This article was originally published at dermotcole.com.
The “prefeasibility study” of the graphite project 37 miles north of Nome says it would have an internal rate of return of 26 percent before taxes, 22 percent after taxes and a net present value of $1.36 billion. The project would break even in 5 years and could be mined for about 25 years.
So why does the Canadian company promoting the project need a 50 percent federal subsidy for the $75 million “feasibility study” that was already under way last November on an accelerated basis?
That question remains unanswered with the announcement Monday of a $37.5 million federal grant and the resulting publicity about boosting development of the largest graphite deposit in the United States and one of the largest in the world.
Graphite is a key ingredient in making batteries for electric vehicles. An EV battery needs 15 times as much graphite as lithium.
“This news is a huge win for Alaska,” Sen. Lisa Murkowski’s office said on Twitter.
“It is great news for our state and our country that the Department of Defense has awarded Graphite One funding under Title III of the Defense Production Act, something I have been working on relentlessly since the project’s inception,” said a statement attributed to Sen. Dan Sullivan in the same press release.
Sullivan, who relentlessly attacks the Biden administration for not doing more to promote mining in Alaska, also said “Alaska should and could be leading the way in unleashing America’s resources.”
Both Murkowski and Sullivan voted against the Inflation Reduction Act. The IRA provided the money for the Graphite One grant, the company said.
“This Department of Defense grant award of $37.5 million under the Defense Production Act is an investment in Alaskan jobs and America’s self-sufficiency in the 21st century,” Rep. Mary Peltola was quoted as saying in the press release. Congress approved the IRA before she was elected last year.
The Murkowski-Sullivan-Peltola press release did not mention that the senators voted against the bill. And they did not mention that the grant money came from the Inflation Reduction Act, saying only that it came from “recent” appropriations. This is dishonest.
Sullivan said last year the IRA bill was “loaded with reckless spending” and would punish “hard-working Americans.”
Murkowski complained that “it contains hundreds of billions of dollars in new spending, and hundreds of billions more in new taxes that will burden the American people and American businesses for years to come.”
Gov. Mike Dunleavy’s office issued a press release praising the congressional delegation, the Defense Department and the company, without mentioning that Dunleavy also opposed the Inflation Reduction Act as a measure that will “unquestionably hurt hard-working Alaskan families.”
While the politicians present this as a matter of national security and a patriotic way to combat the power of China, it’s not as simple as they claim.
They failed to mention, or perhaps are unaware, that Graphite One is working with a Chinese company, Sunrise New Energy Materials Co. Ltd., to “develop an agreement to share expertise and technology for the design, construction, and operation of Graphite One’s proposed U.S.-based graphite material manufacturing facility.”
The Chinese have expertise that is missing in North America for graphite development. The Chinese company is already making sample batteries with graphite mined at the company’s Alaska claims to help generate business with autpmakers.
Sunrise New Energy Co. was known as Global Internet of the People Inc. until a year ago.
This project is really about a small Canadian mining company trying to earn a profit on public resources in Alaska by finding a niche and exploiting it.
This mining project and others would be fine with me, but not until the state increases its minuscule mining taxes.
The Alaska Congressional delegation, the governor and the Legislature won’t ask the essential questions in that regard, though it is more important than the appeals to patriotism. The Alaska mining license tax has not changed since 1955.
The 7 percent Alaska mining tax on net profits is not based on the amount of the resource or the value of the resource. Graphite is the major ingredient in batteries for electric vehicles, the country will need a lot more of it and it makes no sense to be entirely dependent on China.
Regarding the Graphite One subsidy for the feasibility study, the Congressional delegation said the study is needed to move the project ahead.
The company’s goal is to mine graphite in Alaska on state land and barge it to Washington where it plans to build a manufacturing facility. An 18-mile access road will have to be constructed from the graphite site near Nome.
Entrepreneur Anthony Huston, the president and CEO of Graphite One, lives in British Columbia, where the company is headquartered. He has raised more than $150 million in his career on various projects, the company says.
He has a base salary of $450,000, received a $300,000 bonus for work last year and has received stock options, as well as restricted stock units valued at $1.1 million. He owns 548,000 shares of the company stock, which rose 14 percent Monday to $1.20 on news of the federal grant.
Here is the prefeasibility study.
In an interview last November, Huston claimed that the feasibility study was already under way. In a 2022 year-end report, the company said the feasibility was under way on an accelerated basis and expected to be completed by the fourth quarter of 2024, “subject to funding availability.”
He told investors in April that the study would be accelerated and finished by November 2024.
In the press release Monday after the announcement of the $37.5 million federal subsidy, Huston said the money will be used to accelerate the study. The Washington Post said the federal subsidy will cut the time it takes to finish the study to 15 months, meaning late 2024.
The Defense Department press release claimed the grant would accelerate the study “by a full year.” These acceleration claims are contradictory.
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