm, from a 100 μm feedstock. It is unclear as to why the graphite was micronized to below the standard 10-30 μm range typically used for battery anodes.

The flake graphite in Balama East ROM concentrate is distributed as follows [per the same announcement made earlier this month]:

It should be noted that the published flake size ranges are for Balama East (which does not have Demonstrated mineral resources), as opposed to the Balama West deposit.

In March 2014, Syrah announced the completion of a Memorandum of Understanding (MOU) with a subsidiary of Chinalco Group of China for an off-take of 80-100,000 t of graphite over an unspecified time period. The MOU required the two parties to negotiate a binding off-take agreement within three months of execution.

Discussion
From their public announcements, it is clear that these three companies are well on their way to achieving the technical milestones required for the production of battery-grade graphite.

In terms of other parameters, however, it may be a little early to determine if Syrah Resources will be able to provide such materials in time for the launch of the proposed Tesla gigafactory. The lack of a detailed, published SS summary or other quantitative analysis makes it difficult to evaluate the applicability of the Balama project to the gigafactory at this time. Completing a binding off-take agreement with the Chinalco subsidiary could go some way to assuaging such uncertainty; however, the larger issue probably relates to the location of the deposit in Mozambique – a long way from southwest United States. This distance puts Balama at a disadvantage in terms of transportation costs when compared to the other two projects, and potential access to infrastructure.

In terms of technical progress, the results announced by Northern Graphite to date indicate that it has a product that is ready to go for the battery market, with similar definitive results expected from Focus Graphite in the very near future. Based on the Bissett Creek Expansion Case PEA and the Lac Knife PEA (and subsequent updates), Focus appears to have significantly lower operating costs to produce its ROM concentrate, and the resulting concentrate has higher Cg purity levels across the various flake-size ranges.

The projects of both of these companies are located in Canada, which presents relatively inexpensive transportation costs for getting materials to the southwest United States.

It is always hard to compare ‘apples to apples’ when it comes to graphite project flake size, as each company has its own mesh size ranges that it uses to report. However, it appears that the Lac Knife ROM concentrate has a significantly higher proportion of flake, at higher purity levels after beneficiation than that for Bissett Creek. Northern states that the cost to get to high-purity battery grade with its proprietary process is less than $1,000/t; how much less will determine the overall costs required to get from the lower purity levels in the ROM concentrate to 99.9% Cg. Starting at levels above 98% Cg, as Lac Knife does, is a distinct advantage.

The completion of a definitive FS for Northern’s project means that the costs of production of ROM concentrate that result from the study have a higher degree of certainty at this point than those detailed in the Lac Knife PEA (and subsequent updates) for Focus Graphite. Relying on the Expansion Case PEA lowers the production-cost estimates for Bissett Creek, but decreases the accuracy of those numbers compared to the original FS.

It remains to be seen if there will be any increase in anticipated product costs in the forthcoming Lac Knife FS. The costs would have to increase by more than 50%, however, to reach those estimated in the Bissett Creek Expansion Case PEA. The Lac Knife cost advantage is likely a result of the significantly higher grade to be found at Lac Knife (14.8% Cg for Demonstrated resources vs. 1.7% Cg at Bissett Creek), and the proposed larger annual production rate, which naturally gives economies of scale. One might question why the estimated cost differential is not actually higher, given the distinct baseline differences, but it likely indicates that the cost of physical comminution (crushing and grinding) of the graphite ore is a relatively small fraction of the overall mining and processing costs.

Finally, there can be no mine without the financing to construct and to operate the mine. While Northern is no doubt negotiating with third-parties on future off-take agreements and other arrangements, the fact that Focus was the first company in the sector to complete such an agreement, and for such a substantial proportion of its planned output, is significant.

Based on the above criteria, I believe that both Northern and Focus have the potential to take advantage of the Tesla gigafactory, if it comes to fruition. Given the volumes of material required, it is entirely possible that both could service the supply chain requirements. I believe, however, that Focus may well stand to gain greater benefit from the opportunity that the gigafactory presents. Its lower ROM concentrate operating costs, likely lower battery-grade purification costs and the fact that it has already secured a significant off-take agreement (making it that much easier to finance the eventual construction of the mine) are key factors.

I wish both companies well, and I make one last observation. Even if the Tesla gigafactory does not come to pass, there will undoubtedly be opportunities for these and other graphite companies to service the needs of the wider EV market in the years to come. Doing so does not need to come at the expense of the environment either, as appears to be the case in the Chinese graphite sector.

Vehicles ‘fueled’ by electricity, especially electricity generated via renewable means, need to be built using as sustainable and environmentally-friendly a supply chain as possible. In the case of batteries for EVs and the graphite required to make them, natural-flake sources are clearly the way to go.

Disclosure: at the time of writing, Gareth Hatch is neither a shareholder of, nor a consultant to any of the companies mentioned in this article.

It is fuel-cell-vehicle (FCV) season again as many of the world’s premier car makers make their annual ritual announcement that they are ‘studying’ or putting into ‘limited production’ passenger-carrying vehicles for personal use (i.e. cars), propelled by electricity generated by ‘fuel cells.’

