ASX graphite stocks: the lithium of 2023?

It’s no secret that 2022 was an exceptional year for ASX lithium stock investors, with the silvery alkali metal, an essential ingredient of EV batteries, experiencing explosive price growth on rising demand and restricted supply.

However, while lithium, nickel and cobalt are already well-known as commodities necessary for the EV revolution, the fourth key material, graphite is just as essential. Indeed, EVs require 40kg to 60kg of graphite, roughly 40 times more than the requisite lithium. Tesla CEO Elon Musk has previously argued that lithium-ion batteries ‘should be called ‘nickel-graphite’ given their relative weights.

For context, the lithium-ion battery market uses up 35% of all the graphite mined globally every year, but this supply needs to double within the next five years to match the current plans of auto manufacturers. A supply gap on par with lithium could open up soon.

In common with lithium, graphite is treated as a specialty chemical rather than traded on commodity exchanges, as different sources are typically non-fungible; purity, flake size, processing costs and crystallinity all affect the final sale price.

For perspective, spherical graphite is typically the most desirable and can cost more than three times as much as standard graphite, making judging the best ASX graphite stocks a case of considering quality, jurisdiction, and finances among other factors.

ASX graphite stocks to watch in 2023

1. Syrah Resources (ASX: SYR)

Syrah Resources is an extremely volatile ASX graphite stock, having risen tenfold since its pandemic lows and yet remaining down by circa two-thirds since its 2016 record high to AU$2.26 today.

With an AU$1.52 billion market cap, the miner owns and operates the Balama Project in Mozambique which by some measures is the largest graphite mine in the world. For context, the mine has an expected eventual annual output of 15,000 tons of 94% to 98% purity graphite.

Importantly, Syrah operates a li-ion anode factory in Louisiana in the United States. Given the political pressure to expand graphite manufacturing outside of China, the US Energy Department has assigned a US$102.1 million loan to the company to expand the plant, the first from the Advanced Technology Vehicles Manufacturing loan program since 2011, and the first exclusively designated for auto supply chain manufacturing.

Offtake agreements at various stages of sign-off have been signed with Tesla, Ford and SK On.

2. Renascor Resources (ASX: RNU)

Renascor Resources shares have already risen significantly from AU$0.01 to AU$0.24 since early 2021. However, the ASX graphite stock has fallen from its AU$0.34 record from only a few weeks ago, leaving investors with what may be an attractive entry point.

Its two key assets are both in South Australia; the first is the Carnding gold project, which is no bad asset to have as gold prices rise. But the second, Siviour battery anode materials project, is the second-largest graphite reserve in the world excluding Africa, and is projected to see 150,000 tonnes of high quality graphite mined per annum over its 40 year mine life. Further, RNU retains the option to explore and purchase land on the asset’s north-western side, which may make the investment case even more compelling.

The Australian location of Siviour is particularly attractive, as sales can be made to both China and the US with relative ease, as both countries trust Australia’s regulatory system.

3. Magnis Energy (ASX: MNS)

Magnis shares enjoy similar volatility as Syrah, having spiked to highs of AU$0.73 and fallen to lows of AU$0.29 since November 2021. At AU$0.43, the AU$417 million miner owns a 100% interest in the world-class flagship Nachu graphite project in Tanzania.

Magnis believes the project is fully shovel-ready, has acquired full permissions, and completed a bankable feasibility study, a power supply agreement and favourable port authority agreement.

The ASX graphite stock also owns a 60% interest in a lithium-ion battery plant in New York, which it believes makes it the ‘only non-China supply chain capable of meeting both domestic and global demand.’

All three stocks could see share price rises this year as the graphite supply gap widens.

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