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Study details US graphite supply chain

Graphite One PFS includes AK mine, WA battery anode plant Metal Tech News – August 31, 2022

At a time when American automakers are looking for potential domestic supplies of the graphite that makes up nearly half of all the materials that go into the lithium-ion batteries powering electric vehicles, Graphite One Inc. offers up details of its plans to develop a mine at its Graphite Creek project in Alaska and processing facility in Washington that would produce roughly 75,000 metric tons of advanced graphite products per year.

Earlier this year, S&P Global Platts forecast that by 2030 it will take 5 million to 6 million metric tons of graphite to meet annual global demand for this carbon material that serves as the anode in lithium-ion batteries.

During 2021, however, only about 1 million metric tons of natural graphite was mined globally, according to "Mineral Commodity Summaries 2022," an annual report published by the United States Geological Survey.

This means that more than 65 mines – of a size similar to Graphite One's proposed mine – would need to come online in the next eight years to meet the rocketing demand being fueled by the rapid transition to zero-emissions transportation.

"Supply will struggle to catch up with graphite demand," said George Miller, senior price analyst at Benchmark Mineral Intelligence, a world-leading expert on lithium-ion battery supply chains.

A prefeasibility study completed for Graphite One details the company's plans to leverage its world-class Graphite Creek deposit in Alaska to begin filling the growing supply-demand gap in the U.S.

Processing plant, then mine

The USGS recently named Graphite Creek as America's largest deposit of natural graphite.

Located along Alaska's west coast, about 50 miles north of the legendary gold mining town of Nome, 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.

The PFS envisions a mine at Graphite Creek that would produce an average of 51,813 metric tons of graphite concentrate per year, which would be shipped to Graphite One's planned 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 spherical coated graphite that serves as the anode material in lithium-ion batteries and 25,400 metric tons of other graphite products per year.

Given the rapidly growing demand for graphite anode material, the PFS envisions putting the processing facility, which will be quicker to permit and build, into production first.

Permitting and construction of the advanced graphite manufacturing facility in Washington is expected to take three years. The Graphite Creek Mine, however, is expected to take about six years to get through the permitting process and into production.

While waiting on graphite concentrates from Alaska, the Washington facility would upgrade purchased graphite into battery anode material and other advanced products.

By the fifth year of operation at the Washington plant, it is anticipated that Graphite Creek would supply 100% of the Washington facility's planned natural graphite requirement at full capacity. If the Alaska mine begins production sooner, however, Graphite One says the purchased graphite would be reduced accordingly.

IRA to boost strong economics

The already robust economics of building and operating the Graphite Creek Mine in Alaska and advanced graphite materials processing facility in Washington are being bolstered by provisions of the Inflation Reduction Act that was signed into law by President Biden on Aug. 16.

The capital costs to develop the mine and processing facility detailed in the PFS without considering the provisions in the IRA 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 financially robust operations are expected to pay back the capital in 5.1 years.

These figures do not take into account the tax credits offered to suppliers of EV battery materials under the IRA.

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. This credit begins to fade by 25% per year starting in 2030.

The Inflation Reduction Act also 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.

EV tax credits elevate need

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, starting next year, 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.

Given that graphite currently makes up roughly 48% of the material that goes into the lithium-ion batteries powering EVs, it is expected that American automakers will be scrambling for U.S. and American ally supplies of this critical anode ingredient.

The battery materials requirements in the Inflation Reduction Act could make the Graphite One mine and processing outlined in the PFS 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.

In the meantime, Graphite One is immediately transitioning to work on a definitive feasibility study that will solidify the details for permitting and building its Graphite Creek Mine in Alaska and advanced graphite processing facility in America's Pacific Northwest.

To fund this endeavor, the company recently closed a US$7.7 million (C$10 million) initial tranche of a US$16.3 million (C$21.3 million) financing on Aug. 30.

Author Bio

Shane Lasley, Metal Tech News

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With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.


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