Innovation key to cost-competitive graphite production – CarbonScape executive

➤ Innovative graphite production processes are necessary for ex-China graphite to be cost competitive.

➤ Access to public funding tends to be more flexible and faster in the US than in the EU.

➤ Offtake agreements between automakers and minerals producers are increasingly involving equity investments.

Vincent Ledoux-Pedailles, chief commercial officer at CarbonScape. Source: CarbonScape Ltd.

As the need for graphite gains attention from automakers, the mining industry and policymakers alike, production processes will need to change if graphite producers outside of China wish to be price competitive with major China-based suppliers, said Vincent Ledoux-Pedailles, chief commercial officer at CarbonScape Ltd.

New Zealand-based CarbonScape is a renewable carbon products company working to commercially scale its production process for biographite anode material made with timber industry byproducts rather than the traditional feedstocks used for natural and synthetic graphite production. Ledoux-Pedailles is the former chief commercial officer of Vulcan Energy Resources Ltd., where he secured offtake agreements with five original equipment manufacturers and worked on equity financing, as well as the former executive director of corporate strategy at Infinity Lithium Corp. Ltd.

S&P Global Commodity Insights spoke with Ledoux-Pedailles on the sidelines of the Giga USA 2024 conference held June 11–13 in Washington by Benchmark Mineral Intelligence. The following interview has been edited for clarity and length.

S&P Global Commodity Insights: What have been the major changes in the lithium and graphite markets since you entered the space?

Vincent Ledoux-Pedailles: Back in 2016 when I kind of rejoined the lithium industry, lithium was kind of overlooked. Automakers didn't have teams in place to look after graphite sourcing and investors didn't know anything about lithium.

I think graphite now is in a similar space to where we used to be with lithium, where it's been overlooked for many years, it was seen as a less important commodity, and suddenly everybody's waking up and realizing, "Oh, [most of the] graphite capacity is in China." Now, Biden's coming out with import duties, I think Europe will probably replicate something quite similar, and we realized we need to do something about supply, not just from a geopolitical perspective, but also from an [environmental, social and governance] perspective where, you know, producing graphite is just very dirty.

[CarbonScape] is more of a processing kind of cleantech play, which is much easier to develop than having a mining company that only relies on one asset. The advantage of CarbonScape is that virtually you can build as many plants as you want because the feedstock is renewable and almost unlimited. ... It's allowing you to [develop] a project outside of China while being competitive as well.

That's an issue with a lot of graphite projects, they're trying to replicate what was done in China. ... If you just do the same thing outside of China, you're never going to be able to compete on price. Adding a level of innovation into the process is key to be able to compete with the Chinese.

What are some of the main ways graphite producers outside of China can become cost-competitive?

If you're in mining, you have ways to compete depending on the quality of your results. If you find a great deposit with very high grades, you can potentially compete with China because you've got that very specific resource.

But when it comes to processing ... if you just replicate the same technology that's done in China, where you have the same purification steps ... you're just going to have a higher operational expenditure.

So the way we do it is by switching the type of feedstock we need. For example, it's much cheaper to source wood chips than to source petroleum coke or [graphite] flakes; we can compete.

CarbonScape is considering the US or Europe for its first commercial plants. What are the comparative advantages of either location?

We're still deciding, and that's linked to different factors. ... The right site: There are more options in the US than in Europe, Europe being much smaller.

Permitting: We're permitting a processing facility. It's much easier than permitting a mining project, but still, it's easier in the US than in Europe.

Public funding: [It's] much more efficient in the US than it is in Europe. ... [For] downstream partners, I think it's quite similar; the European market and North American market are both quite dynamic. We have more relationships in Europe. But in North America, we're building the relationship in the US. So it's still very difficult for us to decide. We need to make a decision before the end of the year.

What are the main differences in acquiring public financing in the US versus the EU?

It's more flexible ... [and] it's much faster. I think in Europe, if you want to get any public funding locked in, you probably need a year and a half, two years. Same thing if you're dealing with the European Investment Bank on the debt side.

The methodology to actually apply for public funding in Europe can be a bit strange. You need to, in some ways, prove that without public funding, your project will fail. So you need a financing gap, but it's very weird to be approaching the EU and saying, "Without your money, my project fails," but at the same time, you need to show you've got a great project.

[This] is not at all the approach that the US Energy Department or the Defense Department has. So I think the process overall that has been developed in the US makes a lot more sense than what has been developed in Europe.

How has the attitude around offtake agreements between mining companies and OEMs changed in recent years?

A number of years ago, there were offtake discussions, and there were offtakes being signed, but equity was not a requirement to sign the offtake. ... But it became more and more difficult to finance those projects. So now the offtakes, most of the time, also have to come with an equity ticket, which some OEMs are willing to commit to but others are not willing to commit to.

If the OEMs are not willing to commit to equity, they'll ask the battery cell-makers to take care of it.

What has changed is what OEMs are after when we look at specific offtakes. That varies depending on their priorities. So a few years ago, the ESG angle was very important, and the location angle has always been important, or being close to the manufacturing facilities that exist within the same region.

It's still important, but now it's all about costs. If you look at the top five or six priorities for those guys ... ESG is at the bottom at the moment because the priority, for at least the Western automakers, is to be able to compete with the Chinese, and so cost is number one.