, /CNW/ – Graphite One Inc.
The preliminary feasibility study (“PFS”) of the Graphite One Project was prepared by JDS Energy & amp; Mining Inc. with the help of 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 US domestic market on a commercial scale using primarily natural graphite from Alaska. The Project combines the operation of an advanced graphite manufacturing facility located in Washington State (the “STP”) with the supply of natural flake graphite from the Company’s proposed Graphite Creek Mine in Alaska (“Mine”). The resources associated with the company’s Alaska State Mining claims were cited by the US Geological Survey in January 2022 as America’s largest natural graphite deposit1.
Parallel project development strategy
The company anticipates that there will be a business opportunity presented by the projected strong US demand for anode materials beginning this decade and the time required to permit and build a mine, PFS plans to parallel the design, permitting and Construction of the STP in the Mein. The 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 STP’s third year of operation and supply graphite to STP in its fourth year of operation. In the fifth year, Alaska Graphite is expected to supply 100% of STP’s planned natural graphite demand at full capacity. If the mine starts production earlier, purchased graphite would be reduced accordingly.
Table 1 presents a summary of the economic results of the PFS.
Table 1: Summary of PFS economic results
1. Before any effect of 10% federal tax credit introduced by the US Inflation Reduction Act of 2022, effective December 31, 2022
2. Non-IFRS financial measures as defined below
The US tax regime for producers of critical minerals and battery components changed on August 16, 2022 (see below). The project’s post-tax internal rate of return without inclusion of these changes is 22.0%, with 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 (“Act”), which, among other things, 2:
Graphite One’s production is expected to qualify under the law 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 law. The company will evaluate the impact of the law on the PFS economy and announce the results when available. The impact is expected to improve after-tax results.
Based on the updated graphite resource estimate of the PFS, the life of the mine for the purposes of the PFS is 23 years. The PFS assumes STP’s operational life of 26 years based on its startup with purchased graphite and continued operation with graphite from the mine.
On average over its lifetime, the STP would produce approximately 75,000 tons of products per year. About 49,600 tpy would be anode materials, 7,400 tpy of purified graphite products, and 18,000 tpy of unpurified graphite products. The anode materials consist of four products:
Based on the PFS assumptions, the average price of all products over the STP’s life is $7,301 per ton. Product forecasts and prices were developed based on numerous graphite market reports prepared 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 were supported by non-binding indications of supply from current producers.
The estimated initial capital and maintenance capital costs with their respective assumptions are summarized in Table 1. Also presented are the average annual production costs for the life of the project both on the basis of annual totals and costs per ton of production.
The STP is designed to produce lithium-ion battery anode materials on a commercial scale for the US domestic market using natural graphite from Alaska as soon as it becomes available. At full capacity, it would require approximately 34.5 hectares (85 acres) of land, consisting of 17 buildings, and would produce approximately 77,000 tons of manufactured graphite products annually. 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 the graphitization of artificial graphite precursors in high temperature, electrically heated furnaces. STP’s preferred location is in Washington State for access to its relatively low power rates from hydrogenated electricity and its skilled workforce.
The permitting and construction of the STP, once its design is complete, is expected to take three years. The STP would be built in two phases, each with nearly identical equipment and production capacity. One exception is that phase 2 has three melting lines, phase 1 has two. Phase 1 is assumed to operate at 90% capacity for the first year to allow for startup adjustments. After that it would work 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 specialty graphite market; and 18,622 tpy for the unrefined, traditional graphite market. Total annual production would be 77,374 tons based on the expected annual production capacity. The average annual production over 26 years in the PFS is 75,026 tons.
Table 2: STP products and prices
The mine would produce an average of 51,813 tonnes per year of graphite concentrate over the projected 23-year mine life. The deposit would be mined using conventional open-pit mining methods, including drilling, blasting, loading, and hauling. The strip ratio in the PFS plan is 2.2:1 with an ore cut grade of 2.0% graphitic carbon and an average head grade of 5.6% graphitic carbon. The mine would be mined in six phases over a period of 24 years. One year of pre-stripping would occur before the start of the process plant. Ore is hauled to a processing plant built next to the pit. Run of mine waste would come with dewatered process tailings and be placed in landfills.
The process facility would process an average of 2,860 tpd for 365 days per year. The flowsheet design is based on metallurgical test work performed at the facilities of SGS Canada Inc. were made in Lakefield, Ontario. The flowsheet consists of a jaw crusher feeding a semiautogenous grinding circuit. After grinding, the ore is subjected to a series of seven flotation/regrind steps. The flotation/regrind steps are designed to recover the graphite at its largest possible flake size while still retaining a concentrate with a graphitic carbon content of greater than 95%. The graphite concentrate would be filtered and dried on site. The dried concentrate would be shipped by barge from Nome, Alaska to the STP in Washington during the annual shipping season. The tailings from the flotation circle will be dewatered, combined with the waste rock, and placed in a secure waste storage facility. All drainage from the ventilated waste storage facility would be treated by a water treatment plant prior to discharge.
