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Why these graphite miners have soared more than 87%

Producers and explorers in Australia’s fledgling graphite industry have recorded astonishing share price rises over the past 12 months – and much of it is attributed to the rise of the electric car.

Lamboo Resources Ltd (ASX: LMB) is up an incredible 731% since June 2013, Triton Minerals Ltd (ASX: TON) has climbed 509% while Syrah Resources Ltd (ASX: SYR) is up a more respectable 127.7%. Micro-cap Kibaran Resources Ltd (ASX: KNL) has climbed 87% over the same period.

While graphite has traditionally been used in ‘lead’ pencils and steel making, the rise of lithium-ion battery-powered devices from watches to electric cars has seen demand for graphite explode.

As Lamboo CEO Richard Trevillion explained to the Australian Financial Review, “The reason why flake graphite has got into the mindset of the market is because it’s the biggest bit of the lithium-ion battery“, adding, “The market for lithium-ion batteries has really exploded to capture the imagination of investors.

Electric car maker Tesla is estimated to require 6 new flake graphite mines to supply its new lithium-ion battery factory. Demand is estimated to run from 93,000 to 140,000 tonnes of flake graphite each year, according to market intelligence group Industrial Minerals.

China currently produces around 75% of the world’s flake graphite supply, but in December 2013, ordered one of its primary flake producing regions to stop production on environmental grounds, taking about 10% of the world’s flake graphite off the market.

That’s great news for ASX-listed graphite companies such as Lamboo, Triton and Syrah. Syrah certainly looks interesting, given the company’s huge Balama project in Mozambique contains an estimated 117 million tonnes of graphite – more than the rest of the world’s graphite reserves combined.

Like Australian bauxite miners benefitting from rising demand for aluminium, graphite miners appear to be following in their footsteps.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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