For anyone thinking Graphite One (TSXV: GPH) (OTC: GPHOF) is not one of the best positioned small-cap exploration companies targeting an enormous graphite sales opportunity- think again. They are ideally placed. And better still, $GPHOF has the assets, management, and properties to cash in on the massive demand for graphite needed to power the EV and energy storage sectors showing no signs of slowing. Most peer competitors can't say the same. And with small-cap battery metals stocks getting more investor attention than ever, that's excellent news for Graphite One and its investors. In fact, GPHOF is indeed in play. And for good reasons.
Foremost, they are targeting a graphite sales and battery metals market that is, in a word - enormous. The World Bank estimates graphite production will need to increase by at least 500% within the next three decades just to keep pace with what's happening now in the battery metals markets. And while the forecast is enough to feed Graphite One potentially billions in long-term revenues, technology embedded 30 years from now will likely require substantially more graphite to power a global initiative intent on eradicating the need for fossil fuels.
Moreover, those lofty World Bank estimates could be pretty conservative, considering that developing economies are probably not appropriately factored into the long-term demand equation. So, while Graphite One can justify a higher valuation now, a longer-term trade perspective supports a case for exponential higher prices. What's more, the best part of the GPHOF investment consideration is that whether investing for short or long-term appreciation, there's a common theme- $GPHOF shares at current levels look appreciably undervalued.
In fact, at roughly $1.36 a share, its price barely scratches the surface of what GPHOF's near-term opportunities can deliver. Factor in its prospects 2 to 4 years out, and its market cap is even more disconnected from a rational valuation. But, valuation gaps in exploration and mining companies aren't that uncommon ahead of digs. However, what is common is that they can close quickly once work starts. And with GPHOF completing the groundwork to transform from an exploration company into a producer, that gap can close sooner than later. When it does, GPHOF's 52-week high of $2.00 may prove to be just a tiny bump in the road toward much higher prices. That's not an overly ambitious suggestion, either.
Massive Market, Massive Demand For Graphite
Those long to the GPHOF story understand just how fast Graphite One stock can run, some benefitting from a more than 1311% surge between March 2020 and Feb 2021. While those gains were more than impressive, the thing to know is that Graphite One is much better positioned today than when they scored that massive increase. In fact, GPHOF has put the pieces in place to do more than capitalize on opportunities; they can maximize them. And in an expected $29.5 billion graphite market this year, that's a great position to be in.
By the way, the current $29.5 billion market opportunity may be a drop in the bucket to what's in store for the rest of the decade, especially with electric vehicle prices becoming more reachable to a larger mass of consumers. Good news for manufacturers is also good news for GPHOF, noting that the EV sector essentially stalls without an ample supply of vital graphite to power its vehicles.
So, when headlines post that EV sales keep besting record highs, the better investment opportunity could be with those companies behind the scenes. While they may not get the sexy headlines like Tesla (NASDAQ: TSLA), the thing to remember is that they are equally valuable to an industry requiring a group effort to meet surging demand. Moreover, with analysts modeling many times over that EV and its related markets represent a generational investment opportunity, finding undervalued companies vital to the sector's survival may offer substantially more investment bang for the buck. In that respect, GPHOF is quite ripe for consideration.
Remember, aside from the vehicles, most in play are the batteries needed to power them. And, of course, they can't get made without the metals required to keep their respective production lines moving. So, instead of retail investors directing investment dollars toward already high-multiple manufacturers, better opportunities could come through the under-the-radar components suppliers essential to industry growth and even some companies' survival. Thus, with graphite an indispensable contributor to that proposition, and the need for many companies to fill the totality of market demand, Graphite One stock will likely be in play. Actually, it already is. And recent trading is setting up the stock for another rally.
The bulls, in fact, may already control the reins.
