The US Department of Defense, the government of Alaska and Bering Straits Native Corporation (“BSNC”) have committed to moving Graphite One’s vision of a US advanced graphite materials supply chain forward.
Graphite projects are few simply because China has dominated the mineral’s supply chain for years, and many countries have relied solely on Chinese imports. The United States has just started to realize the importance of producing graphite domestically but appears willing to make the necessary investments to build up its own supply.
The country’s largest graphite resource, and one of the largest in the world, as identified by the US Geological Survey, is the Graphite Creek deposit in Alaska. The measured and indicated resource currently stands at 37.6 million tonnes at 5.14% graphite, and an inferred resource of 243.7 million tonnes at 5.07% graphite.
The deposit, part of the Graphite Creek property spans a total of 18 kilometers and is being developed by Vancouver-based Graphite One (TSXV: GPH, OTCQX: GPHOF).
A big reason for the backing given to Graphite One is that the United States has absolutely no graphite production of its own.
By contrast, China is by far the biggest producer at about 80% of global production. The US rival also controls almost all graphite processing, establishing itself as a dominant player in every stage of the supply chain.
According to the US Geological Survey, in 2022 the US imported 82,000 tonnes of natural graphite, of which 77% was flake and high purity. The top importers were China (33%), Mexico (18%), Canada (17%) and Madagascar (10%).
By taking into account the fact that EV batteries require run-of-mine graphite to go through purification and coating, a process controlled by China, the US is actually not 33% dependent in China for its battery-grade graphite, but 100%. This is a precarious position to be in should the country want to stay in contention for EV dominance.
Also factoring into the US Federal government’s decision to fund projects like Graphite Creek is simply the demand growth for raw materials that are critical to the energy transition. Graphite, which represents the largest component in electric vehicle batteries by weight, is very high up on the list.
Bloomberg NEF estimates that demand for graphite is set to quadruple by 2030 on the back of an EV battery boom transforming the transportation sector.
The International Energy Agency (IEA) goes 10 years further out, predicting that growth in graphite demand could see upwards of a 25-fold increase between 2020-2040, trailing only lithium in terms of demand growth upside (see below).
Now the question becomes whether we have enough minerals to sustain the demand pressures of the global EV revolution. The short answer is NO, as production of natural graphite from mines has been on the decline since the start of this decade (see below).
Benchmark Mineral Intelligence has said as many as 97 average-sized graphite mines need to come online by 2035 to meet global demand. That is about eight new mines a year, which at first may seem doable but considering the number of graphite projects worldwide and the time it takes to develop them into mines, we are up against it.
It is understandable that in early 2021, after being nominated by Alaska Governor Mike Dunleavy, Graphite Creek was given High-Priority Infrastructure Project (HPIP) status by the Federal Permitting Improvement Steering Committee (FPISC), which is responsible for the environmental review and authorization process for certain large-scale critical infrastructure projects.
The HPIP designation allows Graphite One to list on the US government’s Federal Permitting Dashboard, which ensures that the various federal permitting agencies coordinate their reviews of projects as a means of streamlining the approval process.
PFS, New Resource Estimate and FS
Last fall, Graphite One underwent a major de-risking event with the release of a prefeasibility study (PFS), which showed a pre-tax NPV of $1.9 billion, 26% IRR and 4.6 years pay-back using an 8% discount rate. The post-tax NPV, IRR, and payback were $1.4 million, 23% and 5.1 years, respectively.
Based on the PFS projection, the mine would produce, on average, 51,813 tonnes of graphite concentrate per year during its projected 23-year mine life.
The concentrate would be barged to the anticipated Washington State graphite product manufacturing facility, for further processing. At full capacity, the facility plans to produce about 75,000 tonnes of products a year, of which 49,600 tonnes would be anode materials, 7,400 tonnes purified graphite products and 18,000 tonnes unpurified graphite products.
The PFS results were based on the exploration of only one square kilometer of the 18-km deposit and includes all the drilling data up to and including the 2021 drilling program. Drilling results since then promise a significant expansion of the Graphite Creek resource.
Graphite One announced the results from last summer’s (2022) drilling program on February 7, 2023. In summary, the successful 2022 drilling program provided the company with:
On March 13, 2023, Graphite One updated its resource estimate, which showed an increase of 15.5% in measured and indicated tonnage with a corresponding increase of 13.1% in contained tonnes of graphite.
The measured and indicated resources now stand at 37.6 million tonnes at 5.14% graphite, with an inferred resource of 243.7 million tonnes at 5.07% graphite. The updated resource did not include Hole 22GC079 (drilled 2.1 km west of the current block model, which encountered 58 meters of 4.18% graphite), due to distance constraints.
The 2023 drilling program, which is currently underway, will target doubling the measured and indicated resources and increasing the inferred resource by infill drilling along trend to Hole 22GC079. The results of the 2023 drilling program will form part of the company’s Feasibility Study.
With a successful 2023 drilling program the feasibility study will contemplate increasing production from 50,000 tonnes of graphite concentrate as estimated in the PFS to more than 150,000 tonnes of graphite concentrate per year. The goal for increased production is to reduce operating costs and improve the economics of the mine.
Given its significant graphite resource, which the USGS now places amongst the world’s largest, the deposit’s potential exploration upside, and it’s anticipated Washington State graphite product manufacturing facility Graphite One is building the foundation to achieve its goal of becoming the first vertically integrated producer to serve the domestic US EV battery market.
