Graphite One sees financial incentives in federal IRA bill

By Megan Gannon
Last month, U.S. President Joe Biden signed the Inflation Reduction Act, a sweeping piece of legislation with many provisions designed to build out domestic 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 U.S. has not produced graphite since the 1950s, but the mineral has become newly important as a primary component in anodes for lithium-ion electric vehicle batteries.
Today, the nation imports all its graphite from countries like China, Mexico and Canada. Graphite One aims to extract natural graphite from a large deposit in the Kigluaik Mountains and then process that material in a manufacturing facility in Washington State. Under its prospective business plan, the company would be able to take advantage of a provision of the Inflation Reduction Act, IRA for short, that allows producers of “critical minerals” to write off 10 percent of the cost of their operations.
“The United States has come out to say that they need to create their own domestic supply chain,” Graphite One CEO Anthony Huston said in a recent appearance on the podcast Mining Stock Daily. “And the way they’re going to do that is to give incentives to companies like ourselves.”
The IRA includes other provisions intended to bolster the demand for domestically produced battery materials like lithium, cobalt and graphite. The bill offers a tax credit worth up to $7,500 for new electric vehicles starting next year, but vehicles only qualify for the total amount of this credit if they meet certain sourcing criteria. One requirement is that the electric vehicle maker sources at least 40 percent of their battery materials from the U.S. or from free trade agreement partners such as Canada and Australia, or from materials recycled in North America. That percentage will gradually increase to 80 percent by 2027. Another requirement is that at least 50 percent of those battery components are manufactured or assembled in the U.S. That percentage will increase to 100 percent 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 set to skyrocket by 400-600 percent over the next several decades, and, for minerals such as lithium and graphite used in electric vehicle (EV) batteries, demand will increase by even more—as much as 4,000 percent,” the White House said in a statement.
In the podcast appearance, Huston said that this designation of graphite as a critical mineral could allow Graphite One to receive grants “equal to 50 percent of the cost of feasibility and permitting in the United States to help us get into production.” He said the remaining 50 percent of those costs would be paid for by “partnerships, joint ventures and equity.”
Anyone driving up the Kougarok Road this summer knows Graphite One has been busy at work. The company established a camp near the graphite deposit on the northern slope of the Kigluaik Mountains that is only accessible by helicopter. From that base, a crew is defining the resource, surveying the surrounding environment and prospecting a proposed 20-mile access road that would connect with the Kougarok Road between miles 28 and 29 to the proposed mine. Huston told Mining Stock Daily that this summer’s fieldwork has all been in service of the company’s next analysis—the feasibility study—which he hoped to have ready in early 2024.
Huston appeared on the podcast last Monday, Aug. 29, the day the company announced that it had completed its pre-feasibility study for the project. Without factoring in the IRA’s tax incentives, the study calculated the post-tax net present value of the project at $1.03 billion. Net present value, a common metric to determine an investment’s worth, takes into account all estimated costs and revenues over a project’s life. A positive net present value generally means an investment is considered worthwhile.
When markets closed last Friday afternoon, the company’s stock was trading at $0.99.
The full text of the study has not yet been made public, but it apparently estimated that the Graphite Creek deposit would produce more than 57,000 tons of graphite each year, on average, during the mine’s projected life of 23 years. In the most recent edition of its Mineral Commodity Summaries, the U.S. Geological Survey said that the nation’s natural graphite imports were an estimated 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-making facility to process purchased graphite. This secondary treatment plant would produce nearly 85,000 tons of battery anode materials, specialty purified graphite products, among other commodities, the company said. The permitting 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 power rates from hydro generated electricity and its skilled workforce.”
Earlier this summer, Graphite One executives visiting Nome estimated that the company is still two to three years away from the permitting stage for the mining portion of its project, which is on state land. Obtaining permits could take another one or two years.
“Not to get political, but I do see the political landscape wanting to create a U.S. domestic supply chain, and have it take less time than maybe it has in the past,” Huston said on Mining Stock Daily. “So I think you’re going to see parts of the permitting side get streamlined—and I don’t mean cutting corners, just taking out some of the bureaucracy and making sure that the right companies, the right projects get permitted in a timely matter so that we don’t find ourselves relying 100 percent on countries that are not our allies.” The supply of raw graphite today largely comes from China.

At a mining summit last month hosted by the University of Alaska Fairbanks, the state’s Republican Sens. Lisa Murkowski and Dan Sullivan advocated for making it easier to mine in Alaska and argued for changes in the permitting and environmental review process.
“We have resources other states clearly don’t have,” Murkowski said, according to E&E News. “What we need is the ability to be able to access those resources in a way that allows us to be competitive.”
Alaska’s Republican Gov. Mike Dunleavy, the keynote speaker at this summit, made similar remarks. In 2019, Dunleavy had nominated Graphite One’s project to be labeled a “High-Priority Infrastructure Project” by the U.S. Federal Permitting Improvement Steering Committee.
The company said it received notice that it was awarded this designation in early 2021.