By Megan Ganon
Last month, US President Joe Biden signed the Cut Inflation Act, a sweeping piece of legislation containing numerous provisions designed to develop national supply chains for the clean energy transition.
Graphite One, the Vancouver-based company exploring a potential graphite mine north of Nome, says it would be eligible for the bill’s tax incentives.
The United States has not produced graphite since the 1950s, but the mineral has taken on new importance as the main component of anodes for lithium-ion batteries in electric vehicles.
Today, the country imports all of its graphite from countries like China, Mexico and Canada. Graphite One aims to mine natural graphite from a large deposit in the Kigluaik Mountains and then process that material at a manufacturing facility in Washington State. As part of its forward-looking business plan, the company could take advantage of a provision of the Inflation Reduction Act, IRA for short, which allows producers of “critical minerals” to write off 10% of the cost of their operations.
“The United States has said it needs to create its own national supply chain,” Graphite One CEO Anthony Huston said during a recent appearance on the Mining Stock Daily podcast. “And the way they’re going to do that is give incentives to companies like ours.”
The IRA includes other provisions intended to bolster demand for domestically produced battery materials such as lithium, cobalt and graphite. The bill offers a tax credit of up to $7,500 for new electric vehicles starting next year, but vehicles are only eligible for the full amount of that credit if they meet certain eligibility criteria. supply. One of the requirements is that the electric vehicle manufacturer sources at least 40% of battery materials from the United States or from free trade agreement partners such as Canada and Australia, or from from recycled materials in North America. This percentage will gradually increase to 80% by 2027. Another requirement is that at least 50% of these battery components be manufactured or assembled in the United States. This percentage will increase to 100% by 2029.
Earlier this year, the Biden administration invoked the Defense Production Act of 1950 to list several minerals, including graphite, as “essential to national defense.”
“As the world transitions to a clean energy economy, global demand for these critical minerals is expected to skyrocket by 400-600% over the next few decades, and for minerals such as lithium and graphite used in batteries of electric vehicles (EV), demand will increase even more, up to 4,000 percent,” the White House said in a statement.
In the podcast appearance, Huston said this designation of graphite as a critical mineral could allow Graphite One to receive grants “equal to 50% of the feasibility and permitting cost in the United States to help us get into production. “. He said the remaining 50% of those costs would be paid for through “partnerships, joint ventures and equity.”
Anyone driving the Kougarok route this summer knows that Graphite One has been busy at work. The company has established a camp near the graphite deposit on the northern slopes of the Kigluaik Mountains which is accessible only by helicopter. From this base, a team defines the resource, surveys the surrounding environment, and surveys a proposed 20-mile access road that would connect to the Kougarok Road between miles 28 and 29 to the proposed mine. Huston told Mining Stock Daily that the fieldwork this summer has all been in service of the company’s next analysis – the feasibility study – which he hopes to have ready by early 2024.
Huston appeared on the podcast last Monday, August 29, the day the company announced it had completed its pre-feasibility study for the project. Without accounting for the IRA’s tax incentives, the study calculated the after-tax net present value of the project at $1.03 billion. Net present value, a common measure for determining the value of an investment, takes into account all estimated costs and revenues over the life of a project. A positive net present value generally means that an investment is considered worthwhile.
When markets closed last Friday afternoon, the company’s shares were trading at $0.99.
The full text of the study has not yet been made public, but it is believed that the Graphite Creek deposit would produce more than 57,000 tonnes of graphite each year, on average, over the mine’s projected life of 23 year. In the most recent edition of its Mineral Commodity Summaries, the US Geological Survey said the country’s imports of natural graphite were estimated at 53,000 tons in 2021.
The pre-feasibility study also revealed that Graphite One is pursuing a “parallel strategy”. The company will explore its mining prospects in Alaska while pursuing plans to develop a battery manufacturing facility to process purchased graphite. This secondary processing plant would produce nearly 85,000 tons of battery anode materials, specialty purified graphite products, among other products, the company said. Authorization and construction of the 17-building facility is expected to take three years, Graphite One said, adding that its preferred location for the site is Washington state for its “relatively lower electricity rates from ‘electricity generated by hydroelectricity and its skilled workforce’.
Earlier this summer, Graphite One executives visiting Nome estimated the company was still two or three years away from the permitting stage for the mining portion of its project, which is on state land. Obtaining permits could take another year or two.
“I don’t want to do politics, but I see the political landscape wanting to create a domestic supply chain in the United States, and make it take less time than maybe in the past,” Huston said on Mining Stock Daily. “So I think you’re going to see parts of the permissions side being streamlined – and I don’t mean cutting corners, just removing some of the bureaucracy and making sure that the right companies, the right projects are allowed in important timing so that we don’t find ourselves 100% dependent on countries that are not our allies.Raw graphite supply today comes largely from China.
At a mining summit hosted by the University of Alaska Fairbanks last month, Republicans sense the state. Lisa Murkowski and Dan Sullivan have advocated for easier mining in Alaska and advocated for changes to the permitting and environmental review process.
“We have resources that other states clearly don’t have,” Murkowski said, according to E&E News. “What we need is to be able to access these resources in a way that allows us to be competitive.”
Republican Alaska Governor Mike Dunleavy, the summit’s keynote speaker, made similar remarks. In 2019, Dunleavy nominated the Graphite One project for it to be called a “high priority infrastructure project” by the US Federal Permitting Improvement Steering Committee.
The company said it received notice that it had obtained this designation in early 2021.