Once again, the perception of greeniosity is meant to trick us into thinking that the fundamental laws of economics have been suspended.

As far as I can determine, the electricity for FCVs will be generated when diatomic hydrogen molecules are split into hydrogen ions and free electrons, by the action of passing the hydrogen over a catalyst. This previous sentence is totally intelligible to a chemical engineer with the only undefined word in it being ‘catalyst.’

As far as I know the only such ‘practical’ catalysts known for such a reaction are the platinum-group metals (PGMs), primarily the metal palladium (Pd). There has been a lot of research over the last 20 years on trying to produce a fuel-cell chemistry based on a more readily available catalyst than a PGM but the results have not been economical. One such program backed by no less than Kleiner Perkins is for a Solid Oxide Fuel Cell (SOFC), which uses the extremely scarce rare-earth-element (REE) related metal scandium (Sc) in its catalyst.

The thing that all current fuel-cell technologies have in common, is that they rely for their operation on large amounts of very scarce materials such as PGMs or Sc, as in the discussion above.

There is another problem, the relative value to achieving the goal of reducing carbon emissions of a FCVm versus an internal combustion engine (ICE) vehicle, using a catalytic converter. This is the real issue of the most efficient use of strategic metals. Let’s say that a Pd-based fuel cell would use at least one ounce of Pd in order to be able to produce enough electricity to power a four-passenger car. That same amount of Pd could be used to manufacture 100 exhaust-emission catalytic converters, for hydrocarbon-fueled ICE-powered vehicles! Note well, that new global production of Pd is in the 200 tons per year range. This is twice what it was 10 years ago, but nearly impossible to increase as most of the world’s new Pd comes from its production as a byproduct of nickel mining in Russia and Canada, with a little more coming from South African platinum mining. North America produces some 10% in total of the world’s annual new Pd. It is difficult to see how green technologists could ask us to depend on either Russia or South Africa for an ‘assured supply’ of anything much less for an increased supply.

So, the best solution for constructing fuel cells is not to use environmentally precious Pd or any other PGM in such a horribly wasteful way. Unfortunately, the best SOFC, based on Sc, is an even worse solution. There simply is not enough Sc produced in the world. Currently just a few tons a year are produced, so it is believed, in the former Soviet Union.

So we can either rob Peter or mine an empty bank vault.

There is a real analogy here to the REE supply issue now facing the world, and even an interface, since Sc is only likely ever to be produced as a byproduct of REE production (which itself is ironically usually produced as a byproduct of iron mining).

PGMs used in automotive-exhaust emission control devices (catalytic converters) are so scarce as to be among the most recycled materials on the planet. In relative-percentage-recycled terms they are right up there with iron, copper, aluminum, lead, and gold. But it is in absolute terms that the comparison fails. An excellent example of this is the PGM rhodium (Rh), used to eliminate acid-forming nitrogen oxides from automotive ICE exhaust. The world production of new Rh as a byproduct of South African platinum production is 30 tons a year. Yet the apparent demand from the global OEM automotive industry is nearly 50 tons per year. This additional material must come from the extensive recycling of catalytic converters.

It is the same type of thing with the REEs with a notable exception geographically. In China extensive recycling of REE industrial process waste as well as of end-of-life waste, is one of three things that keeps the supply of the key heavy REEs terbium and dysprosium, nearly equal to the demand. The others are illegal production within China and purchase of heavy REE ore concentrates from outside of China. The three processes together provide a doubling of ‘official’ production of these key REEs.

Only now in 2014 is there even the beginning of a non-Chinese REE recycling industry. This is because with just one exception, there is no REE separation plant outside of China with the capability/capacity to separate the heavy REEs from ore concentrates or scrap; there are 38 such facilities in China.

What little Sc is produced in the world may be augmented by the three processes above, but officially there is no verifiable Sc production anywhere. So, if there is to be a fuel-cell-powered OEM automotive power-train revolution, it will have to be itself driven by a fuel-cell technology that as of now is unproven, and does not involve a need for large quantities of either PGMs or Sc.

At the moment, supplies of PGMs and Sc globally are either insufficient or unavailable. Thus fuel-cell-powered vehicles will be curiosities, or the toys of the elites, for the foreseeable future.

From my perspective, the natural evolution and expansion of global free-market capitalism into mainland China was disrupted by the reforms of Deng Xiaoping about 25 years ago. By fiat he created a centrally commanded version of capitalism in which it appeared that domestic Chinese costs (of both skilled and unskilled labor) were lower than those in the then-developed world. We now know that this was only a perception (an artifact), due to virtual and actual subsidies paid by the Chinese local, provincial, and national governments, to ‘kick-start’ and then maintain what turned out to be a massive export-driven Chinese national economy.

The ‘reforms’ of Deng were labeled Capitalism with Chinese characteristics and they worked. However, the logical, foreseeable consequences of the subsidy program (invisible to foreigners but known to insiders), namely the economic cancers of over-capacity and over-supply, also began. Its consequences are now sharply curtailing the rate of growth of the Chinese economy, and the impact of these consequences is also to hold back the global ‘recovery’ from the debt-fueled Western economic collapse of 2007.

