Promising Developments in Alaska's Graphite Sector

Source: Streetwise Reports 07/01/2024

Graphite One Inc. (GPH:TSX.V; GPHOF:OTCQX) has officially launched its 2024 Field Program at the Graphite Creek Property, situated north of Nome, Alaska. See how this and the results of recent drilling programs play into the company’s future.

Graphite One Inc. (GPH:TSX.V; GPHOF:OTCQX) has officially launched its 2024 Field Program at the Graphite Creek Property, situated north of Nome, Alaska. The company aims to gather the remaining geotechnical data needed to finalize its Feasibility Study. This initiative follows the positive results of the 2023 drilling program.

Three drill rigs are currently in operation to collect vital geotechnical information necessary for the engineering of pit walls and the foundational structures of the processing facility, tailings/waste rock facility, and other infrastructure. Additionally, Graphite One reported that 22 summer positions had been filled by residents from local communities, such as Teller, Brevig Mission, and Nome, following successful job fairs.

The company is also conducting baseline studies, including assessments of surface and groundwater quality, hydrogeologic investigations, and ecological surveys, among others. This comprehensive fieldwork is integral to Graphite One’s plan to complete the Feasibility Study by December 2024 under the terms of a Defense Production Act grant from the Department of Defense.

The World of Graphite Mining

According to the Global Graphite Mining Industry Report 2024-2030, published on Yahoo! Finance on May 29, global natural graphite production was expected to grow by 4.3% to 1,677.4 thousand tonnes (kt) in 2024, driven by anticipated supply increases from Madagascar, Tanzania, Mozambique, and Canada.

Additionally, global production was projected to continue growing in 2025, with a forecast growth rate of 6.9% to reach 1,794.0 kt, supported by the commencement of two graphite projects in Tanzania. Looking further ahead, global natural graphite production was anticipated to grow steadily through 2030 with a compound annual growth rate (CAGR) of 10.2% to reach 3,007.9 kt, primarily driven by output from Tanzania, Mozambique, and Canada. The report provided historical and forecast data on graphite production by country, highlighting significant future contributions from emerging graphite suppliers like Tanzania, Mozambique, and Canada.

As reported by Statista in May, the total worldwide production of graphite was estimated at 1.6 million metric tons in 2023. Statista also noted that China not only led in graphite production but also held the largest graphite reserves globally, estimated at 78 million metric tons, closely followed by Brazil with an additional 74 million metric tons. China accounted for the highest share of graphite imported into the United States, making up 42 percent of total U.S. graphite shipments between 2019 and 2022. Graphite, due to its high conductivity, is used in electrodes, batteries, and solar panels, among other applications. Historically, graphite was first used during the Neolithic Age as a paint, and since its discovery in England around the year 1565, its uses have increased significantly.

Global Data produced a report in April, where it was projected that graphite production would reach 1,677.4 kt in 2024, supported by anticipated growth in supply from Madagascar, Tanzania, Mozambique, and Canada. Additionally, Graphite One Resources’ Graphite Creek deposit was recognized by the U.S. Government’s U.S. Geological Survey (USGS) as North America’s largest high-grade, large-flake graphite deposit, designated as a high-priority infrastructure project by the U.S. government dating back to January 2021.

Company Catalysts

CEO Anthony Huston emphasized the significance of the 2024 Field Program in the company’s news release, stating, “The 2024 Field Program is a key milestone for our stakeholders as we advance our Feasibility Study with a scheduled December completion target, under the terms of our Defense Production Act grant from the Department of Defense.” Huston also highlighted the strategic importance of the Graphite Creek deposit, which, in addition to being recognized by the USGS as the largest graphite deposit in the nation, is among the largest globally.

Graphite One’s strategy includes developing a complete U.S.-based graphite supply chain. This strategy is anchored by the Graphite Creek deposit and includes an advanced graphite material and battery anode material manufacturing plant in Warren, Ohio. Additionally, a recycling facility to reclaim graphite and other battery materials will be co-located at the Ohio site, forming a crucial part of Graphite One’s circular economy strategy.

Huston noted in the press release, “As the U.S. Government’s U.S. Geological Survey has recognized Graphite Creek as the nation’s largest graphite deposit, and ‘among the largest in the world,’ we are confident that this year’s program will further demonstrate the importance of Graphite One’s complete supply chain strategy in meeting [the] demand for a material that is critical to the 21st-Century technology economy and U.S. national security.”

Expert Analysis

Technical Analyst Clive Maund, in his analysis on May 6, highlighted that the intensifying debt crisis was expected to lead to a capital flight from debt instruments and fiat currency into tangible assets, specifically commodities like graphite, which are anticipated to soar. This trend indicated a favorable point to buy Graphite One Inc. Maund observed that the company’s stock had reacted back over the past year to a zone of strong long-term support, as evident from its 20-year chart. He noted that despite a superficial appearance of breaking down from its trading range, the stock had not fallen below the strong long-term support dating back to 2008-2009, suggesting a potential major reversal to the upside.

Maund’s analysis of the five-year chart showed that Graphite One had a pattern of making dramatic spikes higher, followed by long cooling-off periods. [OWNERSHIP_CHART-5063]

He pointed out that the current reaction within the downtrend had been ongoing for over a year, bringing the price back to a zone of strong long-term support. This support level, combined with a recent rising Accumulation line and improving momentum indicators, suggested a good point for the stock to break out of the downtrend into a new uptrend.

Maund considered the current price area to be a very good entry point for buying Graphite One. He expected the stock to break out soon from its downtrend and noted that if it returned to the vicinity of its highs from recent years, it could result in a more than three-fold gain from its current price.

Ownership and Share Structure

According to Reuters, about 0.07% of the company is owned by institutions, and about 28% is owned by strategic investors. The rest is retail.

Top shareowners include Taiga Mining Co. Inc. with about 28.24%, CEO Huston with 0.5%, Director Patrick R. Smith with 0.36%, Executive Chair Douglas Hampton Smith with 0.25%, Kevin Greenfield with 0.04%, and Purpose Investments Inc. with 0.07%, Reuters reported.

Its market cap is about CA$95.09 million, with 137.81 million shares outstanding. It trades in a 52-week range of CA$1.73 and CA$0.64.

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( Companies Mentioned: GPH:TSX.V;GPHOF:OTCQX, )