For those not paying attention, Graphite One (TSXV: GPH | OTC: GPHOF) stock is higher by over 29% since the start of July. And the better news for current and prospective investors- momentum is at its back. And deservedly so.
In fact, while GPHOF was already a deep value proposition from advancing initiatives to serve massive battery metals demand, the case for investment consideration just got a whole lot stronger after earning an over $37 million investment grant from the Department of Defense (DoD) to "perform an accelerated Feasibility Study to modernize and expand domestic production capacity and supply for graphite battery anodes necessary for electronic vehicles and alternative energy batteries, as an essential national defense technology item."
The takeaway: Microcap exploration company Graphite One will likely become a much larger company faster than anyone may have expected. That's news to some, but not all. Those already following GPHOF have expected a surge in value, knowing that despite its $1.14 share price on Tuesday, GPHOF is doing the right things in the right sector at the right time. But even the GPHOF bulls probably didn't account for the value inherent to its major announcement on Tuesday, noting again its earned a whopping $37.5 million investment agreement grant from the Department of Defense (DoD) to explore ways to make the country independent from relying on foreign contributions for graphite and other much-needed battery metals.
Don't underappreciate what happened.
DoD Turns To Graphite One For Help
The DoD has turned to one of the smallest exploration companies to get some very important answers. That's called, in a word, validation. And for GPHOF and its investors, it exposes a value proposition that may be far too attractive to ignore. After all, that funding represents a significant milestone in the company's history that has every likelihood to become a catalyst for near- and long-term growth.
Consider this: the DoD grant to GPHOF follows the designation of graphite as one of the battery materials deemed under the DPA law to be "essential to the national defense." Currently, the US is 100% import-dependent for graphite, with China being the world's leading producer. The idea and funding are to help GPHOF usher in change by facilitating a feasibility study covering its Graphite Creek Project 35 miles north of Nome, Alaska. As previously announced, Graphite Creek was confirmed by the US Geological Survey to be the country's largest known graphite resource and, better still, "among the largest in the world."
Indeed, GPHOF management is excited, as they should be, with Anthony Huston, founder, and CEO of G1, saying, "Graphite One is honored to receive this award from the Department of Defense, funded by the IRA, and we look forward to advancing our Feasibility Study program," He added, "This Department of Defense grant underscores our confidence in our strategy to build a 100% U.S.-based advanced graphite supply chain – from mining to refining to recycling. The World Bank Group reports that the production of minerals, including graphite, could increase by nearly 500% by 2050, to meet the growing demand for clean energy technologies."
The investment to secure domestic graphite supplies isn't only intended to benefit GPHOF. The US government is also in it to win it, with the investment to increase domestic capabilities for graphite. It exemplifies the Industrial Base Policy's commitment to building a resilient industrial base to meet current and future national defense requirements. Here's something rarely seen- a penny stock company getting touted by the DoD. GPHOF just was.
Dr. Laura Taylor-Kale, Department of Defense Assistant Secretary for Industrial Base Policy, said, "The agreement with Graphite One (Alaska) is in furtherance of the Defense Department's strategy for minerals and materials related to large-capacity batteries." And the potentially better news is that more money could follow. Not only from the DoD but also from others like Tesla (NASDAQ: TSLA, Ford (NYSE: F), and GM (NYSE: GM), who would also like to see homegrown graphite production to mitigate supply chain risk and reliance on other countries, which are at times less than hospitable to outsiders needs. The situation today called for actions to be taken.
United States, EV, and Clean Energy Sectors Are 100% Import Dependent For Graphite
The United States is currently 100% import-dependent for natural graphite. GPHOF intends to change this state by developing a complete U.S.-based, advanced graphite supply chain solution anchored by the Graphite Creek resource. Graphite One's project plan includes an advanced graphite material and battery anode manufacturing plant expected to be sited in Washington State integrated with the development of the property. The plan includes a recycling facility to reclaim graphite and other battery materials, co-located at the Washington State site, the third link in Graphite One's circular economy strategy.