The risks and uncertainties identified for the project are generally described in the company’s quarterly discussion and analysis statements3. These cover the project’s financial, mining, processing, operational, market and regulatory risks, all of which are common to similar projects.
Other identifiable risks and uncertainties specific to the project include:
The Graphite Creek property (“Property”) is located on the Seward Peninsula, Alaska approximately 60 km north of Nome. The property includes 9,600 hectares (23,680 acres) of the state of Alaska’s mining claims. The claim block consists of 176 claims, of which 163 are wholly owned by Graphite One (Alaska) Inc. The graphitic mineral zone is exposed at the surface and strikes east/northeast along the north face of the Kigluaik Mountains. The geophysical expression of the deposit spans more than 16 km (Figure 1).
By 2021, 66 holes have been completed in the resource area for a total of 10,112 meters of drilling. The resource database consists of 6,412 assays. The resource remains open down dip and along strike to the east and west.
The Mineral Resource Estimate for Graphite Creek has been updated with data from the 2021 drill program. The methodology used was similar to that described in the 2019 NI 43-101 report with a lower angle interpretation of the Kigluaik Fault and an additional estimate between interpreted graphite lodes. A lower cut-off grade of 2% Cg was used in 2022 due to the updated mining and processing information, especially with the integration of STP.
The updated resource estimate provided in the PFS is presented in Table 3.
Table 3: PFS 2022 resource estimate5
Comparisons with the previous resource estimate from the 2019 NI 43-101 report are summarized in Table 4.
The tonnage of the Inferred category increased by 177%; indicated, 201%; and measured, 176%. Contains graphite in the Inferred category increased 77%; indicated, 101%; and measured 101%. There is a corresponding drop in graphite grade in each category.
Table 4: Resource estimate comparison – 2022 PFS update to 2019 report6
Note: Cut-off grades PFS 2%, March 2019 at 5%
Table 5 provides the same comparison as Table 4 between the PFS and the 2019 report but with a 2% cutoff grade. The tonnage of the Inferred category increased by 36%; Indicated, 65% and measured, 70%. Contains GRAPHITE in the Indicated category increased 20%; stated, 43%; and measured, 54%.
Table 5: Resource Estimate Comparison – 2022 PFS to 2019 Report at 2% Cutoff Grade7
The mine is planned as a conventional open-pit operation with drilling, blasting, loading and hauling. The mineral reserves, summarized in Table 6, were estimated through the process of pit optimization, pit design, mine planning and cut-off grade optimization. Over a 23-year life, the mine is expected to produce 22.5 million tonnes of ore with an average grade of 5.6% Cg, and a 2.2:1 strip ratio. Peak mine production is expected to be approximately 11,000 tons per day.
Table 6: Graphite Creek Mineral Reserve Estimate
Contains graphite (000’s of tons)
1. Mineral reserves follow CIM definitions and are effective from June 1, 2022
2. Mineral reserves are estimated at an increased variable cut-off of 2.0% Cg – 3.0% Cg, which is required to maximize secondary treatment production. The economic cut-off grade is 0.7% Cg based on a net average graphite price of US$7,677/tonne (including transport & treatment costs) and a mill recovery of 90%.
3. The final pit design contains an additional 7.6 M tonnes of measured and indicated resources between the raised cut grade (2% Cg – 3% Cg) and the economic cut grade (0.7% Cg) at an average grade of 1.7 %Cg. These resources were treated as waste in the last mine production schedule.
4. The final pit design contains an additional 14.0 M tons of inferred resources above the economic cut-off grade (0.7% Cg) at an average grade of 5.2% Cg. Inferred Mineral Resources are considered geologically too speculative to have economic considerations applied to them that would allow them to be categorized as Mineral Reserves, and there is no certainty that any portion of Inferred Resources can be converted into Mineral Reserves.
5. Tonnages are rounded to the nearest 1,000 t, graphite grades are rounded to one decimal place. Tonnage measurements are in metric units.
Qualified Persons and NI 43-101 Technical Report
The PFS for the project will be incorporated into a National Instrument 43-101 technical report, which will be available under the company’s SEDAR profile at www.sedar.com, and the company’s website, within 45 days of this press release. The association and areas of responsibility for each of the independent Qualified Persons (as defined under NI 43-101) involved in the preparation of the PFS on which the technical report is based are as follows (“QPS”):
The qualified persons for this news release are Robert Retherford, P.Geo. and Richard Goodwin, P.Eng. Mr. Mr. Goodwin has also reviewed this news release and verified that it accurately represents the results of the PFS.
