Graphite One sets sights on bigger mine than originally proposed
Graphite One needs to develop a much bigger mine in order to attract investors, company officials said in Nome last week. They said that automakers like Tesla wouldn’t be able to do business with them unless they can promise much more graphite from their proposed mine.
Graphite One has been advancing a plan to build a graphite mine on the remote northern slopes of the Kigluaik Mountains. The exploration company detailed the latest version of these plans in a pre-feasibility study published in August 2022. The study predicted more than $1 billion in profits over 23 years, representing a 22 percent rate of return for investors, said Mike Schaffner, a senior vice president at Graphite One in charge of mining operations.
The company apparently hit a speedbump, when it approached automakers like Ford, Tesla and GMC to gauge their interest in graphite products from the proposed mine. Graphite is a main component in lithium-ion batteries used in electric vehicles.
“What we found out when we went to Tesla, they said, that’s great, we are interested in buying [your graphite products], but we would need to write 40 contracts of this size to meet our need,” Schaffner said at a community meeting at Old St. Joe’s in Nome last Thursday. “So, they weren’t interested in signing contracts with us. Same thing with all the other vendors.”
Schaffner said this news from the automakers means it would be “very tough” to get an investment to create a graphite processing plant. The company plans to build such a facility in Washington state while it explores the potential mine in Alaska. Imported graphite would be processed into battery materials and other graphite products there until mining operations can begin in Alaska under this scheme. Once its potential Alaska operations start, partially processed graphite from the mine would be trucked more than 55 miles to the Port of Nome to be shipped down the coast to the Washington plant. The plan includes the construction of a 20-mile road to the mine site that goes through Mosquito Pass and connects to the Kougarok Road.
The pre-feasibility study revealed another issue in the company’s plans, Schaffner said. Most of its revenue would come from that secondary treatment plant and not the mine itself.
“What we learned from this was the proposed size of [the mine] was too small,” Schaffner said. “We needed to increase the size to get investors interested because the need for the U.S. is much higher than what we were producing. And we want to be able to compete with China on a head-to-head basis, so no matter what the relationships are, if we can match their price today, we will never have a situation where we would have to be shutting this down. And then when the price goes up, it actually starts making very robust revenue.”
It’s unclear how much bigger of a mine the company will eventually propose in its next study. Kevin Torpy, a mining engineer who just joined Graphite One last month as a vice president of operations, was also present at last week’s meeting in Nome. He said that the company needs to add to its mineral reserve in order to achieve the “higher production rate to have global competitiveness.”
The pre-feasibility study described a mile-long open-pit mine. Over its 23-year lifespan, the mine would produce about 25 million tons of ore with an average grade of 5.6 percent Cg (Cg means the total carbon in graphite form). More research from the company’s drilling program will determine the new proposed size.
“Once we start to get that information back from the drilling, we can get our feasibility study and incorporate that new information into the design,” Torpy said.
Most of the graphite used in the U.S. currently comes from China. Graphite One’s business pitch has been to create a U.S. supply chain of this mineral, which the White House recently designated as “critical” to “national security and economic prosperity.” According to North of 60 Mining News, current production of graphite would need to ramp up by nearly 500 percent by 2030 to meet global demand for electric vehicle batteries, and that would represent nearly 100 new mines and processing facilities like the project proposed by Graphite One.
The Graphite Creek deposit is thought to be the largest in the United States. While Graphite One continues to explore this resource, other entities are mapping the region’s graphite as well. The U.S. Geological Survey and its state partners in Alaska got a recent injection of funds from the Bipartisan Infrastructure Law to conduct a graphite assessment of the Seward Peninsula. They were scheduled to fly a geophysical survey this spring to understand the extent of graphite deposits in the Kigluaiks and beyond.
This summer Graphite One also hopes to finish its geotechnical surveys of the areas where it wants to build facilities, like a mill near the deposit, and an access road. Schaffner told the audience in Nome that the Alaska Industrial Development and Export Authority, or AIDEA, was “very interested” in building this access road. He said it would be part of the feasibility study to assess the public bridges and roads, like the Kougarok Road, that Graphite One would use during its operations. That study would help determine if these roads can handle the amount of heavy hauling Graphite One is proposing to do year-round.
Schaffner said the company plans to complete its feasibility study by the end of 2024. That study would allow Graphite One to get financing for the project, and to start filing for its permits, which it plans to begin in 2025. If all goes as the company hopes under this timeline, Graphite One would start building the mine in 2027 and shipping graphite in 2029, but Schaffner said there is no guarantee on these dates.
“The 2027 date is predicated on raising the financing for this,” he said. “Last year, we were running tight on funding, so we cut our program short. We’ve got a very large program going this year. It is predicated on making sure we raise the funds to do that.”
Getting investors interested in U.S.-made graphite is “definitely a new experience for everyone,” he said. “Having said that, there’s a tremendous amount of incentives out there.”
One provision of the Inflation Reduction Act would allow producers of “critical minerals” to write off 10 percent of the cost of their operations. The bill also offers a tax credit worth up to $7,500 for new electric vehicles, but vehicles only qualify for the total amount of this credit if they meet certain criteria. For example, the electric vehicle must source at least 40 percent of its battery materials from the U.S. or from free trade agreement partners such as Canada and Australia, or from materials recycled in North America.
Schaffner added that there are “literally billions of dollars out there for the development of critical minerals. We are actively pursuing these grants.”
In October, the U.S. Department of Energy announced $2.8 billion in grants to 20 companies that are extracting and processing lithium, graphite and other minerals, and advancing manufacturing of these battery components. Graphite One was not among those companies chosen for this grant.
During the meeting, Mayor John Handeland called Graphite One an “exciting project” and said it could be an economic driver for the region. He seemed to encourage those at the meeting to buy stock in the company.
“I don’t see any pull-tab players in this room, but I know that there’s a whole lot of pull-tabs that get sold in this community,” Handeland said. “You can buy a share of stock for just a little bit more than that.”