Graphite One Inc. (OTCQB:GPHOF)

Graphite One Inc. (OTCQB:GPHOF)

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-Project:

Graphite Creek:
Location: America’s highest grade and largest known, large flake graphite deposit.

The Property is located on the Seward Peninsula in western Alaska, along the north flank of the Kigluaik Mountains about 55 kilometers (37 miles) north of the City of Nome. It is approximately 35 kilometers (22 miles) from seasonal roads and 5 kilometers (3 miles) inland from intertidal waters at Windy Cove (Imuruk Basin)

History:Graphite showings at the Property were first discovered after the 1898 Cape Nome gold rush and have been reported under several names including the Uncle Sam, Tweet and Kigluaik graphite deposits. The deposits were intermittently mined from 1907 to 1920 with some 580 tonnes of hand-sorted graphite mined from talus and adits (small <10 m excavations into exposed outcrop) that penetrated high-grade graphitic zones. Prior to Graphite One’s interest, the deposits were last explored during the mid-1990s when mapping, sampling and mineralogical (thin section, polished section and XRD) work was conducted. The graphite showings were never drill tested prior to the Company’s 2012 exploration program.

Mining Claims: The Property consists of 176 Alaska State mining claims (Figure 2, Blue) covering 9,583 hectares (23,680 acres).

Former Federal Mining Claims:

The Company gained control of the 24 Federal claims through a long-term lease agreement with Kougarok, LLC, an Alaska company held by the original stake holders (the “Lease”).

In March 2018 and under the terms of the Lease, Kougarok completed the conversion of its 24 Federal unpatented lode mining claims to State of Alaska mining claims with the Alaska Department of Natural Resources. The Company in turn transferred to Kougarok thirteen of its Alaska state mining claims that overlapped with the lands of 4 of the Federal claims and simultaneously leased them back from Kougarok under the terms of the Lease. This will relieve the Company of the need to comply with certain federal regulatory requirements since federal lands are no longer involved and is anticipated to simplify the permitting process for the Project.

The Lease has an initial term of twenty years commencing January 2014 with provision to extend through the Project’s life. The remaining payments and production royalties due under the lease are:

Annual advance royalty payments of $30,000 until 2019, then $40,000 per year until production begins (all recoupable from production royalties);
Production royalties:
(a) 5% from lands in the 4 former federal claims staked in 1943;
(b) 2.5% from lands within the other 20 former federal claims;
(c) Except as provided in (b) above, 5% from lands within the claims staked by Graphite One Alaska; and,
(d) Except as provided in (a) above, 2.5% from lands within the claims purchased by Graphite One (Alaska);
The Company has the option to reduce production royalties by up to 2% by paying Kougarok LLC $2,000,000 for each 1% reduction of the royalty.

Purchased Claims (56)

The Company purchased 56 Alaska state mining claims in two transactions, with each transaction acquiring 28 claims covering the same lands and representing the junior and senior state mining claims that overlap and surround the 24 Federal claims. The first group of 28 claims was purchased in 2012 and carries a 2% production royalty on future production from the covered area. The Company has the right to purchase the production royalty for $1 million at any time on or before January 24, 2021. The second group of 28 claims was purchased in 2015 and carries a royalty interest equal to 1% on production from the claims. The Company can purchase the royalty for $500,000 at any time within 36 months following the start of mine production. Some of the Purchased state claims overlapped with the former Federal claims leased by the Company and conveyed to the State.

Staked Claims (120):

Graphite One (Alaska) Inc. has staked 120 Alaska state mining claims, some for potentially locating infrastructure.

Geology: The Property’s graphite deposits consist of segregations of semi-massive to massive graphite and graphite disseminations that are hosted in schistose rocks within the lower granulite facies portion of the Kigluaik Group. Based on surface exposures and workings, the deposits strike in a north easterly direction adjacent to the high angle, strike-slip Kigluaik Fault. Graphite zones within the schistose rocks occur as: 1) massive resistant graphite segregations in sillimanite-garnet-biotite quartz schist; 2) flaky graphitic sillimanite-garnet-biotite-quartz schist consisting of 15-55% large graphite flakes; and 3) graphitic biotite-quartz schist containing 1-10% disseminated graphite. Historical sampling show that the sillimanite-garnet-biotite-quartz schist has massive ‘high grade’ graphite segregations that can yield up to 60% graphite, while the biotite-quartz schist contains 2% to 6% disseminated graphite.