The Chinese national government is taking official, not virtual, steps to attempt to reverse the impact of this over-capacity and over-production on its economy, and in this way is again having a direct impact on the entire global economy. This is very apparent in the global rare-earth sector. This sector is tiny in the context of the global industrial economy, but it is a perfect example of the problems created by central (command) control of the production of a natural resource.

The news from China about the reorganization of its domestic rare-earth-mining sector is a strong indication, I think, that from a global point of view the world’s rare-earth total supply chain is also in a rapid transition to reorganization, and, alliteration aside, it is, by economic necessity, evolving toward one of compact regional centers, as distinct from the current Sinocentric model.

In the paradigmatic and foremost of these centers, China, the rare-earth markets are being directed to reorganize into survivable units, i.e. with a minimum size to be profitable, even without virtual and actual subsidies. China’s rare-earth supply chain has too much of everything – mines, separation plants, metal / alloy / fine-chemical makers, and magnet and other end-use product makers. China announced just this past weekend that strict limits on emissions of pollution from named industries, such as mining, are to be enforced. From the point of view of economics, this means the capitalizing (recognizing the costs as liabilities) of both curbs on current polluting emissions and of remediation (cleaning up) of the damage from past emissions.

This means that even as over-production and over-capacities in the total supply chain, which is today essentially Chinese, have driven down the selling prices of the rare earths, the industry will be saddled with new and permanent increased costs of operation and the huge legacy costs of an industry long used to artisanal mining (in China’s case this means rogue and illegal mining). To implement a ‘crackdown’ the Chinese government has already added very significant taxes to mining and processing to fund remediation; it has also promulgated expensive regulations requiring proof of the holding of licenses to produce and to consume rare earths. These taxes and regulations will force the industry to contract, by creating a minimum size for a profitable rare-earth business.

The rising costs in China though, especially due to capitalization of environmental remediation, are also fueled by an expansion of the rule of law (equality of the rich and poor before the law) and even a distinct glimmer of a serious adherence to the concept of property rights, are reworking the rare-earth landscape (“if your pollution injures me or my property I can bring you to law, or, as in China – and the USA – the State can shut you down, pending the resolution of the problem”).

Most of the (logical) evolution of China from a “developing nation,” which it loves to call itself in international trade, to the world’s second largest economy by GDP, has taken place in plain sight and with lots of publicity. We outsiders who do not read Mandarin or understand Chinese culture, see the overall plan, but certainly not the operational details at any particular sites.

The fierce internal competition in China among legal producers of the rare earths, has until now been matched in ferocity by illegal, unregulated ‘midnight mining’. The existing dozens of small separation plants in China (and even nearby in places such as Vietnam and Thailand) have operated for years on irregular offers of such illegal material as cash-generating icing on the cake. Now, as the central government of China forces consolidation and requires certificates of mine and separation-plant allocation, the illegal miners have to work with a ‘total illegal supply chain’ to keep everything ‘off the books’. Those who puzzle over the existence of an illegal separation plant built by Chinese ‘contractors’ in Vietnam and ask, “from where does it get feedstock?” are naive in the extreme. Such a plant is part of an illegal total supply chain. I can only assume that corrupt officials in China, Vietnam, and perhaps other Southeast Asian countries, keep this supply chain going.

I discuss this, because it is a plausible explanation of how a seeming global shortage supported by ‘official data on total production’ of the critical rare earths, does not seem to cause extreme distress or shutdown of industries totally dependent on rare-earth permanent-magnet (REPM) alloys, modified with dysprosium and terbium. The fact that official production figures do not support the current demand picture of dysprosium and terbium, show that end-users must now, in the face of the Chinese crackdown on illegal production, secure their supplies outside of China. If, for example, as the Chinese repeatedly say, they are not able to expand their proven resources of heavy rare earths through legal mining regulated as to health, safety, and pollution, then the illegal mining and refining that is supporting the current shortfalls, is undoubtedly draining the reserves much faster than the official figures are showing. This is the real crisis!

Non-Chinese sources of heavy rare earths must now be brought into production under all circumstances. Non-Chinese manufacturing centers and regions need to attain self-sufficiency as soon as possible. There are ion-adsorption clays exactly as those in China in the tropical regions, in addition to numerous non-Chinese hard-rock sources, including those listed on the TMR Advanced Rare-Earth Projects Index.

There is, however, simply not enough middle and heavy rare-earth separation and purification capacity outside of China, to support European, North American, and non-Chinese, Southeast Asian DEMAND, along with an increasing Chinese domestic demand. This is in particular true as Chinese domestic demand literally explodes. Long-term Chinese planning is based on the very fact that Chinese sources of the heavy rare earths must be conserved, to support the changeover of the Chinese economy from being export-driven to being domestic-consumer-driven.

For the total rare-earth supply chain, the news is even worse. Outside of China the global capacity for rare-earth metals and alloys production is tiny. If we base non-Chinese REPM production capacity on secure access to didymium metal, samarium metal, ferro-dysprosium, and cobalt, then I suspect non-Chinese capacity would be today at most just 10% of global demand.

