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Graphite miner Blencowe set to shine in 2020 – UK Investor Magazine
The latest resource company to list on LSE – Blencowe Resources (LON: BRES) – has enjoyed a strong few weeks of trading since relisting on April 28th, moving up nearly 50% from 6p towards 9p in a weak market where many of its peers are heading in the opposite direction. What makes Blencowe and its Orom-Cross Graphite Project in Uganda stand out as special?
Graphite is not particularly high profile as a mining commodity, but it is a naturally occurring form of crystalline carbon. It has many uses today, but key to its importance is that graphite makes up approximately half the weight of a lithium-ion battery, used extensively for powering electric vehicles (EV) and storing renewable energy around the globe.
Every EV currently contains between 30-50kgs of graphite within its lithium-ion battery, and like all batteries, from time to time they need replacing. Most auto manufacturers around the world have thrown down markers and timelines to replace current diesel and petrol vehicles with electric versions, and although the pace of change around the EV revolution hasn’t swept all before it as dramatically as was initially predicted, the burgeoning levels of investment into battery production and EV production suggests that demand for the core minerals is set to extrapolate over the next decade and beyond.
Enter Blencowe Resources and its Orom-Cross Project, which is one of the largest graphite deposits in the world, estimated to contain over three billion tonnes. Furthermore, most of its graphite is near to surface, which means it can be mined easily and at very low cost.
Add to this the high quality of the graphite, its ability to upgrade to a highly sought-after concentrate and a recently awarded 21- year mining license and it is clear that Blencowe has all the attributes to develop into a world class graphite play. Another important factor is the project’s location in Uganda. The English-speaking nation is universally viewed as one of the most stable African countries, with all the requisite qualities in which to develop a world class resource project.
With over 50% of the world’s graphite currently forecast to come out of much higher risk Southern African countries such as Mozambique, Madagascar and Tanzania, lithium-ion battery producers and auto manufacturers are rightly concerned that one of their key source products may be at risk of a supply bottleneck, all of which makes the case for Blencowe’s Orom-Cross project even more compelling.
And at a paltry £8m market cap, Blencowe may be one junior resource company worth following closely over the next few years as it develops this extraordinary asset into production. Covid-19 restrictions notwithstanding, Blencowe has plenty lined up in 2020, with a maiden JORC resource number and strategic partnerships announcements expected. One thing is already clear – the Orom graphite project will be right on time for the anticipated explosion in demand for EV’s and battery technology.
India looks to lead electric vehicle race with latest push in budget
- The finance minister announced tax rebates of up to ₹1.5 lakh on interest paid on loans to buy EVs
- India, though, like China or countries in the EU, has not set a target for automakers to convert a certain part of their total vehicle production to electric or other electrified offerings
New Delhi: With a host of incentives unveiled in the Union budget for electric vehicles, India has joined governments in China and Europe that have backed the development of the nascent EV industry by offering extensive fiscal incentives and a favourable regulatory environment.
Pushing ahead with its goal to have more electric vehicles to curb rampant pollution afflicting major cities and trim costly oil imports, the government has started from 1 April 2019, the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of ₹10,000 crore. Although this sum may not be significant compared to some developed countries, the incentives announced in the budget for this sector will go a long way in restoring the confidence of investors and customers alike.
In her maiden budget, finance minister Nirmala Sitharamanannounced income tax rebates of up to ₹1.5 lakh to customers on interest paid on loans to buy electric vehicles, with a total exemption benefit of ₹2.5 lakh over the entire loan period. The minister also announced customs duty exemption on lithium–ion cells, which will help lower the cost of lithium-ion batteries in India as they are not produced locally. Makers of components such as solar electric charging infrastructure and lithium storage batteries and other components will be offered investment linked income tax exemptions under Section 35 AD of the Income Tax Act, and other indirect tax benefits.
Most of these steps are similar to the one taken by the governments in China and Europe.
India, though, like China or countries in the European Union (EU), has not set a target for automakers to convert a certain part of their total vehicle production to electric or other electrified offerings. The NITI-Aayog is considering a policy proposal to ban all internal combustion engine two-wheelers under 150cc by 2025 and three-wheelers by 2023.
China, the world’s largest electric vehicle market, has already imposed restrictions on investment in new manufacturing plants for traditional vehicles and the local government has also mandated a quota for EV production for all manufacturers.
Through its New Energy Vehicle mandate, the Chinese government wants carmakers to shift a tenth of their capacity to electric, rising to 12% by 2020. It has also offered major incentives for manufacturing and lithium-ion batteries.
According to a report by the International Energy Agency (IEA), China was home to half of the world’s electric vehicles in 2018, followed by EU countries and the US. China plans to sell 4.6 million electric vehicles by 2020, according to an article published by the World Economic Forum in December.
Japan and South Korea, too, have significantly increased incentives for electric vehicles.
While Japan plans to reduce 80% of green house gas emission from vehicles by 2050, South Korea has extended its National Subsidies to 57,000 electrified vehicles in 2019, compared to 32,000 vehicles in 2018, according to the IEA.
