Graphite One advances US supply strategy
Mining Explorers 2022 - January 19, 2023
Last updated 1/17/2023 at 5:52pm
Pushes ahead AK mine, WA plant to meet vast EV battery demand.
As automakers look to secure the graphite required for lithium-ion batteries that will power the hundreds of millions of electric vehicles expected to traverse global highways over the next three decades, Graphite One Inc. continues to put milestones in its rearview on a journey to develop a mine at its Graphite Creek project in Alaska and advanced graphite processing facility in America's Pacific Northwest.
"Our strategy is to build a complete graphite anode supply chain – from mine to battery – located in the United States," said Graphite One CEO Anthony Huston. "And to complete the circular economy for battery materials, G1 is also adding a battery materials recycling facility to feed recovered materials right back into our manufacturing process."
A prefeasibility study finalized in August provided details of this all-American graphite materials supply chain.
Considering global analysts are forecasting that at least a 500% increase in global mined graphite production will be required by 2030 to keep pace with EV battery demand, nearly 100 new mines and processing facilities similar in size to those being advanced by Graphite One are going to be needed as soon as possible.
The global lithium-ion battery supply chain experts at Benchmark Mineral Intelligence have already flagged a supply-demand imbalance for graphite.
"This is the first year that battery anode demand will overtake demand from the refractory and foundry industries," George Miller, senior price analyst at Benchmark Mineral Intelligence, warned in October. "It is also the first year we expect a structural deficit for the graphite industry in the gigafactory era, with new supply now needed to meet rapidly rising near-term demand."
As the markets tipped toward deficit, Graphite One focused its 2022 fieldwork on collecting the data to surpass the next milestone on its journey to an all-American graphite supply chain – a feasibility study for developing a mine at the largest graphite deposit in the U.S.
Graphite One feasibility
Lying about 50 miles north of the deep-water port facilities in Nome, Alaska, Graphite Creek hosts the largest known graphite deposit in America, according to the U.S. Geological Survey.
Based on drilling completed along less than a mile of the 10 miles of known mineralization, Graphite Creek hosts 32.5 million metric tons of measured and indicated resources averaging 5.25% (1.7 million metric tons) graphite, plus 254.7 million metric tons of inferred resource averaging 5.11% (13 million metric tons) graphite.
A 2022 prefeasibility study based on this resource envisions a mine at Graphite Creek that would produce roughly 51,800 metric tons of graphite concentrate per year, which would be shipped to Graphite One's planned processing and recycling facility in Washington, a locale selected for its abundant low-cost and low-carbon hydroelectricity.
The Washington plant will upgrade Graphite Creek concentrates, along with purchased graphite material, into 49,600 metric tons of spherical coated graphite that serves as the anode material in lithium-ion batteries and 25,400 metric tons of other graphite products per year.
With EV battery demand outpacing the ability to permit and build a mine in the U.S., the PFS envisions bringing the Washington processing facility online first.
The capital costs to develop the mine and processing facility detailed in the PFS are estimated to be US$950 million (C$1.24 billion), which includes a contingency of US$130 million (C$170 million).
With a post-tax internal rate of return (8% discount) of 22% and net present value of US$1.04 billion (C$1.36 billion), the mining and processing operations are expected to pay back the capital in 5.1 years.
To gather the data needed for a feasibility study, the final step before permitting and development, the 2022 program at Graphite Creek included 2,092 meters of infill and resource expansion drilling, environmental baseline studies, and significant camp expansion.
"It is anticipated that the 2022 summer drilling program data will be incorporated when the company is in a position to file a feasibility study to advance Graphite Creek during this critical time of under-supply for U.S. strategic materials such as graphite," said Huston.
EVs drive graphite demand
The growing global graphite supply deficit is being driven by a pipeline of more than 300 lithium battery gigafactories in operation, being built, or on the drawing board to meet the needs of the burgeoning EV market.
"The central demand driver for the graphite market is now the electric vehicle. It's become the largest end market for flake graphite," said Miller.
S&P Global Platts' forecast that automakers alone will need more than 5 million metric tons of graphite per year by 2030.
This compares to U.S. Geological Survey estimates that only about 1 million metric tons of graphite was mined globally during 2021, none of which was mined in the U.S.
For American automakers seeking a secure and responsible source of the minerals and metals needed for EVs, this situation is further complicated by China's domination of graphite markets.
According to USGS data, China produced 82% of the world's mined graphite and virtually 100% of the battery-grade anode graphite during 2021.
"As I've stated before, we currently get our materials for EVs from China, where environmentally responsible mining and processing is non-existent and has caused significant harm to surrounding areas and populations (yet good enough for us to use in EVs, wind turbines and other renewables)," Christopher Smith, the chief government affairs officer at Ford Motor Company, penned in an August letter to the U.S. Department of Interior.
Graphite One's proposed Alaska mine and Washington processing facility could provide Ford and other American automakers with a domestic alternative with strong ESG credentials.
Incentivizing domestic supply
Graphite One's plans to establish a domestic graphite supply chain got a boost with the passage of the Inflation Reduction Act that was signed into law by President Biden in August.
This new US$750 billion piece of legislation provides companies that produce lithium-ion battery materials in the U.S. with a tax credit equal to 10% of the production costs. Aimed at bringing new domestic battery material supplies online as quickly as possible, this credit begins to fade by 25% per year starting in 2030.
The Inflation Reduction Act offers a second tax credit equal to 10% of the costs incurred in relation to the production of 99.9% graphite on American soil. This credit does not have a sunset date.
The mine-to-coated spherical graphite anode material supply chain detailed in the Graphite One PFS would qualify for both tax credits.
In addition to the graphite production incentives, Graphite One's plans to provide an all-American supply of graphite will likely be further bolstered by a $7,500 tax credit offered to EV buyers in the U.S.
To qualify for the tax credit, at least 40% of the materials in the battery of the EV being purchased must be produced in the U.S. or a free trade agreement country. This domestic materials requirement climbs by 10% per year until 2027, at which point it will remain steady at 80%.
Additionally, EVs with battery components or critical minerals supplied by "foreign entities of concern" will not be eligible for the tax credit starting in 2024 and 2025, respectively. This takes companies in China, which produced more than 99% of the global graphite anode material in 2021, off the table.
Streamlined mine permitting
The EV battery materials stipulations in the Inflation Reduction Act could make Graphite One's proposed mine and processing plant an attractive proposition for General Motors, Ford, Stellantis, Tesla, and other automakers that are already cutting deals directly with mining companies to secure the materials they need for the EV transition.
This has Ford calling on the federal government to streamline the cumbersome mine-permitting process in the U.S.
"Today's lengthy, costly and inefficient permitting process makes it difficult for American businesses to invest in the extraction and processing of critical minerals in the United States," Smith penned in his letter to the Interior Department.
"If we don't have a domestic supply chain, which includes mining and processing, we simply won't have the raw materials required for the 'green revolution'," the Ford executive added.
To help fill the widening shortages of battery materials in the U.S., Graphite One is quickly advancing its proposed graphite battery material supply chain toward permitting.
"With this supply shortage emerging just as U.S. policy is implementing incentives for domestic production – tax incentives and domestic content rules for EV batteries – this is a defining moment for the technologies that will define the 21st century," said Dan McGroarty, president of the American Resources Policy Network and a member of Graphite One's advisory board. "It's time to make the connection between the transition to renewable energy and the tech metals that make it possible."