Graphex Group (GRFXY) - Selling Chinese Tech with Western Producers?

Graphex Group Ltd. is a mid-stream processor and producer of spherical graphite, which is primarily used to produce anodes in Lithium-ion batteries for electric vehicles. The company currently produces its spherical graphite at its facility in Heilongjiang Province, China.

The company plans to expand its Chinese operations from the current 10,000 tons per annum of spherical graphite production to 40,000 tons per annum over the next three years. The expanded 40,000 tons supply will, according to the company, be consumed by the electric vehicle market of Asia.

The company is currently underway with discussions with various mining operations located in Mozambique as well as Canada to identify a new upstream supply point. The company aims to create joint ventures with mining operations in areas that allow for close processing of the graphite. The company further can create partnerships with not only a mining operation but also a battery producer to create a complete supply chain of mining, processing and production.

Graphex Technologies, LLC. a wholly-owned US-based subsidiary of the company has recently announced that it has identified the Emerald Business Park in the City of Warren Michigan to be the site of its new 150,000 square-foot graphite processing facility. The graphite processing facility will be a joint venture between Graphex Technologies LLC and Emerald Energy Solutions LLC.

The joint-venture will be allowed complete access to the patents and processing technologies owned by Graphex Group Ltd. The joint venture will further encompass a USD$ 15 million contribution by Emerald Energy Solutions LLC to the joint venture, as well as the supply of all Michigan-based personnel required.

Company and management

The Graphex Group Ltd. is a diverse group of companies consisting of a catering and landscaping division as well as a graphene division, namely Graphex Technologies LLC. The primary goal of the graphite division of the group is the processing of raw graphite into purified spherical graphite. The spherical graphite is implemented in the anode of electric vehicle (EV) lithium-ion batteries.

The CEO of the Graphex Group Ltd. is Chan Yick Yan Andross who is also the executive director of the group. Andross joined the company in January 1991 as the Managing Director and has more than 34 years of experience in operations and management.

John DeMaio is the president of the Graphex Group Ltd. as well as the CEO of Graphex Technologies LLC. DeMaio has more than 35 years of executive leadership and operational management experience in the energy and infrastructure sectors.  He has previously served as the CEO of JouleSmart Solutions, the General Manager of Siemens Smart Infrastructure, the Vice President of MWH Global, the Chief Operating Officer of Thompson Solar Technologies, and the Divisional General Manager of SPG Solar.

The Chief Strategy Officer position of Graphex Group Ltd. is fulfilled by Dan Nye. Nye began his career as a US Naval Officer from where he joined Asyst Technologies leading the manufacturing of the company and growing its revenues from USD$ 80 million to USD$ 300 million. Nye has also worked as a strategy consultant at Bain and Company as well as a fund manager at CIM Investment Management where he oversaw more than USD$ 1 billion in long and short mandates.

Professor Luo Liqun rounds out the company management team as the head of research for the company’s graphene division.  Luo obtained his doctoral degree in Mineral Processing from the Wuhan University of Technology where he is also a Professor and Senior Engineer.

The Graphex Group Ltd. was initially an award-winning landscaping company, which later also included a catering division. The company entered the renewable energy sector in 2019 through the acquisition of its graphene division. John DeMaio, the president of the Graphex Group Ltd. as well as the CEO of Graphex Technologies LLC., explains the company structure as well as its focus as follows:

“…but there is the landscape architecture, and at one point there was a catering business. Both of those other businesses were impacted severely by Covid. The catering business has really been downsized to the point where it's a negligible part of our revenue. The landscape architecture business is an award-winning business and it is really the foundation of the original company that is contributing and is profitable, but the graphene division by far is dominating the revenue, and that is where the focus is.”

The revenue of Graphex Group Ltd. is predominantly through its graphene division, which accounts for approximately 66% of the company’s total revenue. DeMaio states:

“The graphene division is about 66% of revenues, which was around USD$ 50 million in 2021 in our annual report that is available on the website. Yes, the graphene is starting to overtake, and with these expansion plans, we anticipate that it's going to be the primary driver of the entire company going forward.”

