The renewable energy revolution is arguably the most important megatrend of our time. As the transition gets underway, new opportunities will emerge and create tremendous value over a short period. A prime example is Tesla and its rapid ascent to become a top-20 automaker by volume and the largest by market capitalization.
Of course, batteries stand at the core of the renewable energy revolution. So, it couldn’t come as a surprise that lithium has become a red-hot market as auto manufacturers snap up supply to meet soaring EV demand. However, the largest battery material by volume isn’t lithium – it’s graphite. And shockingly, the U.S. doesn’t have any domestic supply.
To provide a little context, the average plug-in EV has 70 kilograms of graphite and government projections suggest the world will need 25x more graphite by 2040 than was produced in 2020. As a result, graphite is included on a list of 23 critical metals that the U.S. Geological Survey deems it critical to the national economy and national security.
A Unique Approach
Graphite One Inc.’s (TSX-V: GPH) (OTCQX: GPHOF) Graphite Creek Project in Alaska is one of the largest graphite deposits in the world. According to a pre-feasibility study, the property has a pre-tax net present value of $1.9 billion, providing investors with a 26% pre-tax internal rate of return over an estimated 26 year project lifespan.
But it turns out these estimates could be conservative. In a March press release, Senior VP of Mining Mike Schaffner said “the continued expansion of our Graphite Creek resource will support our plan to quadruple the annual production from our PFS study.” In other words, the $1.9 billion NPV could be a significant understatement.
While the company works to bring its mining operations online, it’s simultaneously developing a battery anode materials manufacturing facility in Washington State. The goal is to create an operational anode manufacturing facility using graphite purchased in the open market before switching to its internal production when its mining operations start bearing fruit.
Ultimately, the company aims to become the first vertically-integrated domestic producer of graphite anodes to serve the U.S. EV market. As manufacturers silo production to specific regions, the U.S. EV market offers an opportunity to capitalize on a region with low relative political risk and high standards for environment-social-governance (ESG) regulations.
Growing Estimates
Graphite One’s recently announced a 15.5% increase in its Measured and Indicated tonnage with a corresponding increase of 13.1% in contained tonnes of graphite. These updated resources have not yet been converted to reserves, meaning they don’t factor into the $1.9 billion NPV estimate in the PFS. Instead, they’ll be added to the coming feasibility study.
Moreover, the resource estimate did not include Hole 22GC079, drilled 2.1km west of the current block model, which encountered 58 meters of 4.18%. In aggregate, the company has only explored about a quarter of its graphite anomaly, meaning the entire property could truly be a generational resource and among the largest deposits in the world.
Multiple Catalysts
Graphite One’s property, situated on the Seward Peninsula about 60 kilometers north of Nome, Alaska, is the largest known flake graphite resource in the U.S. and among the largest in the world, according to the U.S. Geological Survey. As a result, investors can look forward to future announcements of ongoing exploration results as a catalyst.
At the same time, U.S. politicians are keen on boosting domestic natural resources. For instance, Biden’s American Battery Materials Initiative mobilizes the entire government to secure a reliable and sustainable supply of critical minerals used for power, electricity, and EVs. And future EV credits may depend on a domestic supply to qualify.
And finally, graphite prices themselves are reacting favorably to these developments. Like lithium and cobalt, graphite prices moved sharply higher between April 2021 and March 2022. While China’s EV market cooled due to expiring subsidies, graphite prices continue to trend higher in non-Chinese markets where demand remains strong.
Looking Ahead
Graphite One Inc. (TSX-V: GPH) (OTCQB: GPHOF) aims to become the country’s first domestic graphite producer with a vertically integrated mine-to-anode enterprise.
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Graphite One Inc. is a client of CFN Enterprises Inc. Graphite One Inc. agreed to pay CFN Enterprises Inc. $8,000 per month for 12 months plus expenses up to $20,000 per month, beginning on MArch 13, 2023, for a 12-month investor awareness program.
