Graphite One’s Alaskan Mine Will Bring Stable Supply to Mega-Business
Graphite One Resources Inc. (
TSX: V.GPH,
Stock Forum) has taken a significant step forward on the road to becoming a U.S.-based supplier of high quality, large flake crystalline graphite for use in a range of new and traditional applications, including the fast-growing lithium-ion battery sector.
On December 1, 2014, the company tabled results of the first ten holes of a recently completed 20-hole drill program at its flagship Graphite Creek Project near Nome, Alaska.
All of holes intersected significant widths of high grade, near surface graphite mineralization, the company said. The high grade of graphite averaging 10% found at surface level would mean very low costs of production.
Graphite Creek is already North America’s largest known graphite resource, with a N1 43-101 inferred resource of 284.7 million tonnes, at 4.5% graphite.
The recent drilling campaign is designed to boost the confidence level in the economics of the project, ahead of a new resource estimate and a preliminary economic assessment (PEA) that the company hopes to complete early in 2015 as it moves to attract potential joint venture partners and/or offtake agreements with graphite buyers in the future.
“These high grade, near surface assays continue to demonstrate that the Graphite Creek Deposit stands to be the premier large flake, high grade deposit in North America,’’ said Graphite One President and CEO Anthony Houston.
Graphite One is aiming to join the ranks of global producers amid renewed investor interest in graphite, an industrial mineral that is normally associated with steel production, lead pencils and golf clubs.
Graphite – In Search of Stable Supply
The U.S. is currently importing 100% of its required graphite levels yet still doesn’t offer any domestic production. The U.S. Geological Survey shows that 48% of graphite imports come from China, which is heavily dependent on one international supplier, made more difficult by frequent supply disruptions by government closures which have taken as much as 10% of world graphite supply offline at a time.
On the demand side, who is unaware of the impending supply shortage due to be exasperated by the highly publicized Tesla Motors’ plan to build a lithium-ion “Gigafactory” in the United States with enough cell capacity to produce up to 500,000 vehicles per year by 2020.
Interest in the sector has also been sparked by a little known Swiss company, which is planning to build a gigafactory in North Carolina, producing batteries designed to store energy for use in the power grid.
The growing appetite from the electric vehicle industry as well as traditional applications such as solar panels and superconductors is expected to spur the development of new graphite mines like the one that Graphite One is planning to build in Alaska. Additionally, it would be strategically beneficial for mega-business and for economic reasons to nourish a domestic supply of graphite.
Establishing Reliable Graphite Supply in the U.S.
Graphite One officials believe the advanced stage nature of their project and the fact that it is located near the Alaska coastline (providing direct ocean access) in a safe jurisdiction like the U.S. gives it a significant leg up on competitors who are working to develop graphite projects.
The company estimates that the potential of the supply at Graphite Creek in Alaska could mean a 100-year life for a mine there which is projected to be in production in 3-4 years. The next step is completion of the Preliminary Economic Assessment (
PEA), which is on-track for 2015.
Investors should note that Graphite Creek has a record of production dating back to the First and Second world wars, when the family that owned the property supported the war efforts by shipping graphite “lenses” to San Francisco for use in steel production. Mining activity at the site dates all the way back to 1907, following the discovery of the first graphite showings in 1898. Previous mining the country dates back to the earlier 1800s with Russian gold explorers.
Alaska – A New Silk Road for Mining
The mining industry sometimes faces deposits in volatile locations, yet Alaska however is a stable, maturing, mining-friendly state that attracts
investment from the likes of the University of British Columbia through their Mineral Deposit Research Unit. The
Yukon-Alaska Metallogeny project is government-funded and is designed to support gold and copper exploration companies.
Transporting and exporting the graphite from Graphite Creek is easy given the variety of options. Grantely Harbour is just 3km away for international destinations and has been used for mineral exportation for over a hundred years including to San Francisco and Seattle. Road access is just 20km away - Nome Road and the area also has an airstrip just 3km south-east of Graphite Creek. With surface-level graphite and sea, air and road transport within it’s grasp, the only way the Graphite Creek deposit could possibly be any more accessible would be if the graphite was actually discovered on-location of the buyers.
Asia’s economies are rising and a much broader trans-Pacific corridor is opening. With dedicated government and university investment, clearly the stakeholders recognise the distinct potential of Alaska as a new mining Silk Road.
Graphite Demand is Ready to Rip
To get a better sense of where Graphite One hopes to go in the next few years, investors need only take a look at Australia Stock Exchange-listed Syrah Resources Ltd. (ASX:SYR), which is developing the Balama Graphite (and Vanadiam) Project in Mozambique (Southeast Africa).
Syrah already has preliminary agreements to supply graphite to Chinalco Group of China member Chalieco and Asmet (UK) Ltd., a European trader of metallurgical consumables (including carbon) to the iron, steel and aluminum industries.
Syrah is also looking to other potential markets for its production, including the fuel cell sector. On its website it notes that Honda, Hyundai, and Renault intend to commercialize hydrogen fuel cell cars. Toyota has also said it plans to start production of hydrogen fuel cell cars by 2015.
Initially, Graphite One is hoping to be selling graphite into the battery sector.
But since specialty graphites are becoming increasingly important in automobile production, including in the manufacturing of intelligent exhaust gas recirculation systems, Graphite One officials believe demand will increase significantly over the next decade.
Assuming the company can find buyers for its graphite production, the process of putting the site back into production is expected to be a relatively simple one. “It’s literally a case of digging the graphite off the surface, processing it and shipping out the raw product, ’’ a company spokesman said.
Well-Financed and Carefully Managed
The company is currently well funded after snapping up another $1.3 million in private placement funds on top of an earlier $4.9 million private placement, meaning Graphite One is adequately funded to finance its operations all the way through 2015.
Graphite One has just a management team with the raw experience of directing major exploration projects with sizeable budgets. Chairman and Director Doug Smith is a
Professional Engineer with over 35 years of mining experience and directed the sale of First Coal to Xstrata. President, Director and CEO Anthony Huston is a steady financial hand having served as Managing Partner in public and private companies and acted as a key figure in raising over $100 million in his career to date. Director Patrick Smith earned his stripes with Rio Tinto rising through the ranks in various positions including as Managing Director of Exploration for the Australasia Region and like other members is an entrepreneur also.
General Manager Operations, David Hembree adds significant geological experience to the team having served as Chief Geologist at open-pit operations at Mineral Ridge Resources and Mt. Hamilton Mining Co. Hembree is a Certified Professional Geologist with the A.I.P.G. and is a Registered Geologist in the State of Oregon.
Graphite One shares were trading at 13 cents Friday, leaving a market cap of $21.7 million, based on 166.9 million shares outstanding. The 52-week range is 24.5 cents and 11 cents.