A preliminary economic analysis has found that a graphite mining prospect near Nome — an effort to capitalize on a potential supply crunch from China and a growing appetite for electric vehicles — could be worth hundreds of millions of dollars if it's developed.
"It shows we have an economically viable project," Doug Smith, executive chair of Graphite One Resources, said in an interview. "And it shows in general what size we would be, and what kind of processing facilities we need. Now the next phase is to refine and optimize that."
:quality(70)/s3.amazonaws.com/arc-wordpress-client-uploads/adn/wp-content/uploads/2017/01/31170742/graphite_creek_project.jpg)
The graphite deposit in the mountains 37 miles north of Nome in Northwest Alaska is considered to be one of the world's largest. But the Graphite Creek project, as it's known, would be a relatively small operation for a mine, company officials said from their offices in Canada.
Kyle Moselle, of the Alaska Department of Natural Resources, said the Graphite Creek prospect is unusual compared to other graphite mines around the world because of the large size of the graphite flakes.
The permitting process and environmental review, with public input, is yet to come. Overall, the prospect is small.
"It's more like a rock quarry. This is going to be nothing like any of our operating metal mines in Alaska," he said. "This would be orders of magnitude smaller than the Red Dog Mine."
If the graphite prospect can be developed, strict environmental controls would be put in place, company officials said. Air and water pollution has been a major problem near graphite mining facilities in China, where most of the world's supply of naturally occurring graphite is found.
"Unfortunately, China doesn't have the controls we have and it gives all industry a bad name," said Dave Hembree, general manager of operations for Graphite One Alaska, the company's subsidiary.
Graphite One began exploring the prospect in 2012. But the graphite won't be mined for perhaps five more years, if everything goes according to plan.
Additional work could include two more rounds of assessment drilling, with about 60 exploration holes planned in addition to the 50 already completed. Continued economic analysis and studies, along with permission from state and federal agencies, will also be needed.
The small mining company from Vancouver, British Columbia, hopes to meet growing demand for lithium-ion batteries that power electric vehicles, laptops and cellphones. Graphite is one of the strongest, most stable forms of carbon and a nonmetal conductor of electricity. It is used as one terminal of a lithium-ion battery.
Natural graphite is not produced in the United States, though close to 100 companies use it. The Department of Defense in 2015 labeled it a strategic and critical material in part because of its value in the United States.
California-based Tesla, the ambitious maker of electric cars and their specialized batteries, could be one possible buyer, Graphite One officials said. Tesla plans to ramp up vehicle and battery production at its facilities, leading to growing demand for graphite. Tesla and other companies are seeking materials from North America amid concerns about air pollution from graphite mining in China, according to news reports.
The new economic assessment gives battery manufacturers an "economic yardstick" to judge the prospect, said Hembree.
"Everyone is looking at long-term supply, so they now have an idea whether this project might be viable or not," he said.
The economic review was conducted by Ontario-based TRU Group Inc., an engineering firm which has also done other work for Graphite One, officials said.
Graphite One provided details from the report in recently issued statements. The report will soon be publicly released, including on Wednesday in the communities of Nome, Brevig Mission and Teller, when Graphite One officials launch a three-day outreach effort, officials said.
The report will be available on the company's website and at a Canadian website called SEDAR — System for Electronic Document Analysis and Retrieval — where securities-related information is digitally filed with Canadian regulators. Graphite One is a penny stock traded on the TSX Venture Exchange in Canada, where emerging companies can raise capital.
Details from the report show that a gravel road about 20 miles long must be built to access the site, between the Imuruk Basin and the northern slopes of the Kigluaik Mountains. The road would stem off the existing road connecting Nome and Teller.
The rock containing the graphite is near the surface. Surface mining is proposed "using a truck and shovel operation," the report says.
Geologists believe the formation of granite more than 100 million years ago created the pressure and heat that lifted underground coal and carbon-bearing shales, transforming them into the graphite, Hembree said.
Using what Graphite One calls a conservative approach, the economic review estimates the current value of the project at $616 million. It would require $363 million in startup costs, and have a minimum life of 40 years.
At full operation, the mine would produce about 1 million tons of rock annually. A processing facility at the mine would recover 60,000 tons of concentrate from that, in the form of graphite flakes. Unused rock would go into a tailing pond, though design details of that pond would come later, Smith said.
Because graphite is not a metal, harmful byproducts associated with metal mines, such as arsenic and mercury, would not be an issue, said Hembree. Arsenic, mercury and other natural minerals have been found only in very trace amounts in the host rock that contains the graphite.
"It's a different critter than gold, silver and copper deposits," said Hembree.
The graphite concentrate would be placed in sealed, 1-ton "supersacks" and hauled in shipping containers by truck to Nome. When the Nome port isn't shut down by ice, the graphite flakes would be shipped to a manufacturing facility, perhaps in the state of Washington with low electricity costs.
The graphite flakes would be purified and super-heated in furnaces, turned into tiny spheres and then coated with carbon. The changes increase conductivity and make the "coated spherical graphite" used in lithium-ion batteries.
Tanya Ablowaluk, a tribal council member from Teller, about 25 miles northwest of the prospect, said the community of about 260 has mixed feelings about the project.
Some are excited about the jobs it would bring. Others worry excavators, trucks and other activity will frighten away moose, geese and other animals the village hunts for food.
"The moose hunters do hike up in the mountains," where the mining is expected to occur, she said.
Long-term inhalation of graphite dust over years can cause lung scarring and breathing problems, according to the Centers for Disease Control and Prevention.
The Northern Alaska Environmental Center in Fairbanks is following the project, said Julia Mickley, clean water and mining coordinator.
The center recognizes the need for minerals to support the renewable energy industry, she said. But the conservation group "will need to ensure that the mining of these minerals can be done in the most environmentally safe way possible and that the mine itself is supported by those that live in the region."
Graphite One will take steps to keep road dust down, such as with water sprays, Smith said. It would prevent graphite dust from reaching the environment by creating a closed system, and with technology such as scrubbers that remove particulates before air leaves plants.
If the project continues to move forward, the company will work with villagers and regulators to design pollution controls to reduce concerns and win permitting approval, Smith said.
As for emissions that contribute to climate change, Graphite One said it plans to keep those as low as possible, in line with efforts by companies such as Tesla to support clean operations, said Hembree.
The mining company is looking at projects that include wind power to provide part of its energy needs.
Hembree said Graphite One hasn't conducted a study of the project's overall emissions. But he said increased use of electric vehicles — replacing gas-burning cars and trucks that emit large amounts of carbon dioxide — would counter-balance those concerns, he said.
"We're trying to keep the carbon footprint as small as possible," Hembree said.