The non-Chinese world, even if its costs become level with or lower than those in China, still has one big problem – the cost of building new separation and metal and alloy making facilities, as compared with the already arrayed and substantial available capacity within China. This problem can only be resolved by central, regionally deployed tolling facilities for separation, such as the one being developed in Quebec by Innovation Metals Corp. (whose President is my TMR colleague Gareth Hatch), and perhaps even for metal and alloy making. I believe that this will occur in four regions: Europe, North America, Japan, and Korea. India will most likely be a fifth non-Chinese rare earth total supply chain center, but perhaps later than the first four here mentioned.

Disclosure: Jack Lifton is a member of the Technical Advisory Board for Innovation Metals Corp.

During a visit to Australia last month, I had the opportunity to visit the Commonwealth Scientific And Industrial Research Organization (CSIRO), the country’s main governmental organization for scientific research and development. More specifically, I visited CSIRO’s Materials Science & Engineering Division in Lindfield, New South Wales, about eight miles north of Sydney.

CSIRO is well known in many parts of the international scientific community for the quality of its work. It has its origins in the Advisory Council of Science and Industry which was founded in 1916. Today CSIRO has over 6,500 staff (approximately 5,200 full-time equivalents or FTEs) who work at 56 sites in Australia and overseas. While folks outside of Australia may not be too familiar with CSIRO, you undoubtedly are a beneficiary of some of its work; inventions at CSIRO include the underlying technology behind Wi-Fi systems, phase contrast imaging for X-ray imaging and atomic absorption spectroscopy. The organization had an annual budget in 2012-2013 of approximately AUD 1.6 billion.

Materials Science & Engineering at Lindfield (the Division also has sites in Victoria) shares a building with the National Measurement Institute (NMI), Australia’s top body responsible for maintaining Australia’s measurement standards. I had to chuckle when I arrived in the lobby of the building – on the wall opposite the front entrance are a couple of clocks which show VERY precisely the time at that moment – no excuses for being late in this building! I later found out that it was here at this location, in a collaboration between the NMI and CSIRO’s Australian Centre for Precision Optics (ACPO), that a pair of extremely round objects were created and measured, as part of the international Avogadro project. This is an initiative centered on developing a new way of defining the kilogram, the SI unit of mass. Unlike all of the other fundamental SI units of measurement, the kilogram is the only one that is defined as a comparison to a physical object. The NMI / ACPO project set out to produce two perfect spheres of pure, single-isotope silicon, containing enough atoms to make a kilogram. The idea is for other researchers to then measure the number of atoms in these spheres, in order to re-define the kilogram. The best sphere that the scientists achieved as part of the project had an out-of-roundness of just 35 nanometers – less than 150 times the diameter of a single silicon atom!

My visit to the Lindfield facility was hosted by Dr. Stephen Collocott, a long-time researcher in the field of magnetic materials and applications. I first met Dr. Collocott at a magnetic-materials conference many, many moons ago. We’ve been corresponding and bumping into each at conferences and workshops ever since. It was great to finally get to visit him on his home turf and to learn more about the work that he and his colleagues do at CSIRO.

Dr. Collocott wears two hats these days; he is the group leader for magnetic materials research at CSIRO’s Materials Science & Engineering division; he is also the stream leader for electric drive systems, within CSIRO’S Future Manufacturing Flagship initiative. These Flagships bring together multi-disciplinary teams to focus on key research themes. Dr. Collocott’s group has for years been involved in the application of magnetic materials to real engineering systems, and so is a natural fit for the Future Manufacturing Flagship. The group frequently conducts contract research for OEMs and other companies in the manufacturing, automotive, appliance and general transportation sectors. Past and present clients include GM Holden (both CSIRO and GM Holden are members of the Co-operative Research Centre for Advanced Automotive Technology), Electrolux, Marrand Enginering, and Transfield. The group, presently consisting of eight researchers, has particular expertise in electric machine design using 2D and 3D FEA, power and control electronics and machine simulation.

The magnetic materials group at CSIRO was involved in some of the early work to characterize and optimize neodymium (Nd)-based permanent magnet alloys (Nd-Fe-B). In the early 1990s, a spin-out company called Australia Magnetic Technology (AMT) actually set-up to manufacture approximately 50 tonnes / year of these materials in a pilot plant for the Australian market. Plans to scale up production were put on hold indefinitely due to falling prices at that time, as a result of the growth of Chinese magnet companies. AMT was eventually acquired in 2003 by AMF Magnetics, another Australian magnetics company.

The CSIRO magnetics group continued with its materials research work, being involved in the subsequent discovery of so-called 3-29 rare-earth intermetallic phases for possible permanent magnet applications. They were also involved in melt spinning, mechanical alloying and hydrogen-based processing of rare-earth-based materials, as well as powder metallurgy. This work eventually evolved into looking at more fundamental questions concerning magnetic materials, relating to, for example, the role of dysprosium in increasing the resistance of Nd-Fe-B magnets to being demagnetized (coercivity). The purpose of such research was to increase understanding of the underlying mechanism in such materials, rather than creating incremental improvements in specific magnetic alloys.