In the course of their work, the QPs validated the data that each used in formulating the resource estimate and the PFS findings. This includes such things as: site inspections, core samples and assays, laboratory test work, core logs, environmental and community factors, metallurgical test work, taxes and royalties, and surveys. Both existing and new data collected during the course of the study were validated and used by the various QPs to inform their work. Details on the data used and quality assurance and quality control procedures employed by each QP in the preparation of the resource estimate and PFS will be included in the PFS as well as a further definition on the precise roles, qualifications and responsibilities of each QP.
The company has included various non-IFRS financial measures in this news release, such as Initial Capital Costs and Sustaining Capital Costs, which are not defined under IFRS and do not have a standardized meaning prescribed by IFRS. As a result, these measures may not be comparable to similar measures reported by other companies. Each of these measures used should provide the user with additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
Certain non-IFRS financial measures used in this press release are defined below.
Initial Capital Costs: Initial capital costs include the initial capital investment required for mine construction and related infrastructure capital costs in Alaska and construction of the STP in Washington State.
Sustained Capital Costs: Sustained capital is the ongoing capital investment to maintain and maintain the mining, processing and graphite production infrastructure, including but not limited to mining, production of graphite products, on-site development, and closure costs.
Total cost of capital: Total cost of capital is the sum of initial capital cost and retained capital cost.
GRAPHITE ONE INC. (GPH: TSX–V; GPHOF: OTCQB) continues to develop its Graphite One Project (the “Project”), with the goal of becoming an American producer of high-quality anode materials integrated with a domestic graphite resource. The project is proposed as a vertically integrated enterprise to mine, process and manufacture high-quality anode materials mainly for the lithium-ion electric car battery market. As set forth in the Company’s 2022 pre-feasibility study, potential graphite mineralization mined from the Company’s Graphite Creek Property is expected to be processed into concentrate at a graphite processing facility. The proposed processing facility would be located on the Graphite Creek Property located on the Seward Peninsula approximately 60 kilometers north of Nome, Alaska. Graphite anode materials and other value-added graphite products would be manufactured from the concentrate and other materials at the company’s proposed advanced graphite material manufacturing facility expected to be located in Washington. The company intends to make a production decision on the project after completing a feasibility study.
On behalf of the Board of Directors
Neither the TSX Venture Exchange nor its regulatory service provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this publication.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain “forward-looking information” and “forward-looking statements” (collectively “forward-looking statements”) within the meaning of applicable Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “proposed”, “expected”, or “is expected”, “planned”, “estimates”, “projects”, “intended”, “assumed”, “believes” “, “means” or variations of such words and expressions which state that certain actions, events or results “could”, “could”, “would”, “might” or “will be taken”, “happen”. ” or “be reached”.
Forward-looking statements in this press release relate to future events or future performance and reflect current estimates, forecasts, expectations or beliefs regarding future events and include, but are not limited to, statements with respect to:
the estimated amount and grade of mineral resources and mineral reserves at the mine;
the results of the PFS and the PFS represent a viable development option for the project;
Construction of the mine and STP and related actions;
the merits of the project and the potential for the project to become, if in production, one of America’s largest natural graphite operations and anode material producers;
Estimates of capital costs for the construction of facilities and bringing a mine and graphite manufacturing plant into production, to maintain capital and the duration of the financing periods;
the estimated amount of future production, both produced by the mine and recovered from the mine and produced and sold at the STP;
the availability and future purchase of electricity, graphite feedstock, precursors and reagents;
Life of mine and life of STP estimates and estimates of operating costs and total costs, net cash flow, net present value and economic return of an operating mine and graphite manufacturing facility constructed for the project;
Investigating opportunities to improve the economics of the mine and STP and the success of such opportunities;
the completion of additional optimization studies on the project in advance of or in conjunction with a feasibility study; in the
Timing for the filing of a technical report for the PFS on SEDAR.
All forward-looking statements are based on the current beliefs of the company or its advisors, as well as various assumptions made by them and information currently available. The most significant requirements are listed above, but generally these requirements include:
the presence and continuity of minerals in the mine at estimated grades;
the geotechnical, hydrological, hydrogeological and metallurgical characteristics corresponding to the sample results;
the capacities and durability of various machines and equipment;
the availability of electricity, STP feedstock, personnel, machinery and equipment at estimated prices and within the estimated delivery times;
the graphite and anode material sales prices and exchange rates assumed;
suitable discount rates applied to the cash flow in the economic analysis;
Tax rates and royalty rates applicable to the project;
the availability of acceptable financing under the assumed structure and costs;
the anticipated performance of mined graphite and concentration processes and STP requirement in the graphite product production processes;
reasonable emergency requirements;
Success in the realization of proposed operations;
receipt of permits and other regulatory approvals on acceptable terms; in the
the fulfillment of environmental assessment commitments and arrangements with local communities.