That's not been a secret and was a value driver well ahead of this week's news. And it's not the only one. GPHOF's expansion over the past six months has brought more significant developments than many competing businesses have accomplished in years, with the goal of not only separating from the competitive pack but also laying the necessary groundwork to earn the lion's share of the EV vehicle and energy storage industries' soaring demand for graphite, an essential component in the production of lithium-ion batteries. By completing a good portion of the work, Graphite One had positioned itself to reap the rewards as an early supplier to one of the most profitable industries of today and the future.
The prize is substantial, noting that graphite is set to become one of the most valued commodities in the clean energy and electric vehicle industries, which is still in the early innings of market penetration capability. But the game's pace is accelerating. The World Bank has estimated graphite production will need to increase by 500% over the next 30 years to meet the demand for battery metals if it continues growing at its current pace. If that sounds hard to believe, know this: CNBC has predicted that as many as 125 million electric vehicles will be on the road as soon as 2030.
Industries Are Here To Stay
And that trajectory won't slow anytime soon. Therefore, imagine what that number could look like by 2050 and beyond – and how much graphite will be needed to sustain it. Clearly, the EV and energy storage sectors aren't going anywhere, and it isn't too late to become a leading supplier of these industries' critical production materials. Thus, ahead of the investment grant news, Graphite One's recent expansion justified a higher valuation. After, appreciably more so.
There was positive writing on the wall to call attention to the United States ' commitment to securing its own graphite stash. Legislation was introduced and passed to incentivize development and ensure essential production components. For example, the $1 trillion infrastructure bill seeks to build over 500,000 charging stations, hoping to make half the vehicles on the road electric as soon as 2030.
That goal can only be achieved with graphite. To its credit, the industry, the government, and Graphite One recognize that. For its part, the White House signed an executive order in 2021 that sought to strengthen the nation's reserve of battery metals, with the United States Geological Survey categorizing graphite as one of the 35 minerals and metals considered critical to the United States. Furthermore, the US Department of Defense stated in 2021 that there would be an 83,000 metric ton shortfall of graphite supply in a potential conflict scenario.
In other words, while not earning front-page headlines, the US government has always appreciated graphite as an essential asset to national security and the technology economy, cementing the material's demand for decades to come. And by establishing a reliable supply chain now, they have elevated Graphite One's position to become a leading provider in one of the most active sectors in the world, the electric vehicle sector.
Graphite One Can Be A Breakout Star
The facts say it all: the EV industry desperately needs more graphite to support its current expansion rate. And GPHOF is ideally positioned to deliver an optimal solution to this demand. The company is currently focused on developing its Graphite One Project, a venture now likely to transform this company into one of the EV and clean energy industry's largest suppliers of essential battery metals. And that can happen quickly and efficiently.
The Graphite One Project is a vertically integrated initiative to mine, process, and manufacture high-grade coated spherical graphite, or CSG. It would primarily serve the lithium-ion electric vehicle battery market, with additional revenue opportunities from other graphite-related applications. One of the most exciting assets powering the opportunity is Graphite One's 100% owned Graphite Creek project in Alaska.
Located about 60 kilometers north of Nome, Alaska, the property covers 23,680 acres and boasts 135 State of Alaska mining claims and 41 State-selected mining claims. What makes this such an invaluable asset? Foremost is that Graphite One's preliminary economic assessment of the area indicates a potential 40-year mining life for the Graphite Creek deposit, supporting an annual production of 41,840 metric tons of coated spherical graphite and 13,500 metric tons of graphite powder.