Resource Estimates: The Company conducted three exploration programs between 2012 and 2014 totaling almost 7,600m of drilling and published NI 43-101 compliant resource reports effective January 2013, February 2014 and March 2015. These reports are available at: https://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00025247. An estimated, additional 8,000m of drilling is required to bring the resources to a measured category required for the feasibility study.

An electromagnetic survey, conducted in 2012, identified the approximately 18km graphite mineralization zone on the Kigluaik Mountain front. The 4.8km long area identified as the area of inferred resources is also shown.

2012 Exploration Program:
In 2012, the Company conducted an airborne geophysical survey of the Property. It identified an electro-magnetic (“EM”) conductor, coincident with graphite occurrences, that is more than 18 kilometres in strike length. A second EM conductor in the south or “Araujo zone” was also identified but remains untested by drilling.

An exploration and diamond core drilling program was conducted on the Property in 2012. It consisted of drilling, prospecting, geological mapping, and sampling along the conductors delineated by the airborne survey and previously defined as graphite-bearing schist. The information from the program was summarized in the Company’s maiden National Instrument (“NI”) 43-101 compliant resource report filed in January 2013. It calculated an inferred resource of 107.2 million tonnes at 5.78% graphite using a 3.0% Cg cut-off.

The program included 18 drillholes totaling 4,249 m. Seventeen were in the central portion of the Property near Graphite Creek. These drillholes are spaced about 200 m apart with infill drilling initiated on the western portion of the drill zone at 50m spacing. Except for one drillhole (12GCH005; -87° dip), all drillholes were drilled at -49° to -51° dip to test the true thickness of mineralization. The graphite bearing rocks dip at approximately 60°.

The drill core was sampled approximately every metre resulting in 4,106 samples. Of these, 208 yielded >10% Cg and 1,249, >3% Cg. All drillholes encountered graphite mineralization. Drillhole 12GCH005 encountered 173 m of 5.39% Cg with sub-intersections of 10.03% Cg over 55 m and 12.01% Cg over 42 m. Drillhole 12GCH006 encountered 147 m of 4.0% Cg with sub-intersections of 6.56% Cg over 58 m and 10.14% Cg over 32 m. The results confirmed that graphite mineralization exposed at surface extends to vertical depths of over 225 m.

The 18th drillhole, 12GCH008, was located 2.2 km west of the main drill zone and represents a step-out hole to test graphite mineralization along the EM conductor. It encountered 77 m of 3.0% Cg including 6.02% Cg over 52 m and 7.07% Cg over 31 m. This supports the potential for continuous high-grade mineralization along the geophysical conductor.

The mineral resource estimate was derived using analytical data from 17 of the 18 drill holes and 3,913 samples were assayed for Cg using the LECO analytical method (composite to 2 m). The drill holes were spaced up to 320 metres apart initially with some infill drilling at 50 metre spacing. Interpretation and modeling of five three-dimensional wireframe envelopes were completed to outline the mineralized graphitic horizons. A block model of 5 m (E-W) by 2 m (N-S) by 5 m (vertical) was interpolated using the inverse square of the distance method and a maximum of 6 composites, to estimate each block within the mineralized envelope(s). The specific gravity was fixed to 2.7 kg/m3 and is based on core measurements. The base case cut-off grade of 3% Cg is based on a conservative approach with 80% recovery for a 95% Graphite concentrate and an average selling price of $1,200/tonne.

The 2013 Technical Report was prepared by SGS Canada Inc. and APEX Geoscience Ltd. following the guidelines of the Canadian Securities Administration’s NI 43-101 and Form 43-101F1. The report titled “Technical Report, Maiden Inferred Resource Estimate of the Graphite Creek Property, Alaska USA”, is filed on SEDAR and can be viewed on www.sedar.com.

2013 Exploration Program:
The 2013 program consisted of drilling conductors along strike using data gathered from the 2012 EM survey. Ten diamond drillholes were completed totaling 1,023 meters and typically spaced about 250 meters apart. The results, announced in January 2014, increased the existing inferred resource by 74% to 186.9 million tonnes of 5.5% Cg at a 3% Cg cut off.