Although the Company’s management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Many forward-looking statements are made by assuming the accuracy of other forward-looking statements, such as statements of net present value and internal rates of return, which are based on most of the other forward-looking statements and assumptions herein. The cost information is also prepared with current values, but the time to make the costs will be in the future and it is assumed that the costs will remain stable over the relevant period.
Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continuity of mineralization, uncertainties related to the ability to obtain necessary permits, licenses and title and delays due to third party opposition, changes in government policy regarding mining and natural resource exploration and exploitation, and continued availability of capital and financing, and general economic, market or business conditions.
Readers are cautioned not to place undue reliance on this forward-looking information as of the date stated in this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking information unless necessary. . by applicable securities laws. For more information about the Company, investors should review the Company’s continuous disclosure available at www.sedar.com.
Cautionary note for US investors
This news release has been prepared in accordance with the requirements of the securities laws in force in Canada, which differ from the requirements of the US securities laws. Unless otherwise stated, all resource and reserve estimates included in this press release have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum’s 2014 definition standards on mineral resources and mineral reserves. NI 43-101 is a rule developed by the Canadian Securities Administrators that sets standards for any public disclosure an issuer makes of scientific and technical information about mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and the mineral resources and reserve information contained herein may not be comparable to similar information provided by US companies. In particular, and without limiting the generality of the foregoing, the term “resource” is not equivalent to the term “reserves”. Under US standards, mineralization cannot be classified as a “reserve” unless a determination has been made that the mineralization is economically and legally produced or extracted at the time the reserve determination is made. The SEC’s disclosure standards generally do not permit the inclusion of information regarding “measured mineral resources,” “indicated mineral resources,” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” of the United States. standards and documents filed with the SEC. Investors are cautioned not to assume that any or all of the mineral deposits in these categories will ever be converted into reserves. US investors should also understand that “inferred mineral resources” have great uncertainty nn about their existence and great uncertainty about their economic and legal feasibility. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or other economic studies. Investors are accused of not assuming that all or part of an “inferred mineral resource” exists, is economically or legally mineable, or will ever be upgraded to a higher resource category. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC usually only allows issuers to report mineralization that does not constitute “reserves” by SEC standards as spot tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identifying “reserves” are also not the same as those of the SEC, and reserves reported by the company in accordance with NI 43-101 may not be considered “reserves” under SEC standards qualify. Accordingly, the information on mineral deposits provided herein may not be comparable to information made public by companies reporting in accordance with US standards.
1https://www.usgs.gov/data/graphite-deposits-united-states
2 Section 13502. Advanced Manufacturing Production Credit of Inflation Reduction Act of 2022; – https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.xml
3https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00025247
4https://www.graphiteoneinc.com/graphite-one-signs-mou-with-experienced-lithium-ion-battery-anode-producer-for-design-construction-and-operation-of-u-s-based-anode- facility/
Mineral Resource Statement is effective on June 1, 2022
Mineral resources include mineral reserves. Mineral resources that are not mineral reserves have not demonstrated economic viability. There is no certainty that any portion of a Mineral Resource will ever be converted into Reserves.
Inferred Mineral Resources represent material that is considered too speculative to be included in economic assessments. Additional trenching and/or drilling will be required to convert Inferred Mineral Resources to Indicated or Measured Mineral Resources. It cannot be assumed that all or part of the derived resources will ever be upgraded to a higher resource category.
Mineral Resource Statement is effective on June 1, 2022.
Mineral resources include mineral reserves. Mineral resources that are not mineral reserves have not demonstrated economic viability. There is no certainty that any portion of a Mineral Resource will ever be converted into Reserves.
Inferred Mineral Resources represent material that is considered too speculative to be included in economic assessments. Additional trenching and/or drilling will be required to convert Inferred Mineral Resources to Indicated or Measured Mineral Resources. It cannot be assumed that all or part of the derived resources will ever be upgraded to a higher resource category.
Mineral Resource Statement is effective on June 1, 2022.
Mineral resources include mineral reserves. Mineral resources that are not mineral reserves have not demonstrated economic viability. There is no certainty that any portion of a Mineral Resource will ever be converted into Reserves.
Inferred Mineral Resources represent material that is considered too speculative to be included in economic assessments. Additional trenching and/or drilling will be required to convert Inferred Mineral Resources to Indicated or Measured Mineral Resources. It cannot be assumed that all or part of the derived resources will ever be upgraded to a higher resource category.