Market Too Big To Ignore
And rightfully so. Because, in addition to GPHOF targeting revenue-generating opportunities that are already massive, they will only get better with an EV industry showing no signs of slowing. CNBC recently noted that upwards of 125 million EVs could be on the roads by 2030. But, remember, these vehicles won't run on oil; they need batteries built using graphite. Notably, not something like graphite, but the real deal. Synthetics aren't an option.
Thus, in some circles, graphite is referred to as the "new oil." And that means those early to the investment could amass fortunes similar to oil market investors a hundred years ago that had the foresight to understand the impact combustion engines would have in a developing world. While earning billionaire status through stock ownership in developing companies may be a stretch nowadays, indeed, millionaires can be made. But, that can only happen by taking advantage of current opportunities.
While there may be other options, Graphite One Inc. may be the ideal battery metals exploration stock to consider. Why? Because they are well ahead of many of their peers to monetize an impressive portfolio of assets. In fact, through its Graphite One Project, $GPHOF could develop quickly into a major American producer of high-grade Coated Spherical Graphite (CSG) uniquely integrated with a domestic graphite resource. Moreover, structured as a vertically integrated enterprise to mine, process, and manufacture high-grade CSG adds high-margin potential and generates more effective revenues that fall faster to the bottom line.
Outlined in Graphite One's Preliminary Economic Assessment, potential graphite mineralization mined from its Graphite Creek Property will be processed into concentrate at a graphite processing plant situated on the Seward Peninsula about 60 kilometers north of Nome, Alaska.
Then, as a planned owner-operated year-round truck and shovel operation, the goal is to mine 4 million tonnes of material each year. Of these, about 1 million tonnes with an average graphite mineralization grade of 7% Cg ("contained graphite") would be delivered to the Processing Plant, where getting final products ready for the markets continues.
A Lot Of Graphite Put To The Markets
Once at the plant, additional refining gets the company closer to having a final product. And there's a lot of it. Graphite One says that on an annual basis, the Mineral Processing Plant would reduce 1,018,000 tonnes of graphite mineralization to 60,000 tonnes of graphite concentrate at 95% Cg. The dried concentrate would be packaged and transported to the Port of Nome, Alaska, and shipped on a seasonal schedule to the Manufacturing Plant. Then, the Product Manufacturing Plant would pelletize and thermally purify the material to at least 99.95%Cg, before the majority would be air-milled, turned into spheroid-shaped particles, coated, and graphitized. The end game is where the money is.
Graphite One expects it to deliver 41,850 tonnes of battery-grade CSG per year for end-uses in EV and lithium-ion batteries and Energy Storage Systems from those refining processes. Its remaining advanced graphite material, which $GPHOF expects to be roughly 13,500 tonnes per year, can feed a range of industrial and tech manufacturing supply chains. With the price of natural spherical graphite at approximately $3,000 and coated natural spherical graphite scoring between $7,000-$12,000 per ton, $GPHOF could score between $123 million and $492 million if prices stayed at current levels.
That's probably not the case, however. With sector analysts expecting a 35% increase in lithium-ion battery demand, the need for metals will follow. Thus, pricing pressure to the upside is foretasted into most metal pricing and production models.
Demand Drives Prices Higher
That bullish forecast makes sense. Keep in mind that these metals are hard to find and even harder to uncover. So, markets tend to side with the products having the most value. Graphite will be one. Remember, lithium-ion batteries are not only being used in vehicles. They power everything from power tools, toys, consumer products, and even parts of hypersonic missiles.
Thus, while they may be smaller, they also need to be produced by the billions each to keep their respective products in motion. Hence, assuming an unlikely slowdown in the EV sector, plenty of support markets keep $GPHOF's revenue-generating wheels churning.
That's excellent to know for Graphite One and its investors. More appealing to the GPHOF bulls is that graphite has been listed as one of the top 35 most valuable metals in the United States by the United States Geological Survey (USGS) and is considered critical to building out national infrastructure. And with a trillion-dollar bill recently passed intended for such projects, demand and the dollars generated from them are already starting to affect market demand and pricing. Not only that, markets may get squeezed, especially after the White House signed an executive order in early 2021 to maintain the critical U.S. supply of graphite for the renewable and electric vehicle battery sectors.
