Graphite One Enters Into Agreements Providing Exclusive Access to Industry Leading Anode Manufacturing Technology

Rhea-AI Summary

Graphite One Inc. (TSXV: GPH) (OTCQX: GPHOF) has announced that its subsidiary, Graphite One Products Inc., has signed a technology license agreement and a consulting agreement with Hunan Chenyu Fuji New Energy Technology Co. , a Chinese Anode Active Material (AAM) manufacturer. These agreements provide exclusive access to AAM technology for the North American market, marking a important step in creating a domestic U.S. supply chain for advanced graphite materials.

The agreements include:

• An exclusive license for AAM technologies in exchange for royalties
• Consulting services for designing, constructing, and operating an Ohio AAM plant
• Rights of first negotiation for next-generation products and additional markets

Graphite One plans to construct a commercial AAM facility in Warren, Ohio, subject to financing. The company views these agreements as critical for bringing leading AAM manufacturing technology to the U.S. domestic supply chain for battery materials.

Positive

• Exclusive license for AAM technologies in North America
• Access to critical AAM technology from an experienced supplier
• Planned construction of a commercial AAM facility in Ohio
• Right of first negotiation for next-generation AAM technology
• Potential expansion into European, UK, and Saudi Arabian markets

Negative

• Agreements subject to termination if certain conditions not met by July 31, 2025
• Royalty payments required on net revenues from AAM product sales
• Construction of Ohio facility subject to financing

Insights

Technology Analyst

The agreement between Graphite One and Chenyu marks a significant milestone in the U.S. battery materials supply chain. By securing exclusive access to advanced Anode Active Material (AAM) technology, Graphite One positions itself as a potential key player in the domestic EV battery market.

This move addresses a critical gap in the U.S. supply chain, as there is currently zero commercialization of synthetic anode battery materials domestically. The technology transfer could accelerate Graphite One's entry into the market, potentially giving it a competitive advantage in a rapidly evolving industry.

The structure of the agreement, involving royalties and milestone-based fees, aligns Chenyu's interests with Graphite One's success. The right of first negotiation for next-generation products and additional markets could provide long-term strategic value. However, the July 2025 deadline for hiring an engineering firm adds pressure to secure financing and move forward with the Ohio plant quickly.

Investors should monitor Graphite One's progress in meeting milestones and its ability to capitalize on this technology to establish a strong market position in the growing EV battery supply chain.

Financial Analyst

This agreement represents a potentially transformative opportunity for Graphite One, but it comes with significant financial implications and risks. The company will need to secure substantial funding to build the Ohio AAM facility and meet the contractual milestones.

The royalty structure on net revenues from AAM product sales could impact profitability, but it also aligns Chenyu's interests with Graphite One's success. The milestone-based fees for plant development add to upfront costs but provide valuable expertise.

Investors should consider:

• Capital requirements for the Ohio plant and potential dilution
• Timeline for revenue generation and break-even point
• Market demand projections for AAM in North America
• Competitive landscape and potential barriers to entry

While the agreement offers significant potential, Graphite One's ability to execute and achieve commercial success remains uncertain. The July 2025 deadline adds urgency to secure financing and begin development, which could pressure the company's financial position in the near term.

Execution of the Graphite One-Chenyu Agreements marks key step in providing the knowledge base for U.S. Anode Active Material ("AAM") manufacturing at G1's planned Ohio AAM facility

Leading AAM manufacturer grants exclusive license to the North American market

Graphite One announces grant of long-term incentive awards

VANCOUVER, BC, Oct. 21, 2024 /PRNewswire/ - Graphite One Inc. (TSXV: GPH) (OTCQX: GPHOF) ("Graphite One", "G1" or the "Company"), planning a complete domestic U.S. supply chain for advanced graphite materials, announced today that Graphite One Products Inc., an indirect, wholly owned subsidiary of G1 incorporated in Delaware, has signed a technology license agreement and a consulting agreement (collectively, the "Agreements") with Hunan Chenyu Fuji New Energy Technology Co. Ltd. ("Chenyu"), an Anode Active Material ("AAM") manufacturer headquartered in Changsha City, China that currently supplies qualified AAM to lithium-ion battery producers. The Agreements are an important milestone for G1 in bringing leading technology in AAM manufacturing to the U.S. domestic supply chain for battery materials.