Despite the government incentives, India still lags behind China in setting up an EV ecosystem, according to analysts.
“In developed nations, government subsidies provide for 20-25% of the vehicle cost. Just offering tax breaks would not have much impact unless they are accompanied by non-fiscal incentives. Also, there should be a mandate that leading manufacturers should have a certain share of their sales from EVs after a particular time period,” said Puneet Gupta, associate director, vehicle sales forecasting at IHS Markit
“In major cities in developed markets such as Frankfurt and others, EVs are given free parking space and in certain parts of the cities only such eco-friendly vehicles are allowed. All we can say is that the Indian government has shown some intent from its side to develop India as a potential market for such vehicles,” he added.
EU countries are trying to evolve into a hub for developing batteries and other spare parts for electric vehicles through the Strategic Action Plan For Batteries.
The continent hosts the countries with the largest base of electric car sales. Norway, for instance, leads the electric vehicle market—EVs comprised 46% of the total vehicles sold in the country in 2018. Its figure was over 2.5 times more than the next highest country, Iceland (17.2%), and six times higher than Sweden (7.9%), which comes third in Europe.
In terms of sales volumes, Norway is followed by Germany, the UK and France, the report further notes.
The government in Norway removed import taxes on electric vehicles and cut taxes on their purchase and lease.
The Indian government’s move to reduce goods and services tax on EVs to 5% from the existing 12%—compared to the tax range of 29% to 45% on internal combustion ones—can spur demand for such vehicles here as well.
In the US, California has taken a lead over other states when it comes to legislating tough emission norms for vehicles and providing fiscal incentives for plug-in hybrid and battery electric vehicles.
Lithium-ion battery usage on the rise – via Pace
The demand for lithium-ion batteries continues to increase, driven by the growth in hybrid and electric vehicle (xEV) production and the use of lithium-ion batteries in energy storage systems (ESS), according to a report by metals, minerals and chemical industry consultancy firm Roskill.
The transition from a market dominated by portable electronics to a market led by lithium-ion batteries in xEVs and ESS has seen the requirements for larger batteries with greater battery capacity, longevity and reliability. These changing battery requirements have catalysed the production and use of higher nickel-cathode chemistries such as NCA, NCM 532 and NCM 622.
Roskill uses their inhouse automotive model to evaluate the changing demands of lithium-ion batteries, including demands for battery components, raw material requirements, and the possible impact of new technologies such as solid-state batteries on the overall demand for battery raw materials.
The strong demand growth forecast for lithium-ion batteries however requires many individual components to be produced in order to manufacture a lithium-ion battery cell. These include cathodes, anodes, separators, electrolyte salts and solutions, copper and aluminium foils, binders and cell cases, all of which require a wide array of materials and industrial expertise. The supply chain and production processes for these materials are complex and long, involving multiples stages, with over 150 established companies producing the 9 key components required for the final battery cell product.
The focus of the lithium-ion battery supply chain has been solidly centred in the Asian market, with over 87 per cent of lithium-ion battery cell producers profiled located in Asia, though several producers plan to construct new manufacturing facilities in Europe and the USA. These expansions will ultimately adjust to evolving demand, especially from the automotive industry. Nevertheless, while many market analyses only consider plug-in EVs, other types of electric vehicles such low speed EVs (LSEV) and mild hybrids (48V) must be also considered to obtain a better demand perspective.
Regulatory changes across all regions have accelerated the development and uptake of xEVs, with emissions standards, subsidies and incentives; and potential bans on the sale of combustion vehicles influencing automaker investments, future models and consumer choice. The on-going trend is considered irreversible, as OEMs and component manufacturers have invested heavily in production infrastructure and research and development capabilities for xEVs. Transportation and energy sectors will need to become cleaner, and lithium-ion batteries are currently the most suitable instrument to achieve that end.
In 2018, China remained the largest market for xEVs, with sales surpassing 1.0M units for the first time. China has supported the production and sales of xEVs in its domestic market through a series of subsidies and incentives, resulting in both cash or non-cash benefits. These subsidies were changed in January 2019 to reduce the benefits applied to lower range xEVs, impacting vehicles with ranges under 200km. As manufacturers now look to target vehicles with longer ranges to still qualify for subsidies, the requirements of lithium-ion batteries and the demand for the raw materials used in their manufacture is ever-changing.
The demand for raw materials used in lithium-ion batteries is expected to increase exponentially, as a result of both sales volumes and changing requirements for battery components. Lithium demand from lithium-ion batteries is forecast to grow by 26 per cent per year in the years to 2028, increasing from 136.7kt lithium carbonate equivalent (LCE) to in excess of 1.4Mt LCE. Demand for nickel and cobalt will also experience considerable demand growth albeit their feedstock availability may be compromised. Beyond feedstock, the previous minerals and other relatively abundant materials as graphite and copper will face challenges, especially in the conversion capacity to process them into battery-grade materials.