Keep in mind, too, the U.S. government may have just thrown a wild card into the graphite markets domain. And it's one bullish to the metals market. Why? Because the EV and battery metals market players are already bidding prices higher for the limited supplies of graphite being brought above ground. Now, the U.S. appears to be scrambling to replenish and stabilize its graphite supply. In fact, while not addressed much in the national headlines, graphite has been added to the new U.S. National Stockpile (NDS) Acquisitions List. That inclusion onto the National Defense Stockpile list further signals graphite's growing importance to national security. Not only that, the way the U.S. spends money, graphite prices could be driven appreciably higher as they bid against companies that have no metals to spare.
While those cost increases may trickle down to the consumer level, in the meantime, it presents a perfect storm of revenue-generating opportunities for Graphite One. Thus, higher graphite prices fuel a GPHOF rally from an investor's perspective.
Where They Gonna Get It
Of course, the most tremendous potential in the world can't be realized without having the assets to capitalize on opportunities. Graphite One has a master class. They are advancing prospects from its 100% owned Graphite Creek project in Alaska, which included infill and step-out core drilling in the resource area. On top of this, it saw additional core and sonic drilling for geotechnical data collection in the proposed mill site and dry tailings/waste rock storage areas. Other work included access route engineering, surface water and groundwater hydrology studies, wetlands mapping, and aquatic life surveys. Data analysis from the extensive drill is expected to get published this quarter.
The better news is that if results post as expected, more projects are already in the crosshairs. Notably, the company expects good results, recently saying they were "very pleased" with the successful execution of the 2021 Field Program, as historical drilling coupled with the new data clearly demonstrates the predictability and consistency of high-grade, near-surface graphite.
They pointed out as well that with the concepts and conclusions outlined in the PEA suggesting a 40-year mine life, the Graphite Creek deposit continues to show potential to be an essential long-life component of the graphite supply chain, again noting the value of being one of four critical minerals that are on the U.S. National Defense stockpile list.
A Sum Of Its Impressive Parts
Thus, management hasn't been shy to say its assets are well-positioned to exploit the right market at the right time, and all indicators suggest they are spot-on in that assessment. Regarding leadership, GPHOF is led by a team that has achieved outstanding results in its industry careers, and their combined knowledge and experience won't leave investors wanting, either. They bring to the company extensive experience in mineral exploration, development, and production; strong corporate backgrounds; managed major exploration, development, and operating programs; and collectively financing over $250 million for various resource companies. Thus, Graphite One is more than asset rich; they are led by a management that knows how to deliver results, and that adds to a value proposition much too attractive to ignore.
Instead, with GPHOF offering exposure into an EV and battery metals sector that is still in its infancy, paying attention to what's front and center is a better idea. And with Graphite One set to monetize near and long-term opportunities, managing assets that could exponentially boost its balance sheet, and selling into a market with inherent long-term demand and extraordinary pricing power, investors are doing just that. And that should bode well for the trading in GPOHF stock in the coming days and weeks.
Keep in mind, while Graphite One isn't the only graphite battery metals play in the market, after evaluating the sum of its parts, they are one of the most undervalued metals stocks that provide immediate exposure to several industries that need what GPHOF has to sell. Thus, while the bulls may take the stock higher in the comings days and weeks, fuel could get added from project updates said to be imminent. Hence, consideration is warranted, but timing is everything. And investors may want to pull the investment trigger ahead of expected news.
As noted, good news can make this low-priced stock fly. It did last year, and it can do it again. And why not. Graphite One is doing the right things in the right markets at the right time, and that's usually a foolproof recipe to create shareholder value. Moreover, it's probably the reason why Graphite One stock has been catching the eyes of investors.
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