2014 Exploration Program:
The 2014 program was designed to infill between existing drill holes and increase the confidence in the continuity and distribution of the graphite mineralization. Twenty-two diamond drill holes amounting to 2,313.9 meters were drilled. An additional two were completed in separate areas of the deposit to provide core samples for metallurgical test work on the two principle near-surface zones of mineralization. A metallurgical program was initiated in November 2014 to evaluate the processing parameters of representative samples of the two upper zones of mineralization seen in the drilling. One of the study’s goals was to optimize the process flow sheet for the Project’s processing facility. The metallurgical program is ongoing.

In March 2015, the Company provided an updated mineral resource estimate of 17.95 million tonnes indicated, grading 6.3% Cg, and 154.36 million tonnes inferred, with 5.7% Cg, using a 3% Cg cut-off grade. The drilling results moved a portion of the previously released resource estimate from inferred to indicated resource status. (See Technical Report, 2015 Indicated and Inferred Mineral Resource Estimate at the Graphite Creek Property, Alaska, United States effective March 17,2015).

QA/QC: The Company maintains a rigorous QA/QC program with respect to the preparation, shipping, analysis and checking of all samples and data from the Property. Quality control for the Project’s drill programs applies to the complete chain of custody of samples and includes verification of drill hole locations (collar surveys and down-hole directional surveys), core handling procedures (logging, sampling, sample shipping), analytical-related work including duplicate sampling, "check analyses" at other laboratories, and the insertion of standard and blank materials. The QA/QC program also includes data verification procedures.

Sample preparation and analysis for the Project is done by ISO/IEC 17025 accredited Activation Laboratories Ltd. of Ancaster, Ontario, Canada (“ACL”). All samples are assayed for graphitic carbon (“Cg”). The technique used for determining Cg is by LECO whereby the pulp is either digested with hydrochloric and perchloric acids, or subjected to a multistage furnace treatment to remove all forms of carbon with the exception of Cg.

As part of the comprehensive QA/QC program, one blank is inserted into the assay stream for every 10 core samples submitted. Blanks are inserted directly after highly mineralized samples to test for contamination during the preparation. Three separate blank materials are used. Duplicate samples include ¼ drill core splits and were submitted as two separate samples with consecutive sample numbers. One duplicate sample was inserted for every 20 samples. Three commercially available graphite standards were utilized in the sample stream with one inserted for each 10 cores. These standards are an additional check on the internal standards utilized by ACL.

ACL uses standard quality assurance and control policies in all aspects of its laboratory operations. The programs were developed from guidelines published by the International Standards Organization (“ISO”) commonly referred to as ISO\IEC17025 Guidelines. ACL uses 5 different masses of EDTA as well as 99.9% pure graphite as internal quality control. These are used at a 10% frequency. ACL also uses a 10% sample duplicate frequency.

Drill hole sample rejects are routinely sent to ISO/IEC 17025 accredited SGS Lakefield and/or ACME Analytical Laboratories Ltd. for check analyses.

Quality control is carried out by the Company’s employees under the supervision of David Hembree, P.Geo., General Manager Operations. Mr. Hembree is a Qualified Person as described by NI 43-101 and has reviewed the scientific and technical information disclosed on this website.

Mineralization: The Graphite Creek deposit is characterized by coarse, crystalline (large-flake), graphite within graphite-bearing schist. Graphite mineralization is exposed at surface along the Kigluaik Mountain Range front. The large flake graphite occurs as disseminations and high grade segregations and lenses in distinct sillimanite-garnet-quartz-biotite schist and quartz-biotite schist. The host schist is continuous over 18 km of strike length, based on mapping, sampling and airborne geophysics.

The STAX Advantage: The Company commissioned TRU to recommend development options for the Property and to conduct test work to determine the characteristics of its graphite. TRU recommended a vertically integrated concept for the Project with three facilities (mine, mineral processing plant and product manufacturing plant) producing coated spherical graphite and other purified graphite products from Graphite Creek’s processed concentrate. This approach formed the basis for the Project’s PEA and the Company’s strategic plan.

Early in its test work, TRU and its associated graphite consultants recognized that the Property’s graphite had unique characteristics. With further study, they concluded the morphological characteristics of Graphite Creek’s STAX graphite are both globally unique and commercially important. Characterization test work conducted to date concludes that it has both crystalline, large flake characteristics and naturally occurring morphologies characteristic of already processed materials.

