BlackEarth Minerals NL (ASX:BEM) has soared to a new record high on signing a graphite supply and marketing agreement with Luxcarbon GmbH, Germany – a move that further positions the company as a supplier of graphite concentrate and downstream graphite products to EV and alternative energy markets.
Luxcarbon is one of Germany’s major suppliers of graphite and carbon products to top tier suppliers like Volkswagen, Mercedes, Ford as well as to major chemical corporations.
Recognising the importance of the agreement, investors have responded positively with shares more than trebling.
From the previous close of A$0.092, securities have been as much as 205 per cent higher to A$0.28, a new record, on volume of more than 268 million.
Under the terms of the agreement, Luxcarbon will source and supply to BlackEarth up to the amount of 25,000 tonnes per annum of high-grade concentrate, which BlackEarth will use to assist Urbix in completing its plant development – as part of its existing MOU commitment with Urbix.
The agreement also provides that Luxcarbon shall exclusively market and sell up to 25,000 tonnes of BEM and BEM JV produced material annually into the European markets to meet growing demand for battery EV material.
“Positive commercial outcomes”
The agreement also provides the BEM team with the advantage of having a secure and substantial product supply to meet its proposed downstream JV operations and other downstream production plans that it is developing in Australia and in overseas jurisdictions – a unique strategic advantage that will position the company well for growth and development during 2021 and beyond.
BlackEarth managing director Tom Revy said: “The board is delighted to sign this agreement with Luxcarbon, a leader in the graphite supply and marketing of graphite concentrate and downstream products throughout Europe.
“This agreement provides a number of great outcomes for BlackEarth.
“Firstly, it enables us to secure a supply of world-class graphite concentrate that can be supplied to Urbix’s operations in the USA and also our own downstream processing facility whilst we complete the development of our plants in Australia and Madagascar.
“Secondly, Luxcarbon are leaders in the supply and understanding of downstream graphite products and this will assist us greatly.”
Members of the Luxcarbon team and BlackEarth director David Round have previously worked extensively together in developing sales and market networks for the supply of substantial quantities of graphite and the company is confident this relationship will ensure similar, positive commercial outcomes for both companies.
Revy said: “We are excited at the prospects and opportunities this unique agreement provides to our shareholders.”
The supply arrangement will continue whilst BlackEarth fast tracks the development of its own high-grade, large-scale graphite properties in Madagascar, which will then form a regular supply to its proposed downstream graphite operations.
Demand for downstream products
Demand for energy store and use is expected to surge over the next few decades and the production of critical commodities such as graphite will need to jump to unprecedented levels just to meet demand.
According to a new World Bank Report, just to meet the increasing demand from this segment, graphite output will need to jump by nearly 500% by 2050.
The marketing and sales components of this agreement provide BEM with the opportunity to supply its refined product to meeting this growing demand from EV manufacturers as well as related industries that require expanded and purified graphite products.
In addition, members of the BEM executive team have extensive experience with developing supply and logistical networks in Europe (and other markets) and the company’s relationship with Luxcarbon is expected to assist in positioning the company as a preferred supplier in the early stages of the anticipated strong demand for downstream graphite products.
Expanding EV and battery markets
BlackEarth’s focus, with the help of Luxacarbon, will be to develop supply chain logistics and sales channels for the initial supply of downstream products for use in the rapidly expanding EV and battery market.
Europe has seen significant EV growth with sales increasing 44% in 2019 with Germany and the Netherlands contributing nearly half of overall EV-market growth in Europe.
In both countries, these strong EV sales resulted from increased demand for new models, the availability of existing models with larger battery sizes, and changed government incentives.
In the first quarter of 2020, European EV sales rose as the overall EV penetration rate increased to 7.5 per cent.
The strong regulatory tailwinds and high purchase incentives in several European countries could dampen the impact of the COVID-19 pandemic and further boost the EV market.
Notably, the EU’s new emissions standard – 95 grams of carbon dioxide per kilometre for passenger cars – could boost EV sales as 95 per cent of the fleet must meet this standard in 2020 and 100 per cent in 2021.