Processing expansion Initiatives

Graphex Technologies LLC. Announced in early 2022 that it had entered into a non-binding memorandum of understanding (MOU) with the Municipal Government of the Mashan District in Jixi City, China. The MOU underlines the company’s intent to increase its processing capacity at its existing processing facilities from 10,000 tons per annum (tpa) to 40,000 tpa of high-purity spherical graphite as well as create the in-house capability to produce 10,000 tpa of coated spherical graphite (CSG) additionally. DeMaio explains that due to the demand of the Asian EV market, the entirety of the increased supply, brought about through the expansion initiatives at the company’s Chinese operations will be consumed by the Asian battery market, he states:

“In China, we are going to expand from 10,000 tpa to 40,000 tpa over the next 3 years, and that supply will basically be consumed within the Asian electric vehicle market, and that makes perfect sense.”

US expansion initiatives

Graphex Group Ltd. announced at the beginning of March 2022, that it had filed a registration with the US Securities and Exchange Commission regarding its proposed public offering to list on the NYSE. The offering will be underwritten by EF Hutton, a division of Benchmark Investments, LLC. DeMaio explains the intention and aim of the company regarding entering the US market as follows:

“The end consumer for us is our battery manufacturers and electric vehicle manufacturers, and they run hand in hand. You have GM working closely with LG, you've got Ford working closely with SK, etc. Therefore, our customers are both of those entities. Again, it would normally be strictly the battery manufacturers, but because there's such a focus on securing the supply chain and having enough material to meet the ambitious goals of electrification, for example, General Motors is going to be 100% electric by 2035…”

Michigan processing plant and Joint Venture

The company announced in March 2022, that it had selected the future site of its new 150,000 ft2 graphite processing facility in Warren, Michigan. The processing plant, which will be located in the Emerald Business Park, will be a joint venture between Graphex Technologies LLC and Emerald Energy Solutions LLC. The joint venture will have complete access to the patents and processing technologies owned by Graphex Group Ltd.

The joint venture will further encompass a USD$ 15 million contribution by Emerald Energy Solutions LLC to the joint venture, as well as the supply of all Michigan-based personnel required. De Maio explains that the US shows high demand for spherical graphite, he states:  

“…there are 188 gigawatts of Giga factories that have been announced here in the US over the next couple of years. That's about 188,000 tons of graphite needed to feed that. Therefore, even at 10,000 tons, 15,000 tons, we're barely making a dent. If you think about our production facilities in increments of 10,000 tons, we can theoretically locate operations,…, we can have the primary process upscaled to 10,000, 20,000, 40,000, 50,000 tons, depending on the production we get out of the mine.”

Production expansion initiatives

The Graphex Group Ltd. aims to play a part in the entire graphite supply chain, not only in China but in the US and various other locations. The company aims to diversify its operations into various other locations, which include Brazil and Mozambique, DeMaio explains that the intent of the company is not only to expand its production capacity but also to diversify out of China:

“We already have an established supply chain in China, so if there's a need for volume into the US, we can upsize that operation to provide it. That is meeting a need. The other part of the need is that diversification away from China, which is a desire of many of the manufacturers here in the States.”

DeMaio further explains that there is no foreseeable supply of graphite in the US, and as such the company is searching for other locations from where to source the graphite, he explains:

“…we are looking at Canada, as our closest neighbour, we're looking at securing off-take agreements with the material there. In addition, there is Brazil, Mozambique and other places where we can bring in non-China supply and process it into the material.”

Future

The Graphex Group Ltd. will investigate the possibility of an agreement with both graphite mining operations and battery suppliers regarding a joint venture to encompass the entirety of the graphite supply chain, DeMaio states:

“…it is not out of the question that we would have a three-way conversation between a mining operation, a company like ours to do the secondary transformation as it's sometimes called, and to have a third party, maybe a battery manufacturer or even an OEM that is interested in locking down future supply”

The role of the company in the graphite ecosystem is not just as a processing step, but as a technical expert enabling coated on un-coated spherical graphite production from various feed grades supporting not only graphite mining operations but also the EV battery industry.

DeMaio sums up the company’s future initiatives as follows:

“We're not a start-up in this space. We've been producing spherical graphite for over 10 years now, selling it commercially for the last 8. We're not a new technology provider, we're not a new start-up, and we're not a new technology. We're a proven technology with the capability to perform at high volumes. 10,000 metric tons is a fair amount, going to 40,000 tons, that's really just 4x what we were doing. Again, what I'm trying to say is that there's not a lot of risk in our expansion plan. Our conversations are: we can meet the quality specifications, we can meet the quantity specifications and we have stable sources of supply.”

To find out more, go to the Graphex Group website