Alabama Graphite – Straight to Battery Ready
Alabama Graphite Corp. (V.ALP) has released a Preliminary Economic Assessment on its Coosa graphite project in central Alabama. Reading through the PEA and the press release, it is immediately apparent that there are a number of features which truly differentiate Alabama Graphite from its peers and suggest that the company’s management is focused on the real business in graphite – battery-ready graphite.
Succeeding in the graphite business requires focusing on where the value and demand are in the market. Graphite itself is abundant. There is certainly no shortage of graphite projects in North America.
Where the graphite is located – relative to roads, rail, power and ports – is of critical importance. So is jurisdiction, distance from market and metallurgical considerations. If you have the wrong “sort” of graphite (graphite which is not suitable for battery use), all the infrastructure in the world will not make a successful mine. If the graphite meets metallurgical requirements, the next two items to address are how easy it is to mine and how much the mine will cost to build.
“When I joined Alabama”, said Don Baxter the co-CEO, “The first thing I did was look at the metallurgy of the deposit. Then I went down to visit the property.” He was impressed by the deposit but he also was struck by the complete infrastructure, including the Port of Mobile only three hours away. There were roads, power, a workforce and, a few miles down the road, a huge marble quarry.
Baxter knew what he was looking for. He is a mining engineer by training and served as mine superintendent at the Kearney Graphite mine when it operated in the 1990s. He was a director of mining at Ontario Graphite Ltd. Baxter has also worked for Inco and Noranda Minerals, as well as numerous consulting projects for base and precious metals. He holds a degree in mining engineering from Queen’s University, is a Registered Professional Engineer and a Qualified Person under NI 43-101. Baxter had just left Focus Graphite and was looking for a real mining opportunity when he was approached by Alabama Graphite.
“The Alabama deposit has a diggable geology. It consists of a ridge of oxidized material which contains a lot of graphite. You could mine for decades in nothing but this soft rock, oxidized material,” said Baxter.
That is a great advantage, but the problem is that the market for graphite concentrate is limited and, at the moment, well supplied. Graphite concentrate is pretty much a commodity material. On the other hand, the metallurgy demonstrated that the material at the Alabama property was suitable for conversion to the value-added “coated spherical graphite” required by battery manufacturers.
“We needed to do something different,” explained Baxter. “We’ve done the PEA based on converting 100% of the graphite concentrate we produce into value-added material, mainly coated spherical graphite or CSPG.”
Green technology, from electric cars to peak shaving grid batteries to solar and wind generation, all depends on the availability of inexpensive lithium-ion batteries. What many people do not know about lithium-ion technology is that it uses far more graphite than lithium.
Most of that graphite currently comes from China and that poses two problems. “First, you can’t make a clean green battery with dirty inputs,” said Baxter. He does not need to point out that the Chinese natural and synthetic graphite industry is off the scale in terms of environmental damage.
“Second, a secure, ‘Made in USA’ solution requires that materials be sourced from (not just processed or refined in) the United States. We’ll have the only graphite mine in the lower 48 states and we’ll be the only American source for the coated spherical graphite used in batteries.”
Green technology is already a significant story in the US and the rest of the world. It is not just Tesla and the Elon Musk battery gigafactory, it is a whole industry powering everything from smart phones to cars to massive stationary storage and distributed storage.
“Panasonic did a presentation a few months ago, stating that personal electronic devices and transportation are using more batteries, but the exponential growth in the lithium-ion battery market will occur in stationary storage applications,” said Baxter.
Alabama Graphite is ready to face that growing demand with value-added graphite products. However, it intends to meet that demand in a phased, frugal manner. “The first phase of the project will let us mine and process 200,000 tons of material and produce 5,000 tons of value-added material. All with a CAPEX of approximately 43 million dollars. 75% of the value-added material produced will be coated spherical graphite ready for battery use. We are not even going to sell graphite concentrate.”
Baxter contemplates a modular processing facility build with new production capacity coming online as demand increases and financed entirely by cash flow. He anticipates a 60/40 debt equity mix and sees that as being realistic in the present market.
In our conversation, it was clear that Baxter is ready for the challenge of mining the Alabama deposit, and he is very much aware that the market is really only interested in battery-ready coated spherical graphite. The numerous end users interested in this supply critical green-energy input material are not the traditional mining markets, rather it is the California-based high-tech/clean-tech world.
With the PEA in hand Baxter is able to set to work raising the money to fund Alabama’s CAPEX – the lowest initial CAPEX in the graphite development space. When we spoke to Baxter, he was in Europe with meetings scheduled for the next ten days. Developing a mine which is also a green-technology play gives Baxter confidence that Alabama Graphite will move quickly toward production.
At time of writing Alabama Graphite was trading at $0.18 with 115.6 million shares out and a market cap of $20.8 million.