ASX-listed Quantum Graphite has executed a binding offtake agreement with Swiss-based global metal and minerals trading group MRI Trading AG for 100 per cent of stage 1 production from its Uley 2 flake graphite mine.
The five-year agreement will add flake graphite to MRI’s existing mineral coverage and provide Quantum with access to the trader’s customer base across Europe and Japan.
Conditions of the deal include commencing production by the end of 2026 and delivering a minimum standard of product that appears well within the capabilities of the company’s Uley 2 deposit.
The parties have developed an innovative two-step pricing method to determine the selling price. The first step will use prevailing market prices with the second step to apply an agreed premium or discount to the agreed market price.
The pricing mechanism provides MRI with the flexibility to contract strategically with prospective customers in different regions and market segments.
Both Quantum and MRI believe the forecast demand for graphite is likely to generate significant upward pricing pressures and create opportunities to maximise price in different regions and market segments.
Quantum Graphite Managing Director, Sal Catalano said: “The parties were acutely aware in negotiations that the agreement had to extend well beyond a simple minerals supply arrangement. Emerging thermal storage technologies, the explosive demand forecast for Li-ion battery production and the changes to the existing supply chain paradigm required an agreement structure that would cope with a rapid change in the marketplace.”
Commenting on the exclusive deal, MRI management said: “We recognised that through this deal we would become the largest trader of natural flake outside of China.”
With the S&P ASX 200 index down about 4.3 per cent for the month, the Australian graphite company appears to be one of the few keeping its head well above water. Since the turn of the new year, Quantum’s share price has risen from $0.16 to $0.48 in today’s intraday trading – an increase of about 200 per cent.
Quantum’s Uley 2 project was one of three graphite ventures listed in the Federal government’s Critical Minerals Prospectus of 2021.
The resource stands at 6.3 million tonnes at 11.1 per cent total graphitic carbon for a total of 672 thousand tonnes of contained graphite.
The US Geological Survey pegs China as the top producer of graphite in addition to a list of other minerals.
The economic superpower produced about 82 per cent of the world’s graphite in 2021, followed by Brazil with a meagre 6.8 per cent.
As the globe’s appetite for graphite increases, there are concerns China may restrict future exports to satisfy its own rapidly growing market.
With more graphite than lithium in an average electric vehicle battery, a strong demand is forecast for the mineral.
The International Energy Agency predicts the demand for graphite could increase 20 to 25 fold by 2040.
In addition to the burgeoning electric vehicle market, Quantum is also offering exposure to the “long-duration energy storage” industry through its joint venture with The Sunlands Co. The collaboration will result in the company supplying natural flake graphite to Sunlands to produce thermal energy storage cells.
The cells are designed to temporarily store energy to be used later for power generation and importantly can be used to balance changing energy demand caused by the variable nature of renewable energy output.
The agreement will see MRI assume responsibility to supply the joint venture.
Quantum sees the use of graphite in thermal storage media as contributing to the long-term growth in natural flake demand with at least 100,000 tonnes required annually to meet Australia’s net zero by 2050 plan.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
