Supply deal with EV maker Lucid Group powers Graphite One stock higher

Graphite One (TSXV: GPH; US-OTC: GPHOF) shares rose by a third after the company said it’s signed a deal with U.S. electric car maker Lucid Group (NASDAQ: LCID) for the supply of anode active materials (AAM) used in batteries for at least five years.

Graphite One CEO Anthony Huston called the deal “a historic moment” as it is the first synthetic graphite supply agreement between a U.S. graphite developer and U.S. EV company.

The shares rose by 24¢ apiece to 95¢, giving the company a market cap of $128.9 million. The stock has traded in a 52-week window of 55¢ and $1.51.

Under the agreement, Graphite One will provide Lucid with 5,000 tonnes of battery-ready anode material per year for an initial five-year term. Sales are based on an agreed price formula linked to future market pricing.

“Subject to project financing required to build the AAM facility, the supply agreement with Lucid puts Graphite One on the path to produce revenue in 2027,” Huston said in a release.

“And that’s just the beginning for Graphite One as work to meet market demands and create a secure 100% U.S.-based supply chain for natural and synthetic graphite.”

Manufacturing site

The agreement follows the company’s selection of a site for its proposed AAM facility in March of this year.

The location, a brownfield site in Warren, Ohio, previously used for storage of National Defense Stockpile critical minerals by the U.S. government, is located in the heart of the automobile industry, in an area with ample low-cost electricity produced from renewable energy sources.

The site’s existing power lines are sufficient for Graphite One’s initial production target of 25,000 tonnes per year of battery-ready anode material, and land is available for expansions to ramp to 100,000 tonnes per year of production.

The lease term is for 50 years, with an option to purchase. Construction of the first phase facility is expected to begin within 36 months, with an estimated cost of US$435 million.

The company anticipates that the Ohio facility will manufacture synthetic graphite anode active materials. Production of natural graphite anode active materials will be added as soon as feedstock from its Graphite Creek project near Nome, Alaska, becomes available.

Large graphite resource

The Graphite Creek project, located on the Seward Peninsula of western Alaska, is the site of the largest graphite deposit in the country as estimated by the U.S. Geological Survey.

According to company estimates, the deposit contains 32.5 million tonnes of measured and indicated resources grading 5.25% graphitic carbon for 1.7 million tonnes, and 254.7 million inferred tonnes at 5.11% graphitic carbon for 13 million tonnes.

A prefeasibility study outlined a graphite mine with a 23-year life and a manufacturing plant originally planned in Washington state with a 26-year operating life. The project has an initial capex of US$1.1 billion, an after-tax net present value (at 8% discount) of US$1.3 billion and an internal rate of return of 22%.