The group then turned its attentions to the use of magnetic materials for specific end-use applications, building on the industrial collaborations that it had fostered over the years. These days the focus is on high torque density and high power density electric drives, based on brushless permanent-magnet machines as well as switched-reluctant machines that use no magnets at all. The idea is to provide the best machine required for the specific application being developed and refined. Examples of such applications include drives for electric vehicles and for more energy-efficient (and lower cost) consumer appliances such as washing machines. Some of the group’s machines have been used in ultra-long distance races for solar-powered vehicles, where the ultimate in efficiency and reduced weight is required. Being able to meet or exceed the specifications for such challenging applications helps to spur the wider development and utilization of such devices for commercial applications, just as innovations that we see in, for example, Formula One racing cars eventually make their way into the mainstream some years later.

During my visit I got a chance to tour Dr. Collocott’s group laboratories; as you might imagine, a number of the projects are sensitive (commercially or otherwise); I was allowed to take some photos though, which can be seen by clicking the thumbnail images above. I saw some really interesting electric devices and equipment under development, but I think my favorite device of the ones that I was shown was a more energy-efficient electric sheep shearing device. This tool uses an Nd-Fe-B magnet, and dissipates heat by using the blood flow in the operator’s hand, without him or her noticing the device getting warm. A very clever and elegant way to improve a long-established tool used in one of Australia’s quintessential industries.

Dr. Collocott commented that 60% of the CSIRO budget comes from government funding; the rest is drawn from contract research, royalties and licensing fees from previous technology, as well as cooperative entities. The organization has a number of ongoing research programs in collaboration with groups outside of Australia. One example in which Dr. Collocott is involved is with the University of Shanghai. He commented that quite often, Australian-based researchers are seen as “honest brokers” when it comes to their perspective on matters pertaining to strategic materials. This reinforces similar comments that I’ve heard from others too, from entities that would rather work with Australian than US or even Canadian groups, for this reason.

That said, CSIRO as a whole has strong collaborations with partners in Canada and the USA, with dozens of projects undertaken each year. Canadian projects tend to focus on minerals, mining, mineral resources and related engineering services. Recent partners include Alcan, COREM, Barrick Gold, Riot Tinto Alcan and Syncrude. Incidentally, CSIRO has a Minerals Down Under Flagship which builds on the organization’s expertise in these areas (most notably on extraction and separation), based at a CSIRO facility in Clayton, Victoria. US-based partners include Boeing, Chevron, DuPont, NASA, the US Department of Agriculture, the National Oceanic and Atmospheric Administration. According to the CSIRO web site, other initiatives include the Fulbright CSIRO Postgraduate Scholarship, established in 2008 to enable an American citizen to undertake postgraduate research in Australia at a CSIRO institute.

The strong Australian dollar has been an ongoing issues from the economic perspective, since it hurts the country’s ability to export products that it manufactures. As a consequence there has been a lot of off-shoring to Thailand and Malaysia, primarily because of free-trade agreements in place with these two countries. The once strong electrical appliance industry in Australia has largely disappeared, with some exceptions, namely in the large refrigeration and commercial cooking appliance markets. There has been 15-20% decline in the manufacturing of larger passenger vehicles in Australia; Toyota, General Motors and Ford still have a visible presence but are confined these days only to a handful of vehicles being manufactured in the country.

Still, it is through working with entities like CSIRO that the Australian manufacturing sector can re-group and prosper once again. CSIRO is undoubtedly a jewel in Australia’s crown, a jewel that hitherto now has not got a lot of whole lot of attention from strategic materials folks outside of the academic community. Folks in the rare-earths sector may have heard of the work and capabilities of ANSTO Minerals, another Australian government organization, with respect to process development; CSIRO also has extensive capabilities and experience in these and other related areas too and should not be overlooked. Groups like the one that Dr. Collocott leads can be a “below-the-radar secret weapon” for manufacturers, who need high quality contract research done by folks who know what they are doing.

My thanks go to Stephen Collocott for facilitating my visit to the CSIRO Materials Science & Engineering Division.

Rare-earth deposits are not rare; they are just rarely put into production. Why is that? It is because of pricing economics driven by supply and demand. The demand for the rare earths as raw materials is today in southeast Asia, so it should not be surprising to see how the producing supply base has migrated to that part of the world. Yet pundits and politically charged writers keep hinting at a vast intentional Chinese conspiracy to ‘control’ the rare earths. It is more than likely actually a consequence of the operations of the market forces of (what we now ironically call) free-market capitalism. as practiced today by governments following the model originated by John Maynard Keynes.

The American financial regulators are as guilty of allowing foreseeable but unintended consequences of their actions, as the Chinese regulators are responsible for maximizing the benefits of American oversight for China’s economy. There is actually no intractable problem so long as both economies practice free trade, but when Chinese self-interest is seen as a threat to American self-interest, it is the ‘other’ rather than the ‘system’ that is brought into ill-repute.

