Department of Defense awards Graphite One $37.5 million

Graphite One is getting a big injection of taxpayer dollars to support its mine development. The U.S. Department of Defense announced on Monday that it will award Graphite One $37.5 million to help fund the company’s feasibility study.

The grant uses funds from last year’s Inflation Reduction Act and is made possible under the Korean War-era Defense Production Act, or DPA.

Last year, the Biden administration invoked the DPA to list several minerals, including graphite, as “essential to national defense.” Under Title III of the DPA, more federal funds are now available for private ventures that seek to extract and produce those minerals domestically.

According to the announcement from the Department of Defense, this new grant “will allow Graphite One to fast-track their feasibility study by a full year, informing and expediting decisions to move the project further through their plans for a complete U.S.-based graphite anode supply chain.”

Mike Schaffner, Graphite One’s senior vice president in charge of mining operations, said the company still aims to have its feasibility study finished by December 2024 as previously discussed in the last community meeting held in Nome, on April 20.

“We assumed having adequate funding in the community presentation,” Schaffner told the Nugget in an email. “Had we not received the grant or been able to raise the funding, it would have delayed the project.”

Schaffner said Graphite One applied for this funding, adding that the company will have to provide matching funds for the grant, which means Graphite One will spend $75 million and then be reimbursed for half. The company has 18 months to complete this work for the feasibility study.

The Department of Defense was not able to respond before press time with more information about its agreement with Graphite One.

In that feasibility study, Graphite One will further outline its plans for an open-pit mine in the Graphite Creek deposit on the northern slopes of the Kigluaik Mountains. The company’s crew has been busy this summer drilling cores to better define the resource. Under the company’s latest plan outlined in its pre-feasibility study, Graphite One would truck its partially processed material about 50 miles to Nome. That route would take haul trucks over a proposed industrial access road through Mosquito Pass, and then over about 28 miles of the Kougarok Road. From the Port of Nome, the mineral would be shipped to a proposed processing facility in Washington State. That processing facility would begin operations with imported graphite while Graphite One waits to begin its own mining operations.

Politicians rally behind Graphite One

The new grant earned praise from the bipartisan Alaska Delegation—U.S. Senators Lisa Murkowski and Dan Sullivan and Representative Mary Peltola—as well as Alaska’s Governor Mike Dunleavy.

“Critical minerals like graphite will be key for the inventions of the future, from clean energy to advanced defense technologies, and with this funding, Alaskans can build a crucial link in our nation's supply chains,” said Peltola. “This project will also bring needed jobs and economic development to a rural area of Alaska, with opportunities for hundreds of local hires during construction and operation. I look forward to seeing the completion of the feasibility study for this project, and will continue to support the development of our critical mineral resources.”

In his own statement, Dunleavy thanked the Department of Defense and the Alaska Delegation, adding that “Alaska is a resource powerhouse in a strategic position globally, with much more to offer than just our beautiful scenery and wildlife.”

Earlier this month, Murkowski visited Graphite One’s drill site. She returned to Washington with a hunk of graphite to show off as she continues to ask for more federal support for the company’s proposed mine.

“I’ve always supported Graphite One and what they're doing in Alaska, but really after my site visit there on Saturday, I’m convinced that this is a project that every one of us, those of us here in the Congress, the Biden Administration, all of us needs to support," Murkowski said in a speech on U.S. Senate floor last Tuesday. “This, Mr. President, is a major opportunity for us.”

Murkowski noted that she previously expressed disappointment that the Biden administration—specifically the U.S. Department of Energy—offered loans and grants to a graphite-processing plant in Louisiana that imports graphite from Mozambique. The senator said Mozambique has a “poor human rights record” with “significant labor unrest” and is a place where “ISIS is reportedly active.”

Critical minerals push

Murkowski has been a leading figure in the recent political push to bring about more domestic mineral extraction and production after decades of relying on offshore operations. She appeared at another event in Washington, D.C.last week to talk about graphite. The Wilson Center think tank hosted a two-day summit called “Critical Minerals in the Arctic: Forging the Path Forward,” in which Biden administration officials, politicians, analysts and researchers discussed the strategies and problems involved in building out domestic supply chains in Alaska. Virtual participation was not possible and the few sessions that were livestreamed began at 5 a.m. Alaska time.

During one panel, Duncan Wood, the Wilson Center’s vice president for strategy and new initiatives, identified three main factors that he said have brought a more intensive focus on critical minerals. 

“The first one is what I like to call the shift from value to values in our supply chain thinking,” Wood said. “We used to think, ‘Well listen, if it's dirty, if it's low value-add, let's just make it where it’s cheapest. If we can save five cents on the widget, then let’s put it across the other side of the Pacific Ocean, because that brings down the price for everybody. And all anybody cares about is the lowest price. The lowest price is the law. In the past couple of decades, we’ve shifted from that to a focus less on just value for money, but more on values—values such as ESG [environmental, social and governance], values such as human rights, values such as environment value, such as corruption, transparency, etc. values such as resilience of supply chains, values of national security and geopolitics.” 