These included:

-Naturally occurring Spheroidal shapes, close to the size ranges required for lithium ion batteries - expected to increase the yield of CSG and reduce the residence time in the spheronizing machines
-High proportions of Thin, large flake graphite with high aspect ratios - particles expected to be more amenable to milling, also important for graphene and premium alkaline batteries.
-Significant proportions of “pressed flake” or three-dimensional, Aggregated graphite particles, some in the shape of flakes, alongside integral classic flake both with high aspect ratios - important for lithium ion batteries
-Naturally Expanded or exfoliated flake graphite - used in flame retardant applications
To highlight these unique properties, the Company has branded Graphite Creek graphite as “STAX GRAPHITE” and designated the features as: “S”, as in Spheroidal; “T”, as in Thin; “A”, as in Aggregate; and, “X” as in Expanded. -The Company has applied to register the trademark “STAX” in the United States and Canada, in association with Graphite Creek graphite. The Canadian application has been allowed, and registration will ensue following commencement of commercial use of the trade-mark. The U.S. application is currently suspended pending registration of the Canadian application, given that the Canadian registration is the filing basis for the U.S. application.

TRU identified the need for additional research and development to more fully understand these characteristics and the potential impact on processing the graphite and producing finished products.

CSRP: The objective of Graphite One’s Community Relations Program is to foster relations with the local communities through regular, open dialogue and information sharing to ensure that all stakeholders have a voice in the Project’s planning, exploration and development phases. To date, the program has focused on building the Company’s relationship with the Inupiaq communities closest to the Property (Teller, Brevig Mission and Mary’s Igloo) as well as the City of Nome. There is a high level of interest in the Project and the possibility that it could bring economic and employment benefits to the region. There are also concerns that the Project might disrupt the region’s subsistence way of life.

Since 2014, Graphite One has held numerous meetings with residents of the communities of Teller, Brevig Mission, Mary’s Igloo and the City of Nome. Each governing entity within these communities has been included in these meetings. In addition, meetings have been regularly held with regional organizations and governing bodies such as Kawerak, Inc. and Bering Straits Native Corporation.

In meetings held to date, Graphite One has described the exploration program, generally introduced the Project and answered questions from the participants. The company is assisting the Inupiaq communities in establishing Subsistence Advisory Councils to, among other things, advise the Company on matters related to the Alaskan Natives’ hunting and gathering issues.

As the Company now progresses beyond the Project’s PEA to its feasibility study, Graphite One will continue to consult with each of the communities, explain the Project with advancing detail and respond to questions from community members. Uqaqti Consulting, LLC from Fairbanks, AK assists Graphite One in coordinating its Community Relations Program. Uqaqti’s principal consultant is an Alaskan Native, has lived in remote villages for fifteen years and has a comprehensive understanding of Alaskan Native social, economic, political and cultural issues.

Graphite One conducts mineral exploration under the State of Alaska Annual Hardrock Exploration (AHEA) Permit. Environmental Program: The AHEA covers drilling activities, water usage, temporary camps and small land disturbances. In addition, GPH participates in the BLM and State reclamation bonding pools. Many state and federal permits will be required to conduct mining operations at the Property. A full list will not be determined until after a Feasibility Study has been conducted and a Plan of Operations has been developed. Absent that plan, Graphite One has provisionally identified ten federal and twenty-four state permits/certificates that could be required to undertake mining on the Graphite Creek Property.

Graphite Creek Mine:

A truck and shovel operation with four active mining areas is projected for the mine based on the PEA. Company owned and operated equipment is assumed mining about 4 million tonnes of material through 360 days each year, once full production is reached in Year 6. About 1 million tonnes of this would be graphite mineralization with an average grade of 7% Cg delivered to the Processing Plant. Key mine equipment and facilities planned include:

-4 excavators, 8 rear dump trucks and accompanying support equipment
-22-mile access road connecting the mine and processing plant to the Nome-Teller highway
-Three 2MW diesel fueled power generators
-Power distribution system
-Tailings facility
-Water and sewage treatment facilities
-Maintenance, storage and administration facilities

Mineral Processing Plant:

The Processing Plant, as proposed, would reduce 1,018,000 tonnes of graphite mineralization with an average grade of 7% Cg to 60,000 tonnes of graphite concentrate at 95% Cg per year, once full production is reached in Year 6. The process equipment includes multiple crushers and flotation circuits as well as drying and packaging equipment. It would operate 330 days each year. The dried concentrate would be packaged in one tonne super sacks and loaded in containers. The containers would then be shipped by truck, based on the PEA, about 50 miles to the Port of Nome, stored, and barged seasonally to the Manufacturing Plant.