Rare-earth-based production (the supply) and production levels are determined by the economics of overall demand. So long as the lowest cost for rare-earth products is obtained by buying such types of goods manufactured in China, the total supply chain and the focus of the rare-earth industry will remain in China.

Today, in early March 2012, I am going to give one prescription for the re-birth, health and continued growth of a non-Chinese rare-earth industry, and I’m also going to make one prediction about the growth of the global rare-earth industry over the next ten years.

First, before I assume the mantle of the business-survival specialist or of a resource-markets Nostradamus, I need to point out that the growth of demand for a rare-earth element (REE) is in the case of almost all of the REEs, within a unique market for each of them individually. The demand for cerium (Ce), for example, has almost nothing whatsoever to do with the demand for lanthanum (La), or any other REE. They are not interchangeable, nor substitutable for each other, except in very few cases such as that of neodymium (Nd) and praseodymium (Pr), which in some limited applications in rare-earth permanent magnets (REPMs), are substitutable/interchangeable.

Notably the demand for Nd for use in REPMs is the principal driver of the demand for dysprosium (Dy), whereas the inverse is not true. This complex subject, the demand for individual and certain combinations of the REEs, is glossed over by pundits as if it doesn’t matter. This is a fatal flaw in creating investment strategies for developing REE supply, because what is overlooked is that the supply of the rare earths must be examined on an element-by-element basis. and not looked upon simply as a ‘basket’ containing all of the REEs.

This error of assuming that all or most of the REEs are interchangeable for marketing purposes, gives rise to the glib assumption that the same strategies will work for selling REEs to a variety of end users, whose only common interest is that their products all contain REEs.

An even more flawed assumption is the idea that the individual REEs are of equal importance to our technological economy in any of their uses, and so one simply calculates a basket price and this metric then defines an opportunity to produce a combined value. Nothing could be farther from the truth.

China appears to have unused (excess) capacity in the production of the lower-atomic-numbered rare earths (LANREs) in the amount of more than 50%! This means that China could ramp up production to twice today’s output of LANREs and, based on even old (from 1997) basically anecdotal data from the US Geological Survey, keep this level of production up indefinitely.

On March 5, 2012, there was official news from China (reported in the China Daily, the English-language version of the People’s Daily, the house organ of the Chinese Communist Party) for example, that Jiangxi Copper, which has been given responsibility to consolidate rare-earth production in Sichuan province, says that it will increase production there to 50,000 tpa and will target the export markets! Rare-earth prognosticators please pay attention! Jiangxi Copper is a world-class commodity-metals-producing giant. It is also state-owned and has more working capital and borrowing firepower than all of the non-Chinese rare-earth ventures on Earth combined.

The domestic growth of the Chinese demand for the REEs is today without doubt the principal driver for any attempts to increase the supply of REEs. China’s domestic demand for all of the REEs today is probably at 70-80% of the world’s total supply (also, of course, today produced in China domestically).

China is openly moving to change its economy from an export-led to a domestic-consumption-led model. As China does this, the domestic demand for REE-containing consumer products (the vast majority) will increase in China, apparently without decreasing outside of China. Unless there is increased production of those among the REEs that are the critical REEs, there will be shortages and price hikes – but NOT in China, which will simply consume more REEs domestically while reducing exports, as it has already begun to do precisely to prepare for the change of direction in its economy.

Reacting to that change and to world opinion, China has restructured its REE industry and this has resulted, for example, in Jiangxi Copper telling the world that it will ramp up production in the area under its control, so that both the Chinese domestic market and the export market can be served.

Jiangxi is a new competitor in the global REE market, and it is a large profitable company run by excellent managers. It has no competition outside of China in the REE space that can match it in resources of intellectual property, manpower resources, capital, and knowledge of world markets.

Yet in China, Jiangxi faces Baosteel and Chinalco in the newly consolidated REE production space as its competitors. Keep in mind that it will be an uphill battle to beat China at its own game inside China. So what is left for the non-Chinese REE supply wannabes is to produce something that the Chinese domestic REE market needs, and which is not produced in China in sufficient quantity, so that it will be in demand whether or not a total supply chain is ever constructed outside of China.

It seems that the higher-atomic-numbered rare earths (HANREs), the so-called ‘heavy rare earths’ fit this description and their number may even be joined by the LANRE Nd.

There are two cultures on Bay Street (the center of junior-mining finance in Toronto, and most likely the financial world). Among the denizens of one of those two cultures, it is the share price of a company that measures its success; in the other culture, the question asked is: ‘how much money will it take to bring this venture into (profitable) production?’. The probability of achieving profitable production is this second group’s measurement of success.

It is late in the rare-earth ‘boom’ and so lately the line between the two cultures has begun to blur in the rare-earth ‘space.’

Junior mining is basically the mineral-data mining of the Earth. The data are discovered and recorded by field geologists and then it is filtered through layers of physical and chemical analysis, until for a given volume of the Earth’s crust, a picture can be drawn in three dimensions, of the distribution of specific minerals within the chosen volume. If there are known mechanical and chemical procedures for recovering any valuable metals or minerals in the defined volume, and the result of those procedures is a product, or products that can be sold for more than the cost of production in volumes above the break-even cost of the venture then, if those factors have additionally a high probability of continuing in time, we have a mineable ore body that is economic.