"The United States has zero commercialization of synthetic anode battery materials. The execution of these Agreements represents a critical step in creating domestic supply for the lithium-ion battery materials," said Anthony Huston, CEO of Graphite One. "Supplying proven products to the North American battery material supply chain will give G1 a competitive edge by allowing rapid entry into a market where technology is developing quickly." 

The Agreements give G1 access to critical AAM technology from an experienced AAM supplier to major battery manufacturers on a commercial basis. AAM technology is evolving rapidly as battery makers require fast charging, high density, and long-life battery specifications and G1 expects to keep pace with this advancement.

The Agreements are strictly fee-for-services arrangements, and provide no direct or indirect equity in G1, no representation in the management or Boards of Directors of G1 or any of its affiliates, and no direct or indirect rights to control the projects of G1 or any of its affiliates. It is noteworthy that technical license agreements have been used for EV battery development by such companies as General Motors¹ (NYSE: GM) and Ford.² (NYSE: F).

________________________

1 https://www.bnnbloomberg.ca/investing/commodities/2024/09/12/gm-in-talks-to-buy-chinese-batteries-made-in-us-by-japans-tdk/

2 https://media.ford.com/content/fordmedia/fna/us/en/news/2023/02/13/ford-taps-michigan-for-new-lfp-battery-plant--new-battery-chemis.html

Subject to financing, G1 is planning to construct a commercial AAM facility using this technology at its Warren, Ohio property.

The Chenyu Agreements include:

1. Technology License Agreement: Chenyu grants an exclusive license to certain AAM technologies in return for the payment of royalties applied to net revenues received by G1 from the sale in each calendar quarter of AAM products manufactured using the technology;
2. Consulting Agreement: Chenyu will provide:
        a.    Advice and guidance in designing, constructing, commissioning and operating the Ohio AAM plant in return for the payment by G1 of milestone fees which track events progressing from the commencement of work on the plant by hiring an engineering, procurement and construction management firm through ultimately to G1 successfully qualifying licensed products manufactured at the plant with a U.S. customer.
        b.    Consulting and advisory services as requested based on individual statements of work for agreed upon fees.
3. Other contractual provisions:
        a.    Right of First Negotiation for Next Generation Products: Chenyu agrees to offer G1 advanced, next-generation AAM technology prior to offering it to other AAM manufacturers in North America; and
        b.    Right of First Negotiation for Additional Markets: Chenyu agrees to offer G1 the right to license Chenyu's AAM technology in Europe, the United Kingdom and the Kingdom of Saudi Arabia before offering it to other AAM manufacturers.

Chenyu reserves the right to terminate both the Technology License Agreement and the Consulting Agreement for convenience if G1 has not hired an engineering, procurement and construction management firm to assist with the design of the Ohio AAM plant by July 31, 2025. Termination of either of the Agreements by Chenyu if G1 does not meet these conditions automatically terminates the other agreement.

In anticipation of its manufacturing developments in Ohio, G1 has completed an internal corporate reorganization, adding indirect, wholly owned U.S. subsidiaries, including Graphite One Products Inc.

Copies of the Agreements will be filed under G1's SEDAR+ profile at https://www.sedarplus.ca.

About Chenyu

Founded in 2019, Chenyu is a high-tech company specializing in R&D, production, sales and professional services of lithium-ion battery materials including artificial graphite anode, natural graphite anode, silicon carbon anode materials and waste battery recycling. The company currently has five production facilities and an R&D center.

Dr. Zhou Xiangyang, a professor and doctoral supervisor at Central South University in Changsha, China will guide Chenyu's experienced project team providing work under the Agreements. He is a member of several professional organizations in the United States and a recognized expert in battery materials' science. Dr. Xiangyang has published more than 100 professional papers and obtained more than 100 patents. He has successfully developed products for global battery companies and will advise Graphite One's commercial program.

Grant of Long-Term Incentive Awards

The Company announces that the board of directors has approved a grant effective October 21, 2024 of the remaining 1,215,778 performances share units ("PSUs") to senior management pursuant to the terms of the Company's Omnibus Plan. The grant of these PSUs was previously disclosed in the Company's March 20, 2024 press release Link. It was subject to receipt of the approval of shareholders to increase the number of common shares available under the Omnibus Plan and the approval from the TSX Venture Exchange, both approvals have now been received.