Graphite One’s Advanced Graphite Materials Supply Chain
To do that, the company entered into an MOU in April 2022 with Sunrise (Guizhou) New Energy Material Company, a China-based lithium-ion battery anode material producer. The intent is to enter into a technology licensing agreement and to share expertise and technology for the design, construction, and operation of the proposed graphite material manufacturing facility in Washington State.
The Washington facility represents the second link in Graphite One’s advanced graphite materials supply chain. A planned recycling facility to reclaim graphite and other battery materials is planned to be co-located at the Washington plant, completing the third link.
Grants and Loans
Last month, Graphite One was given a vote of confidence from the US Department of Defense, which awarded Graphite One with a technology investment grant of $37.5 million under Title III of the Defense Production Act.
The company subsequently announced it had entered into a one-year $5 million loan agreement with Taiga Mining Company, its largest shareholder. The proceeds will be used for infill drilling, as Graphite One moves towards its next milestone, the completion of a feasibility study. The company granted Taiga an option to purchase up to a 1% net smelter royalty interest (“NSR”) in increments of 0.25% for every $1.25 million advanced to the company on 133 Alaska state claims owned or lease by the company, which was bought back for approximately $0.5 million on June 21, 2023. The option may be exercised at anytime prior to maturity. If and when the option is exercised, the outstanding loan balance and accrued interest will be deemed to be the consideration paid for the purchase of the NSR.
Neither the grant, nor loan, was dilutive to shareholders.
Earlier this month, Graphite One closed a $2 million strategic investment by way of a private placement from Bering Straits Native Corporation with an option to invest a further $6.0 million over the next twelve months to support the development of the company’s Graphite Creek deposit in Alaska.
Formed in 1972, BSNC is the regional Alaska Native Corporation (ANC) for the Bering Strait region, which includes the Seward Peninsula in Western Alaska. Graphite Creek project.
The BSNC investment follows multiple community meetings with local residents and company officials during 2023, Graphite One said. To coordinate regional and community development, both parties will establish an advisory board to ensure direct communications of the company’s activities and development details as well as utilize the local expertise of BSNC.
“This is not just an investment in Graphite One, it is a long-term investment in our region. We at BSNC have watched for years as Graphite One has worked to advance the Graphite Creek project and become a friendly neighbor in the region,” Dan Graham, BSNC’s interim president and CEO, commented in the Sept. 5 press release.
“Graphite One has told us of its intent to develop an environmentally responsible project and provide an exciting economic opportunity for the region that hopefully will play a crucial role in the nation’s transition to a clean energy future. This is at the heart of our board’s unanimous support of the project.”
“We are grateful for and humbled by BSNC’s support. Working collaboratively, we can make Graphite Creek a project to be modeled after in Alaska and nationwide,” Anthony Huston of Graphite One added. “BSNC is a dynamic development force in Alaska, with an unwavering commitment to community and heritage.”
The strategic investment from BSNC bolsters Graphite One’s position and brings added creditability to the project. With the support and backing of BSNC, the company can proceed with increased confidence as it strives to bring the Graphite Creek project to full scale operations a reality.
Full press release:
This week Graphite One was awarded a $4.7 million contract from the Defense Logistics Agency (DLA, part of the US Department of Defense, to develop a graphite and graphene-based foam fire suppressant as an alternative to incumbent PFAS fire-suppressant materials, as required by US law.
“Graphite One is pleased to begin work on this Defense Logistics Agency project, which responds to the legally mandated requirement to develop a new alternative to long-standing foam fire suppressants which are known to have toxic impacts on human health and the environment,” said Anthony Huston, president and CEO of Graphite One, in a Sept. 11 news release.
“This DLA contract underscores the importance of graphite for innovative technology applications beyond the renewable energy markets.”
Under a signed teaming agreement, Vorbeck Materials Corp of Maryland, is the primary sub-contractor on the DLA contract. Vorbeck is a global leader in graphene production and advanced graphene applications. Its graphene offering, VOR-X, can produce the material at large-scale levels and integrate it into numerous solutions.
Full press release:
The world simply needs more graphite, a key ingredient in EV batteries and energy storage systems that we have no substitutes for.
Global analysts estimate that by 2030, it will take at least five million metric tons of graphite per year to fill our battery demands. This is roughly four times the 1.3 million metric tons mined globally, according to the USGS’s Mineral Commodities Summaries 2023.
In its highest demand projection, the US Energy Department forecasts that global graphite demand could be more than eight times current production by 2035.
“In 2035, flake graphite demand for energy applications will account for 91% of the total demand, and EV batteries will account for 74% of the total demand,” the DOE said in its Critical Materials Assessment.
This is why the DOE, in its assessment, ranked graphite near the top of its list of minerals critical to America’s energy future. The US Federal government’s critical minerals list also has graphite as one of five key battery minerals that are at risk of supply disruptions.
The only way to alleviate that risk is for the United States to find its own source of graphite production, and at AOTH we believe a project like Graphite One’s ticks all the boxes. The amount of funds committed by various parties listed above towards the company so far speaks volumes about its urgency and importance.
The US Federal government (DoD, DLA), the government of Alaska, Taiga Mining and the BSNC have committed to moving Graphite One’s vision of a US advanced graphite materials supply chain forward.
Graphite One Inc.
2023.09.20 share price: Cdn$1.15
Shares Outstanding: 129.0m
Market cap: Cdn$145M
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