The day of reckoning is upon the rare-earth juniors. Those of them who have no knowledge of supply-and-demand-based pricing, or the geographic distribution of demand, or who have no knowledge of finance will be gone first. Even among those that survive this first cut, if they believe that the goal of a business is anything other than producing consistently a competitive profit from selling products produced at the lowest cost with the lowest possible break-even threshold, then they will be gone next.

The survivors will be those ventures which can sell their product at a profit, at a place in the supply chain which their management and marketing skills can maintain.

The Vatican in Rome regularly issues statements of Catholic doctrine, which are intended to be the ‘correct’ interpretations of questions of faith for believers. These statements are written in church Latin and the translation of the category aspect of the title of all such statements is a papal ‘bull.’ This is the short form of the Latin word bulla, used to describe the clay stamp traditionally applied to such edicts, and from which in English, we get the word ‘bulletin.’

I consider this article to be a ‘bulletin’ to investors in the rare-earth space.

I am not. nor do I pretend to be infallible, but I recognize that much of what passes for interpretation in the mainstream media of the announcements that regularly flow from junior miners, or, in some cases from companies actually running mining operations, is just plain ‘bull.’

If a junior miner is to survive. it must either sell its ore body or develop a profitable mining operation. There has been little interest by the major mining companies in purchasing the properties of the current rare-earth juniors. Therefore to survive, the juniors will have to try to put their ore bodies into production as mines. This means that the clock is ticking. There will be no more than a dozen rare-earth ventures outside of China in actual development by the end of 2014. The global REE demand outside of China needs very little additional supply of the LANREs if it does not ramp up its metal-, alloy-, and component-manufacturing supply chain. Certainly there is way too much potential and/or planned production of the LANREs chasing too small a market.

It is just the opposite for the HANREs. China is short of these very critical materials, so that even if no supply chain at all is constructed or enhanced outside of China for using such raw materials, there will be a demand for them.

The problem with the HANREs market is that it is not understood as a free-standing market by non-Chinese investors. Additionally it has turned out that the highest grades of HANREs as a proportion of total REEs, are in hard-rock ores and tin and uranium residues, the ‘metallurgy’ (cracking) of which has not been successfully (i.e. economically) achieved to date. I believe, however, that the metallurgies of the hard-rock ores have been addressed with sufficient success outside of China, by companies attempting this endeavor, to allow me to recommend to my institutional-investment clients that they fund the development of the best-managed and best-sited ones.

The skills to extract the HANREs into a pregnant leach solution, and to separate the individual HANREs from that solution are in very short supply. No one, as of yet, outside of China has addressed the commercial separation of the HANREs. Innovation Metals, a company co-founded by my TMR colleague Gareth (and to which I am an advisor), is attempting to do something about this, with its goal of creating the world’s first independent rare-earth separation facilities, to toll-treat rare-earth concentrates. Do not be fooled by those who say that all you have to do is ‘buy’ a property and ‘feed’ the ore into an existing LANRE separation system. This is flim-flam.

I predict that at least one, perhaps two American companies, and one European company will be producing HANREs competitively with the Chinese within 3-5 years. from hard-rock mining. I further predict that it is these operations which will catalyze the re-birth of a non-Chinese total supply chain for the production of Dy-modified REPMs. There are a number of promising Canadian, Southern African, and Australian HANRE-themed junior miners, who I believe will become suppliers to the total supply chains located in the USA, Europe, Japan, or even China. Their ability to do so will be based on competitive pricing.

I am not mentioning Great Western Minerals Group’s South African/UK integrated operations, because they are now in a group of one, at least with regard to the commercial production and utilization in the downstream total supply chain of the heavy rare earth Dy. As far as I know their, output of Dy is fully taken up by their customers, and is only a market factor in the reduction of non-Chinese demand for Dy it will cause (less than 3% of the current market).

The first step in the production of a REE is the mining of an ore containing a mineral that has REEs in its molecular or physical composition. In simple English, a rare-earth mineral is one in which the REEs are either chemically bound into, or in a few cases, just physically attached (adsorbed) onto a substrate mineral. The ore at Molycorp’s Mountain Pass mine is an example of the first and the famous adsorption clays in China’s southern provinces are an example of the second.

A common pundit error at this point is to declare that the ores with the highest concentrations of the rare earths are the most valuable. The most valuable rare-earth ores are those from which the rare earths can be extracted efficiently at the lowest cost per unit. In fact, the most pressing problem today in the rare-earth supply space is the fact that all of the HANREs now produced commercially, are from the very low overall grade ‘ionic adsorption clays in China. This is because of:

1. The fact that by ignoring (and not capitalizing) safety or environmental ‘costs’, the Chinese mining industry has been able to continue due to the high demand for their ‘unique’ products, and
2. The lucky situation that the ionic clays are essentially thorium and uranium free, allowing their processing by crude heap leaching in the open.

