Alabama Graphite: Made in America

A recent article in the Financial Post highlighted Alabama Graphite Corp. (TSXV:ALP,OTCQX:ABGPF).
As quoted in the article:

Mining engineer Donald Baxter, President and CEO of Alabama Graphite Corp. (TSX-V: ALP), understands the complexities of the graphite market better than most. A leading graphite mining and processing expert, Baxter has designed a unique business strategy for Alabama Graphite based on specialty secondary processing of the graphite from its Coosa graphite deposit into battery-ready Coated Spherical Graphite (CSPG) for lithium-ion batteries. “The people who are buying graphite are not buying primary-processed run-of-mine graphite concentrate. That product — the focus of all flake graphite development companies worldwide — is used in traditional applications such as brake linings and crucibles for the steel industry and is currently oversupplied with depressed pricing,” explained Baxter. “But to assume that graphite concentrate and CSPG are the same or even similar is simply wrong. One is an unfinished graphite product that is presently in oversupply with marginal forecasted future growth, while the other is a high-value, high-demand finished, battery-ready product with historically strong, inelastic pricing. People are buying secondary-processed CSPG graphite for use in lithium-ion batteries. The lithium-ion battery market is the only graphite market demand driver indicating exceptional growth in the future.”
The key differentiator between Alabama Graphite and all of its peers in the flake graphite space is that while competitors are planning to produce anywhere from 20,000 to more than 300,000 tonnes of primary-processed graphite concentrate (in a global market that struggles to consume 375,000 tonnes per annum currently), Alabama plans on diverting 100% of its primary-processed graphite to secondary processing to produce (much higher value) battery-ready CSPG for primary (non-rechargeable) and secondary (rechargeable) lithium-ion batteries. Alabama’s production targets seem realistic and, as importantly, easily sellable. The company intends to produce 5,000 tonnes of specialty graphite yearly, expanding to 15,000 tonnes annually in year seven (note that they intend to fund expansion via free cash flow).
The flake graphite Alabama Graphite will be mining from its Coosa deposit in Coosa County, Alabama has a huge environmental benefit: the geology of the company’s graphite is conducive to an environmentally sound, closed-loop, low-temperature, halogen gas purification process technology, developed by Baxter and his team. This is good for the environment, but also good for Alabama Graphite’s bottom line, as evidenced by the company’s Preliminary Economic Assessment (PEA), published late last year. Alabama’s all-in costs to produce CSPG are USD$1,555 per tonne, the lowest published cost per tonne of CSPG of any graphite development company. Add to that the fact that the mining and processing will take place directly on the Alabama site and you have complete traceability. Nearest competitor, Australian-listed Syrah Resources advancing a graphite project in Mozambique, Africa, is the only other graphite junior to disclose CSPG cost at USD$3,200 per tonne.
Baxter and the executives at Alabama Graphite realized early on that there was little point in making “commodity” graphite concentrate because there is an abundant worldwide supply of that, if you are not too concerned about harming the environment. Instead, they built their business model on producing the material battery makers actually need. It is a smart move because now Alabama can deal directly with battery manufacturing customers and provide the materials they need.
Accordingly, Alabama Graphite attempted to determine if there were battery manufacturers who have a real need for completely “Sourced and Made in America” battery-grade graphite. Enter national security.
After publication of Alabama’s CSPG test results announcement in January (Independent Test Results: Alabama Graphite Corp. Succeeds in Producing High-Performance Coated Spherical Graphite (CSPG) for Lithium-ion Batteries), a U.S. Department of Defense Li-ion battery manufacturer approached Baxter to investigate the potential of a reliable supply of conveniently located, sourced-in and made-in-U.S.A. CSPG. In late June, Alabama Graphite announced the shipment of its American sourced and manufactured CSPG samples to a United States Department of Defense (DOD) lithium-ion battery solutions provider. The company conveyed fine and coarse sized CSPG made from its Coosa Graphite Project material that will be tested in two different defense applications; namely, high-powered military engine starter batteries, and soldier portable power and other energy-dense applications. This battery company is known for its demonstrated expertise and ingenuity in Li-ion battery development for the DOD and several other industries. This company is also a United States Department of Energy battery supplier that has been awarded multiple DOD contracts in recent years, specializing in critical stationary energy storage, renewable energy, and transportation battery markets, as well as other Li-ion battery applications and industries.
As the electronic battlefield emerges there is a huge demand for batteries to power the high-tech gear carried by every soldier, mounted on every tank and, increasingly, on smart bombs and clever missiles. An array of American companies are building those batteries and the U.S. DOD strongly encourages them to buy American-sourced materials whenever possible for battlefield deployment.
Knowing this, Alabama Graphite got in touch with DOD contractors who manufacture both primary and secondary lithium-ion batteries for battlefield systems. In short order, more than six of these companies had signed NDAs with Alabama Graphite and asked for specifically tailored samples – in addition to the multiple NDAs the company has in place with non-DOD-related companies.
For these DOD contractors, having a “Sourced and Made in America” supply for a critical component of their battery systems is important – and the demand is only going to get larger.
With these NDAs in place, Alabama is on the road to attaining offtake agreements which really drive the graphite industry. But they will not be bulk concentrate agreements, rather they will be for high-value, battery-ready CSPG.
Now Baxter and his team are able to raise their next financing with a clear pathway to production firmly in place. Permitting is expected to be the fastest in the graphite space as the Coosa graphite project is located on private land (requiring state-level permitting only) and the State of Alabama is very eager to see a new industry – and a new source of tax revenues – in place as soon as possible.
“We’re making the samples as fast as we can,” said Baxter. “I believe the Department of Defense battery manufacturers may present a significant opportunity to bring our mine and our manufacturing facilities into production as quickly as possible.”

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