Even better, the graphite found in Graphite Creek has been noted to naturally exhibit the morphological characteristics of an already-processed material, a property that could bring significant efficiencies when producing the Coated Spherical Graphite required by Li-Ion and EV batteries. These unique characteristics have led the company to brand Graphite Creek's graphite by the acronym "STAX" or "Spherical Thin Aggregate Expanded." Preliminary research on STAX graphite has indicated that it could even be helpful for applications beyond EVs, such as high-purity nuclear-grade graphite, fire-suppressant graphite foam, and industrial diamonds for next-gen semiconductor substrates.
It's extraordinary properties and high yield might sound promising enough, but here's where its potential is amplified even further: As noted, the United States graphite supply has been 100% dependent on imports since 1990, with China supplying the vast majority of the materials. The government imported 58,000 metric tons of natural graphite in 2020, almost identical to Graphite One's potential annual output. Therefore, Graphite One and its Alaskan Graphite Creek project are in a position to quickly become the largest domestic producer of graphite, an unprecedented title that would bring about record-high revenues and, of course, investor attention. And more than just investors are excited about what Graphite One could be on the verge of accomplishing.
Government Favorability And Funds Expedite Expansion
As mentioned earlier, the US government has emphasized strengthening the development and production of battery metals and minerals to incentivize cleaner energy sources and correct an over-reliance on foreign sources for these critical materials. In February, the White House reiterated its vision to expand the domestic mining, production, processing, and recycling of essential minerals and materials. This means that Graphite One has 100% ownership of domestic property rich in graphite and is conducting its operations under a government eager to support its efforts.
Graphite One is doing its part, creating solid relationships with the Alaska US Delegation, the State of Alaska and other relevant state agencies, and the local Alaska Native entities. In fact, Alaska Governor Mike Dunleavy nominated Graphite One as a High-Priority Infrastructure Project in 2019, stating, "Graphite Creek is the largest deposit of graphite in the Nation, and would be a superior domestic supply of this critical mineral, which is necessary for modern batteries, renewable energy technology, and many other high-tech uses."
This nomination allowed the company to present its project to the Federal Permitting Improvement Steering Council (FPISC), in which its operations were found to qualify under both the "renewable energy" and "manufacturing" sectors. All of this provides Graphite One a green light to continue the development of their Graphite Creek property in Alaska, having secured CDN $21 million in funding last year to support the recent completion of a pre-feasibility study for what could potentially be the most lucrative graphite deposit in the nation.
Expect 2H/2023 To Be Milestone Rich
It's fair to say that the market stars have aligned to favor GPHOF for a tremendous back half of 2023. Remember, Graphite One is not a newbie to the space. They already have a clear path ahead to become one of the first graphite producers in the United States, a mission supported by early surveys of their owned land showing that they could do so at a scale that nearly matches the entire nation's annual demand for graphite.
Remember- renewable energy, tech manufacturing, and national security all rely on a consistent source of graphite, meaning that the United States 100% dependency on imports as of 2021 is an unsustainable model for an industry of its size and importance. Moreover, the demand for graphite is expected to rise by nearly 500% by 2050 as the development of EVs and other battery technologies outpace the current rate of graphite production.
This supportive US government legislation makes domestic graphite production a lucrative and timely venture. And with Graphite One's Graphite Creek project showing signs of being one of the largest material deposits in the nation, the company is in an ideal position to reap the rewards of being one of the country's first suppliers.
Despite its recent run, that makes current GPHOF share prices a value proposition screaming for attention. And adding a wild card to the mix, an opportunity is indeed in play to score a significant partnership to earmark future deliveries, leading to a logical assumption that GPHOF's stock path of least resistance is higher. In fact, don't be misled by weakness.
GPHOF is better positioned than at any time in its history, operationally and financially, to expedite its mission of becoming the most critical graphite player in this country's history. Remember, the DoD took a long, hard look before giving up the $37.5 million. It's fair to conclude they liked what they saw, providing millions of dollars to show support. Deducing that to an investor's perspective, a similar conclusion can be supported. At $1.14 yesterday, GPHOF could be the battery metals play of the decade.
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