Graphite One Advances its United States Graphite Supply Chain Solution Demonstrating a Pre-tax USD$1.9B NPV (8%), 26.0% IRR and 4.6 Year Payback on its Integrated Project

Date/time : 2022-08-29 05:00 AM
Symbol :

GPH

Company : Graphite One Inc.
Price : 1.29
Market cap : 113,292,458
O/S : 87,823,611
Exchange :

TSXV

Industry :

Other Industrial Metals & Mining

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Graphite One Advances its United States Graphite Supply Chain Solution Demonstrating a Pre-tax USD$1.9B NPV (8%), 26.0% IRR and 4.6 Year Payback on its Integrated Project
Graphite One Advances its United States Graphite Supply Chain Solution Demonstrating a Pre-tax USD$1.9B NPV (8%), 26.0% IRR and 4.6 Year Payback on its Integrated Project

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Pre-Feasibility Study Delivers Robust Economics before Accounting for Tax Credits Enacted by the U.S. Inflation Reduction Act of 2022, Expected to Improve Post-tax Results

Projected Commercial Scale Anode Material Production for U.S. Battery Market Using Alaska Graphite

VANCOUVER, BC , Aug. 29, 2022 /PRNewswire/ - Graphite One Inc. (TSXV: GPH) (OTCQX: GPHOF) (" Graphite One " or the " Company "), is pleased to announce the results of its Pre-Feasibility Study of the Graphite One Project.

  • Parallel strategy to simultaneously develop a commercial scale battery anode materials manufacturing facility in Washington State and the Graphite Creek Mine in Alaska . Manufacturing would begin with purchased materials until Alaska production is available.

  • Pre-tax internal rate of return of 26.0%, using an 8% discount rate, with a net present value of $1.93 billion and a payback period of 4.6 years.

  • Post-tax internal rate of return of 22.0%, using an 8% discount rate, with net present value of $1.36 billion and a payback period of 5.1 years, before accounting for tax credits enacted by the U.S. Inflation Reduction Act of 2022, effective December 31, 2022 .

  • Measured plus Indicated resources increased 197% over 2019 results. Inferred resources increased 177%.

The Preliminary Feasibility Study (" PFS ") of the Graphite One Project was prepared by JDS Energy & Mining Inc. with assistance from various independent technical consultants.

The Graphite One Project (the " Project ") is planned as an integrated business operation to produce lithium ion battery anode materials and other graphite products for the U.S domestic market on a commercial scale using primarily natural graphite from Alaska . The Project combines the operation of an advanced graphite manufacturing facility to be located in Washington State (the " STP ") with the supply of natural flake graphite from the Company's proposed Graphite Creek Mine in Alaska (the " Mine "). The resources associated with the Company's Alaska State mining claims were cited by the U.S. Geological Survey in January 2022 as America's largest natural graphite deposit 1 .

Parallel Project Development Strategy

The Company anticipates that there will be a business opportunity presented by the projected strong U.S. demand for anode materials beginning in this decade and the time required to permit and construct a mine, the PFS plans the parallel design, permitting and construction of the STP and the Mine. Permitting and construction of the STP is estimated to take 3 years. The STP would operate during the first four years by processing purchased graphite.  The Mine would begin production in the third year of STP operation and begin supplying graphite to the STP in its fourth year of operation. By the fifth year, it is anticipated that Alaska graphite would supply 100% of the STP's planned natural graphite requirement at full capacity. If the Mine begins production sooner, purchased graphite would be reduced accordingly.

Summary of PFS Economics

Table 1 presents a summary of the economic results of the PFS.

Table 1: Summary of PFS Economic Results

Economic Parameters

Project

STP

Mine



Pre-tax

NPV (8%)

$1,927 M





IRR

26.0 %





Payback

4.6 Years





Post-tax 1

NPV (8%)

$1,361 M





IRR

22.0 %





Payback

5.1 Years





Project Life

26 Years

26 Years

23 Years



Average Annual
Production

Graphite Concentrate



51,813 tpy



Anode Materials


49,615 tpy




Purified Graphite


7,354 tpy




Unpurified Graphite


18,057 tpy




Total


75,026 tpy

51,813 tpy



Capital Costs

Initial Capital Costs 2

$1,070 M

$571 M

$499 M



Contingency

$170 M

$90 M

$80 M



Sub-Total

$1,240 M

$661 M

$580 M



Sustaining Capital Costs 2

$205 M


$205 M



Contingency

$39 M


$39 M



Sub-Total

$244 M


$244 M



Total Capital Costs 2

$1,485 M

$661 M

$824 M



Operating Costs

Average annual

$237 M

$165 M

$72 M



Average per tonne production

$3,590 pt

$2,196 pt

$1,394 pt



Average Product Price

$7,301 pt





1 . Before any effect of 10% Federal tax credit enacted by U.S. Inflation Reduction Act of 2022, effective December 31, 2022





2 . Non-IFRS Financial Measure as defined below






The U.S. tax regime for producers of critical minerals and battery components changed August 16, 2022 (see below). The Project's post-tax internal rate of return without inclusion of these changes, is 22.0%, using an 8% discount rate, with a net present value of $1.36 billion and a payback period of 5.1 years.