Product Manufacturing Plant:

The PEA assumes that the Manufacturing Plant is located in Washington State to take advantage of low cost hydro electric power ($0.04/kWh). The Project as outlined in the PEA assumes that the Manufacturing Plant receives 60,000 tonnes per year of 95% Cg concentrate in 20-foot containers barged from the Port of Nome during the shipping season. The concentrate would then be pelletized and thermally purified to at least 99.95% Cg in high temperature electric furnaces with a nitrogen atmosphere. Once purified, the graphite would be air milled and turned into spheroidal shaped particles in 11 spheronizing machines. The resulting spherical graphite is then coated with a carbon pitch and heated in 4 carbonization furnaces to graphitize the coating. The finished CSG (41,850 tonnes per year) is then bagged and shipped. Purified graphite powder that is recovered in the process (13,500 tonnes per year) would also be bagged and shipped.

Criteria relevant to deciding the location of the Manufacturing Plant include power cost and supply, availability of industrial zoned land, proximity to tidewater and port facilities, and infrastructure that supports both the workforce and delivery logistics for input materials, services and finished products. The Company is working with AIDEA to identify qualified sites in Alaska. AIDEA has identified four potential sites.

Project Economics, Graphite Pricing and Markets:

The PEA projects a Net Present Value (“NPV”) for the Project on a pre-tax basis of US$1,037 million using a 10% discount rate, with an Internal Rate of Return (“IRR”) of 27%.

On a post-tax basis, the NPV is projected at US$616 million using a 10% discount rate, with an IRR of 22%.

Graphite Test Work:

Important observations in exploratory product development test work conducted to date follow. Many are directly attributable to the STAX characteristics.

-High conversion rates to spherical graphite were achieved (75% vs. 30 to 40% for Chinese graphites)
-Direct spheronization was possible as no jet milling of the purified graphite was required prior to the spheronization process
-The entire size distribution of the graphite feed could be used.
-Residence time in the spheronizing mill (a high electricity consumer) was half that which has been experienced with conventional Chinese flake graphite and two thirds of the energy input was used
-The product was determined to be electrochemically stable and in the size range applicable to advanced lithium ion battery systems
-A streamlined mineral beneficiation process may be possible, producing graphite concentrate with less equipment and a higher proportion of the result being directed to CSG production
-A record Tap Density value (1.17 g/cm3) was measured with non-milled spheroidal flake (higher density means higher energy storage capabilities)
-Near theoretical performances in electrochemical properties were produced in battery tests with uncoated and coated spheronized STAX graphite. The results of tests on coin cell batteries made with uncoated and coated STAX graphite and presents the best results for each compared to tests with coin cells made with Chinese flake and top grade synthetic graphite.

Notes: 1. Carbons for Electrochemical Energy Storage and Conversion Systems (2010) 2. Lithium-Ion Batteries Science and Technologies (2009)

The measure of comparison is discharge capacity, a measure of a battery’s energy storage capability once first charged. The best results with STAX CSG achieved reversible discharge capacity as high as 370.1 Ah/kg - or 0.5% below the theoretical maximum possible. For uncoated CSG, the best result achieved the theoretical maximum of 372 AH/kg. In other tests with uncoated STAX CSG, the first discharge capacities of most showed a deviation of just 1% from the theoretical maximum and the greatest deviation was 3%. In addition, all the STAX tests performed demonstrated the ability to achieve the same or similar discharge capacities in repeated subsequent charging/discharging cycles.

The ability to reach and closely approach theoretical maximum discharge capacity and to consistently maintain high repeated values on cycling demonstrates the high performance potential of STAX graphite. Coin cell 1220 successfully completed three charge/discharge cycles, the second and third discharge curves show almost complete coincident overlap with the first discharge curve, attesting to repeatability in performance across subsequent charge/discharge cycles.

The Company recognizes that more research and development work is necessary to understand and quantify the significant features of STAX graphite as well as assess its performance in commercial equipment for establishing purchase specifications. The unique morphologies of STAX graphite may well turn out to be the major competitive advantage of Graphite One contributing to lower costs and superior performance.


Graphite One Inc.. is a publicly traded company listed on the OTCQB under the ticker symbol GPHOF. This is not investment advice. Please view the disclaimer found on this website.
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