Each PSU will convert into one common share of the Company on the March 19, 2027 vest date subject to the achievement of certain corporate share price performance criteria. Further details regarding the Omnibus Plan are set out in the management information circular of the Company dated May 15, 2024, which is available on the Company's website at www.graphiteoneinc.com or on SEDAR+ at www.sedarplus.ca.

Following the above noted grant of PSUs, the Company has 138,969,294 common shares issued and outstanding, 6,833,151 restricted share units and 3,200,436 performance share units issued and outstanding under the Company's Omnibus Plan.

Graphite One's Domestic Supply Chain Strategy

With the United States almost 100 percent import dependent for anode active materials, Graphite One is developing a complete U.S.-based, advanced graphite supply chain solution anchored by the Graphite Creek deposit, recognized by the US Geological Survey as the largest graphite deposit in the U.S. "and among the largest in the world." The Graphite One Project plan includes an advanced graphite material and battery anode material manufacturing plant located in Warren, Ohio. The plan also includes a recycling facility to reclaim graphite and the other battery materials, to be co-located at the Ohio site, the third link in Graphite One's circular economy strategy. The building of these facilities remains subject to financing.

About Graphite One Inc.

GRAPHITE ONE INC. continues to develop its Graphite One Project (the "Project") to become an American producer of high-grade anode materials that is integrated with a domestic graphite resource. The Project is proposed as a vertically integrated enterprise to mine, process and manufacture anode active materials primarily for the lithium‐ion electric vehicle battery market. As set forth in the Company's 2022 Pre-Feasibility Study, graphite mineralization mined from the Company's Graphite Creek Property, situated on the Seward Peninsula about 60 kilometers north of Nome, Alaska, would be processed into concentrate at an adjacent processing plant. Natural and artificial graphite anode active materials and other value‐added graphite products would be manufactured from the concentrate and other materials at Graphite One's proposed advanced graphite materials manufacturing facility expected to be located in Warren, Ohio. The Company intends to make a production decision on the Project upon completion of its Feasibility Study, expected in Q1 2025.

On Behalf of the Board of Directors

"Anthony Huston" (signed)

For more information on Graphite One Inc., please visit the Company's website, www.GraphiteOneInc.com. 

On X (formerly Twitter) @GraphiteOne

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

All statements in this release, other than statements of historical facts, including those related to the timing and completion of the anticipated Feasibility Study, future production, establishment of a processing plant and a graphite manufacturing plant, establishment of a battery materials recycling facility, and events or developments that the Company intends, expects, plans, or proposes are forward-looking statements. Generally, forward‐looking information can be identified by the use of forward‐looking terminology such as "proposes", "expects", "is expected", "scheduled", "estimates", "projects", "plans", "is planning", "intends", "assumes", "believes", "indicates", "to be" or variations of such words and phrases that state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". The Company cautions that there is no certainty that tests of the Company's material will be successful or that such tests will result in the development of successful products. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continuity of mineralization, uncertainties related to the ability to obtain necessary permits, licenses and title and delays due to third party opposition, changes in government policies regarding mining and natural resource exploration and exploitation, and continued availability of capital and financing, and general economic, market or business conditions. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this press release, and the Company undertakes no obligation to update publicly or revise any forward-looking information, except as required by applicable securities laws. For more information on the Company, investors should review the Company's continuous disclosure filings that are available at www.sedarplus.ca.

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SOURCE Graphite One Inc.

FAQ

What agreements did Graphite One (GPHOF) sign with Chenyu?

Graphite One signed a technology license agreement and a consulting agreement with Hunan Chenyu Fuji New Energy Technology Co. , providing exclusive access to Anode Active Material (AAM) technology for the North American market.

Where does Graphite One (GPHOF) plan to construct its AAM facility?

Graphite One plans to construct a commercial AAM facility in Warren, Ohio, subject to financing.

What rights does the agreement with Chenyu give Graphite One (GPHOF)?

The agreement gives Graphite One exclusive license to certain AAM technologies in North America, consulting services for plant development, and rights of first negotiation for next-generation products and additional markets.

What is the significance of these agreements for Graphite One (GPHOF)?

These agreements are important for bringing leading AAM manufacturing technology to the U.S. domestic supply chain for battery materials, potentially giving Graphite One a competitive edge in the rapidly evolving battery market.