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Overreliance on China for graphite unsustainable – Nouveau Monde Graphite CEO

➤ Battery-makers often need graphite, a form of carbon, to make electric vehicle batteries, but an anticipated supply crunch this decade could threaten Western automakers' EV production targets, according to Eric Desaulniers, founder, president and CEO of Canadian company Nouveau Monde Graphite Inc.

➤ China, the world's top producer of graphite, will have trouble meeting the surge in demand for the energy-intensive mineral — especially given the country's attempt to cap air pollution, Desaulniers said. The world faces a graphite deficit of over 80,000 tonnes as soon as 2022, and only a handful of producers outside of China are prepared to fill the gap, according to Benchmark Mineral Intelligence's forecast.

➤ Nouveau Monde is well underway with its own graphite production site, but the slow mine development process could hamper the global transition to a low-carbon economy.

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Eric Desaulniers, president and CEO of Nouveau Monde Graphite Inc.
Source: Nouveau Monde Graphite Inc.

Canadian mining company Nouveau Monde Graphite Inc. plans to build a vertically integrated graphite and battery anode production site in Canada, delivering 42,000 tonnes of anode material to market per year, starting in 2025. The company's Matawinie open-pit graphite mine in Canada is under construction and will showcase an all-electric mining equipment and vehicle fleet by 2028. Nouveau Monde says its operations will rely on nearby hydroelectric power to offset the carbon emissions associated with graphite production.

In addition to its mine, the company aims to build a plant to turn the mined graphite into finished materials used in a battery anode, or the negative electrode of lithium-ion batteries, offering one of few alternatives to China for graphite.

S&P Global Market Intelligence spoke with Eric Desaulniers, the founder, president and CEO Nouveau Monde Graphite, to learn about the challenges miners face lifting battery metal mining projects off the ground in North America, and why automakers' reliance on China for graphite puts the transition to electric vehicles and energy storage at risk.

S&P Global Market Intelligence: Why build a mine to supply graphite material for batteries in North America and Europe when a majority of the world's existing capacity is already well established in China?

Eric Desaulniers: We cannot rely anymore on China to be the provider of graphite for the whole world. That's not sustainable for China, because their air is already very polluted and they have started to have energy problems. We need to build capacity to cover a little bit of our demand here. It's a little absurd: If you look at the scale of the lithium-ion battery boom that is happening, it's happening too quickly. Everybody wants to build a lithium-ion battery plant. If you do the math and count all the announcements in the last six months, that's a lot of graphite that will be needed in America.

When it comes to battery materials, graphite can often get overlooked. But in terms of weight, graphite can be one of the largest parts of a lithium-ion battery. What challenges could the electric vehicle sector face when trying to source enough graphite for their batteries?

There's a big disconnect between raw materials and the demand for electric vehicles. It takes time to develop a mine. We've been at it since the discovery in 2015 [of the Matawinie graphite deposit], and we're planning to deliver to the market 42,000 tonnes per annum of the finished graphite product in 2025. That's 10 years. We developed it as quickly as we could. There's a big disconnect between the carmaker, the battery-cell maker and the consumer, who all believe they will have [enough] electric cars in two years because they demand it. It will be very difficult in that time frame. We need to streamline permitting. We need to go back to exploration to find more deposits of these minerals. And we need to build our own supply chain locally. We cannot rely on China to build it all for us, like in the past.

We see a lot of investment dollars pouring into energy transition initiatives. Is enough going to new mine development for battery materials like graphite?

I think the money is there to finance the whole supply chain. But lenders don't like risk, and they want to understand where they are investing. We need a commitment from a battery-cell maker or a carmaker so we can demonstrate to our lenders and our investors that our product is the right one and that the customers will purchase a large quantity of it. Lenders want more de-risking to occur because nobody knows exactly what types of materials will go into batteries and in which form. I think the money is there, waiting on the side with the check, but there's a bit of disconnect. They want to see the projects become a bit more mature before deploying it. So, it's really the job of the battery-cell maker to commit quicker to the product.

Do you think there will be a premium on "sustainably mined" or "low-carbon" battery materials?

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Construction underway at Nouveau Monde Graphite Inc.'s Matawinie mine in Canada.
Source: Nouveau Monde Graphite Inc.

Absolutely. I believe there will be a premium in the future. For us, it makes all the sense of the world to be carbon-neutral. In a nutshell, we have chosen to go all-electric because it's cheaper for us and we have hydroelectricity. We've positioned ourselves to use the most hydroelectricity possible.

You're planning to produce natural graphite, which is mined, but there's also synthetic graphite, which is a manufactured product. Why the shift to natural graphite, and do you think automakers will follow?

A lot of the battery-cell makers started out using synthetic graphite when cell making was an art and at a small scale. It was a really small market. Now if you want to reduce your cost and carbon footprint, you need to use more and more natural graphite. That's what you see from the big guys, from the [battery] companies, like Panasonic Corp., LG Chem Ltd. and SK Innovation Co. Ltd. They all want to buy more and more natural graphite without changing the performance of the battery.

There is a slight variation between synthetic graphite and natural graphite. But at the end of the day, graphite is graphite. It's a small variation overall. It's all about reducing costs and keeping flexibility on the side of the customer. That's why many companies blend natural and synthetic graphite. They can also blend it with silicon. That gives them much more flexibility, especially when pricing for synthetic graphite goes up massively, like it is now in China, because of energy costs.

How has the growing scrutiny around environmental, social and governance issues changed the outlook for the graphite sector, if at all?

ESG is super-important. For the first time, carmakers need to worry about where all their materials come from, because their consumers are worried. People buying electric cars, they really want to be cautious about what they're buying. They want to understand the lifecycle of those materials and how they will be recycled. That's something that we're working hard on as well. We have all the equipment to recycle graphite in our purification furnaces. In the future, we need to also play our role in implementing a higher percentage of recycled graphite into our process.