The second factor, Wood said, is the recent systemic shocks of events like the COVID-19 pandemic, which “brought home the issue of supply chains to the average voter for the first time.”

“Going into a supermarket and not being able to buy whatever you wanted was a huge psychological shock for many people,” he said.

Thirdly, Wood said the federal government, as well as state and local governments, have a new focus on the energy transition moving away from fossil fuels. “Some of our major automobile manufacturers are saying they’re going to go 100 percent electric by 2035,” he said. And the way many of those vehicles’ batteries are currently designed means they need minerals like graphite.

At one point, panelists were asked to name the one research question related to critical minerals that they would like to see tackled. Wood and the Department of Energy’s Arctic Energy Office Director Erin Whitney both emphasized the need for more research on how to power mines with greener energy sources. Meanwhile, Emily J. Holland, an assistant professor in strategic and operational research at the U.S. Naval War College in Rhode Island, said she wanted more research on how to convince communities to get on board with domestic mining projects.

“Mining has very bad PR,” Holland said. “What we've seen is there is this obvious need to increase responsible mining in a variety of places. But if you poll people about their thoughts on mining, they don’t want it in their neighborhood. We’ve seen, particularly in Europe over the last decade, a host of projects just sitting there and stopping despite the promise of economic development and jobs. I would want to know, what would we have to communicate to communities to get them to view mining as greener or as going to build the community, or as working towards a larger project? Because I think we don't have that sort of level of communication with the average public yet on why mining is so important, why it's different than the mining of 30 years ago, why it might be a benefit to bring to their communities.”

Convincing the public

Public perception and outreach came up again the next day when Murkowski appeared for a short address and a talk moderated by University of Alaska President Pat Pitney.

“We’ve got to build support from really a very broad constellation of stakeholders, not just the state and the boroughs and the communities and the local residents,” Murkowski said. “We’ve got half of the nation's tribes. We’ve got hundreds of Alaska Native corporations who are key to these discussions. So it’s never simple up there. But that’s why we have to make the strongest case for our ability to lead on mineral development.”

Murkowski said she thought minerals could be Alaska’s “next Prudhoe.” But she also discussed the challenges ahead for creating that new industry. She said infrastructure needs—roads, ports and power generation—are often “part of the Achilles’ heel” for resource extraction projects in Alaska. She said the state’s workforce needs to be developed, too, so that Alaskans can benefit from the jobs offered by such projects. Murkowski added that changing the public perception of mining could help stoke more interest in those jobs locally. She said promoting that shift in public opinion would be as important as all the policy initiatives being rolled out to subsidize the industry.

“We’ve got to change this because we need to get the support for projects,” she said. “We need to get the support for subsidies and trade protections and whatever else is going to be necessary to a more robust U.S, supply chain.”

She acknowledged that Alaskans have been witness to bad practices in mining, where companies have failed to clean up and remediate their sites.

Concerns

The proposed mine is on state land, and public input on Graphite One’s work will become increasingly important, especially once the company starts applying for its environmental permits, the next step after the feasibility study is completed. However, tribes in the surrounding region have already raised concerns about how the proposed mine could affect salmon habitats and other subsistence resources that they have used for thousands of years.

The Native Village Traditional Councils of Teller, Brevig Mission and Mary’s Igloo have been working with the advocacy group Water Policy Consulting to collect flow data from streams near the mine and apply for the right to keep the average base flows in the streams. In May the Native Village of Teller applied for an instream flow reservation permits for Hot Springs Creek and the Native Village of Brevig Mission applied for one for Glacier Canyon Creek with Alaska’s Department of Natural Resources, or DNR. Graphite One has already been using water from these creeks to support its operations, using a temporary water use authorization from DNR, but the company has yet to apply for water rights.

“Instream flow water reservation is the same thing as a water right, except with a water right, you are taking water out of a stream or river and with a flow reservation you’re keeping it in, so it’s specifically for the protection of fish habitat,” said Hal Shepherd of Water Policy Consulting. Shepherd said the process to obtain such a reservation is rigorous, requiring a long record of data. Another complication is that the state often requires the tribes to waive sovereign immunity to obtain the reservation, Shepherd said.

“The state is concerned about it, because if they get sued, when they start an adjudication, then they need to be able to bring the tribe in as a party, because they’re the ones applying for the water reservation,” Shepherd said.

If that effort is successful, instream flow reservations would protect the water from being used by mining operations.

“Once you get the reservation, then you have a priority date of the day that application was submitted, and therefore a mining company can’t come along and take that water after your priority date,” Shepherd said.

Shepherd recalled that Graphite One seemed like a small operation when he first began working with the tribes more than a decade ago.

“They were trying to find money to continue their investigating and exploration, and it didn't look like they were going to get it,” he said. “Now we get this news that they’ve just gotten $37.5 million. They're expanding all the time. They're probably unique in Alaska for being, I would say, one of the biggest poster children for critical minerals.”