For hard rock, HANRE-enriched deposits have been found outside of China, the concentration of desired minerals is accomplished by preparing the ore (typically this involves crushing and/or grinding followed by gravity separation). Milling is the first step, with the second typically done by floatation, in which the higher specific gravity minerals are separated from the lighter ‘rock’. by a combination of surface-chemistry techniques and the differences in their densities.

When we have the ore concentrated, we come to a point in the process where mining terminology diverges from both common English and from the strict definitions of terms as they are used in modern materials science. When miners use the term ‘metallurgy’, they usually mean ONLY the extraction from an ore concentrate of the CHEMICAL forms of the elements desired.

In such cases, developing the metallurgy means chemically leaching the ore or ore concentrate. Leaching is a wet chemical process most often involving acids or bases), which places into solution the chemical elements present in the ore, so that they can be further chemically processed to separate them from each other.

Typically even the separated elemental chemicals must be further purified – especially in the frequent case where separation is not analytical (i.e., is not complete). The purified chemicals are then reduced by chemical/physical processes to create pure metals.

An example of straightforward mining metallurgy is the processing of common sulfide ores of copper (Cu). Their metallurgy starts with roasting ( i.e. forced-air, high-temperature oxidation). The Cu oxide so obtained is dissolved in sulfuric acid, obtained in part by capturing the sulphur dioxide from the roasting, catalytically oxidizing it further to sulphur trioxide and dissolving this in water.

The Cu sulphate solution is electrolyzed so that the pure Cu collects on the cathode and the nuisance metals, such as molybdenum, gold, silver, palladium, tellurium, selenium, and arsenic collect in the “mud” formed under the anode. Some of the nuisance metals contained in the Cu ore are also collected in part from the exhaust gases of the roaster, which include volatile oxide species of many of the elements also present in the mud.

The mining metallurgy of Cu ores is complex, and time- and energy- (and thus capital-) intensive, but it pales in comparison with the complexity of the separation of the individual rare earths after they have been extracted from their ores into a pregnant leach solution.

The separation of the mixed rare earths produced by the leaching of their ore concentrates into individual REEs is a labor intensive, time-consuming operation, accomplished commercially today only via the process known as solvent extraction (SX), which is expensive to facilitize, difficult to supply with some Chinese-produced chemical reagents, slow, and in need of a large body of skilled chemical engineers for its operations and quality control. Outside of China, and previously in Japan and possibly Kyrgyzstan, no-one has yet constructed a SX operation with the capability to separate the HANREs.

I have been told that a HANRE-separation-capable facility is, in fact, being constructed in the Western Cape province of South Africa, by Great Western Minerals Group, but I do not know the timetable for that project. I do know that the punditry has now figured out that the HANREs are the most desirable of the REEs, but, once again, the highest grade. largest total ore tonnages are being mindlessly touted as ‘the best investments.’

Of course, the best investments are the well-managed ventures that own ore bodies for which known extraction techniques work, and from which a pregnant-leach solution can be made, which will be capable of being fed into a separation plant, that will produce separated, purified rare-earth chemicals. All of this will have to be done at the lowest costs possible and the lowest breakeven possible.

HANREs so produced, mainly Dy and terbium (Tb), will be saleable into a market in deficit for the rest of this decade and beyond.

A total supply chain to produce Dy-modified Nd-based magnets will be built in Europe. I believe that such a project is also underway in the USA. The successful mining ventures in the HANRE space will most likely sell their products in a magnet ‘bundle’. In order to get Dy, the customer will also need to buy Nd in a ratio of the two that insures the total sale of both.

There are already too many contenders in the LANRE space outside of China. The survivors will be the low cost, lowest breakeven, producers.

Anyone who is going to invest in a junior rare-earth-mining venture must look at its balance sheet, for its break-even point at reasonable prices. One must also ask exactly what market share the company needs, to break even at those prices. Next one must ask for a list of the products to be produced, which are to be sold at that point into the supply chain, and match that list with the companies expertise, or access to expertise, necessary to technically accomplish each step in the supply chain in which it will be directly involved.

Size matters in a high-school locker room. Only skills and break evens matter in the world of mining…

Disclosure: at the time of writing Jack Lifton is long on Great Western Minerals Group (TSX.V:GWG).

Earlier today I got word that the US Department of Energy (DOE) has released an update to its Critical Materials Strategy, which was first published as a report in December 2011 2010. This document has helped to shape a fair amount of the debate on rare earths in particular, and critical & strategic materials in general, in the past 12 months.

You can download a copy of the report from here.

I’m still digesting the contents of the report; I can tell you that the DOE still considers the five rare earths dysprosium, neodymium, terbium, europium and yttrium to be critical in the short and medium term; indium is judged to now be near-critical in the near term, compared to being categorized as critical in the 2010 report.

New sections include one that covers the use of rare earths in fluid cracking catalysts, and how the petrochemical refining industry reacted to escalating prices of materials in 2011.

More to follow once we’ve had a chance to read through the report more thoroughly.

Update (01/17/12): the URLs for the report have been updated, since the original links no longer work.