Global governments are working feverishly to reign in inflation. Still, it's important to note that it results from one common denominator: surging consumer spending. Sure, other macros are involved, including reckless spending bills and liberal monetary policies. But at the core of rising prices is that consumers continue to want more. More of everything, from consumer staples to luxury electric automobiles and everything in between. It's that in-between opportunity providing companies in the right space with appreciable revenue-generating opportunities extending well past this decade. Focused on monetizing assets related to powering the EV and energy storage market, Graphite One (TSXV: GPH | OTC: GPHOF) makes that list.
The better news: in addition to GPHOF capitalizing upon a battery metals sector where demand far outstrips supply, they are doing so more efficiently than many of their senior competitors. As a matter of fact, the company's expansion since only 2022 has provided more accretive value than many competing businesses have accomplished in years. And they aren't slowing in 2023. Instead, Graphite One continues to separate from the pack, resulting in GPHOF doing the right things at the right time to earn a potentially sizable share of the EV vehicle and energy storage industries' soaring demand for graphite. And an essential component in the production of lithium-ion batteries, that need is expected to continue for a while.
That's great news for GPHOF, its investors, and its clients. And by positioning itself to contribute appreciably to that demand, great news can translate to potentially huge rewards.
Soaring Global Graphite Demand
Believing GPHOF can be a significant contributor is not an overzealous presumption. Despite its smallcap size, GPHOF is set up well to feed the demand of one of the most valued commodities to an industry still in relative infancy. Remember, while the EV sector is booming, it still hasn't reached all the way down to the mainstream consumer. But it will, especially with EV companies like Tesla (NASDAQ; TSLA), Ford (NYSE: F), General Motors (NYSE: GM), Mullen Automotive (NASDAQ: MULN), and others focused on bringing MSRP's of vehicles down to the $20,000 level.
The impact of that inclusion can be enormous. 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. But the current speed is accelerating, so much so that CNBC has predicted that as many as 125 million electric vehicles will be on the road as soon as 2030.
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. Graphite One's expansions target that opportunity. In fact, progress made positions them to turn its groundwork completed into dollars. And that could mean its over 38% YTD share price increase is the precursor of more to come.
They could get help to realize their full potential. It's no secret that the US has strongly supported the expansion of electric vehicle technologies, introducing legislation designed to incentivize their development and secure essential production components. For example, a $500 billion infrastructure bill passed in 2022 intends to facilitate building over 500,000 charging stations, with a goal of making at least half of the vehicles on the road electric by 2030.
Of course, reaching that goal entails unearthing substantially more graphite than what is currently being manufactured. The government – and Graphite One – recognize this. Proactively, the White House signed an executive order in 2021 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.
Also contributing to the value proposition, the US government has identified graphite as an essential asset to national security and the technology economy, cementing the material's demand for decades. And by establishing its foundation to feed that need, Graphite One has a solid chance of becoming more than a provider to expedite EV adoption; it can help fortify national security.
Graphite One Is Expediting Its Mission
For now, the EV industry exposes the most near-term revenue-generating opportunity. Targeting this potential, the company is focused on developing its Graphite One Project, an interest that could transform this smallcap stock into one of the EV industry's largest suppliers of essential battery metals.
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 inherent 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. The better news inherent to GPHOF 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.
Better yet, 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 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.
Its extraordinary properties and high yield sound promising enough. Still, its potential is amplified even further. 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 enviable title that could inspire record-high revenues and investor attention. And not just investors are excited about what Graphite One could be on the verge of accomplishing.
Public Sector Funded Expansion
The US government could be a satisfied customer too. They have 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. Last year, they double-down by reiterating its vision to expand the domestic mining, production, processing, and recycling of essential minerals and materials. This means in addition to Graphite One's 100% ownership of a domestic property rich in graphite, they may also have a deep-pocketed partner eager to support their efforts.
Graphite One has also built a strong relationship 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, supported by promising pre-feasibility studies showing potential to exploit one of the most substantial graphite deposits in the nation.
Set Up For A 2023 Breakout
In other words, milestones reached in 2022 can become 2023 catalysts. And clearing most regulatory hurdles, that's likely the path of least resistance this year, noting Graphite One is already en route to becoming a leading graphite producer in the United States. More than leading, they can be one of the first in the domestic market. Better yet, surveys of their owned projects show that they could do so at a scale that nearly matches the entire nation's annual demand for graphite.
That assumption is supported by data indicating the long-term prospects of Graphite One's operations are excellent. And while GPHOF certainly fits the description of a buy-and-hold stock, there is much in play in the near term. The graphite market is expected to soar again in 2023, eclipsing the $29.5 billion mark set in 2022. Being one of the first graphite producers within the United States could allow Graphite One to seize a considerable portion of that market. Remember, mining and explorations are especially susceptible to trading at a discount until they prove their prospective location is asset rich.
Graphite One's share price shows they are no exception to that rule. However, as the company continues to publish supporting evidence of its value, that can change quickly. Valuation gaps generally close once investors recognize a company's move from conceptual to tangible. With Graphite One the latter, that could lead to its 38% YTD gain being a springboard, not a platform.
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