On August 16, 2022 , the United States enacted the Inflation Reduction Act of 2022 (the " Act ") which instituted, among other things 2 :

  1. A tax credit to producers in the U.S. of anode materials equal to 10 percent of the costs incurred with respect to the production of anode materials commencing December 31, 2022 and reducing to 75%, 50%, 25%, and 0% in 2030, 2031, 2032 and thereafter, respectively.
  2. A tax credit equal to 10 percent of the costs incurred with respect to production of graphite purified to a minimum purity of 99.9 percent graphitic carbon by mass (" Purified Graphite ") – the phase out provisions in 1 specifically do not apply.
  3. Only production in the United States qualifies for the tax credit.

Graphite One's production is expected to qualify under the Act for tax credits in both categories as it plans to produce both anode materials and Purified Graphite in the United States , as defined in the Act.  The Company will evaluate the Act's impact on the PFS economics and announce the results when available.  The impact is expected to improve the post-tax results.

Based on the PFS's updated graphite resource estimate, the Mine's life for the purposes of the PFS is 23 years.  The PFS assumes the STP's operational life is 26 years based on its startup with purchased graphite and continued operation with graphite from the Mine.

On average over its life, the STP would produce about 75,000 tonnes per year of products.  About 49,600 tpy would be anode materials, 7,400 tpy purified graphite products, and 18,000 tpy of unpurified graphite products.  The anode materials are comprised of four products:

  • CPN: Coated, spherical natural graphite;
  • BAN: Blended natural and artificial graphites;
  • SPN: Secondary particle natural graphite; and,
  • SPC: Secondary particle composite.

Based on the PFS assumptions, the average price of all products over the STP's life is $7,301 per tonne.  Product forecasts and prices have been developed based on numerous graphite market reports commissioned by or purchased by the Company, combined with the Company's internal information. The long-term market forecast used is based on Wood Mackenzie Limited's Graphite Market 2021 Outlook to 2050, updated by its Global Graphite Market Strategic Planning Outlook – Q2 2022.  Purchased graphite prices have been supported by non-binding indications of supply from current producers.

The estimated initial capital and sustaining capital costs with their respective contingencies are summarized in Table 1.  Also presented are the average annual production costs for the life of the Project on both the basis of annual totals and costs per tonne of production.

Secondary Treatment Plant

The STP is designed to produce lithium ion battery anode materials on a commercial scale for the U.S. domestic market using natural graphite from Alaska as soon as it is available.  At full capacity, it requires about 34.5 hectares (85 acres) of land, consists of 17 buildings, and would annually produce about 77,000 tonnes of manufactured graphite products.  The products are grouped into battery anode materials, specialty purified graphite products, and traditional unpurified graphite products.  The products are manufactured from natural graphite concentrate, artificial graphite precursors, coke and pitch.  Key components of the manufacturing process are the purification of natural graphite and graphitization of artificial graphite precursors in high temperature, electrically heated furnaces.  The STP's preferred location is in Washington State to access both its relatively lower power rates from hydro generated electricity and its skilled workforce.

Permitting and construction of the STP, once its design is finalized, is expected to take three years. The STP would be constructed in two phases, each with almost identical equipment and production capacity.  An exception is that Phase 2 has three furnace lines, Phase 1 has two.  Phase 1 is assumed to operate at 90% capacity for the first year to allow for start up adjustments.  Thereafter it would operate at full capacity.  Phase 2 would come on stream in Year 2 and the STP would operate at full capacity.

The STP, at full capacity (Table 2), is designed to produce 51,167 tpy of anode materials for the electric vehicle and energy storage battery markets; 7,585 tpy of purified, sized material for the speciality graphite market; and 18,622 tpy for the unpurified, traditional graphite market.  Total annual production would be 77,374 tonnes based on the expected annual production capacity. The average annual production over 26 years in the PFS is 75,026 tonnes.

Table 2: STP Products and Prices

No.

Category

Name

Description

Purity
(%Cg)

Ph 1
(tpy)

Total
(tpy)

Ph 2
(tpy)

Total
(tpy)

1

Anode
Material

CPN

Coated, spherical NG

99.95

6,015

25,584

12,030

51,167

2

BAN

Blended AG and NG

99.95

11,458

22,915

3

SPN

Secondary Particle NG

99.95

1,829

3,658

4

SPC

Secondary Particle Composite

99.95

6,282

12,565

5

Purified

3299

+32 Mesh Purified

99+

59

3,792

117

7,585

6

599

+50 Mesh Purified

99+

527

1,055

7

899

+80 Mesh Purified

99+

586

1,172

8

199

+100 Mesh Purified

99+

977

1,953

9

Battery Conductor

-320 Mesh Purified

99.9

692

1,386

10

Synthetic Diamond Precursor

-320 Mesh Purified

99.99

951

1,902

11

Unpurified

3295

+32 Mesh

95+

95

9,311

189

18,622

12

595

+50 Mesh

95+

851

1,701

13

895

+80 Mesh

95+

945

1,890

14

195

+100 Mesh

95+

1,575

3,150

15

Carbon Raisers Lubricants

Carbon Raisers Lubricants

95+

4,640

9,279

16

Coke Reject

Coke Reject

95+