Hi Graphite, many thanks for your thoughtful, informed and balanced comments.
Your point on the effect of a change in market price is a very important, and current, issue here. Many people here do not realize that the "binding offtake agreements" which have been signed so far, are agreements which are binding on the amount to be delivered, but not binding on the price to be paid. Great stuff if you are the buyer, but maybe not nearly so good if you are trying to sell your graphite production.
The issue of how large a market is represented by each of the major new applications - aluminium anodes, Li-ion batteries, and steel/iron recarburisers - remains open, to some extent at least. For compamies which can produce, concentrate, and ship 97% grade to Europe, China or US, for about US$300 per tonne, all of these are likely to be profitable opportunities. Not all companies are ignorant of their true mining, flotation and transport costs. Graphite mining may have been an art in the past, but the new mines are going to be an order of magnitude larger, and will be limited by the solutions to engineering problems, not by the artistic skills of their operators. Orebodies 100m or more in thickness, outcropping at the surface, and with strike lengths measured in kilometres, do not call for clever extraction from tiny lenses of ore that pinch in and out.
Your point on management is an excellent one, with which I completely agree. To date, of the significant Australian graphite miners, only SYR has seriously recruited, and put in place, a qualified and experienced team of production and marketing personnel. The production staff includes people with many years experience operating in Africa - a strength which, so far, has enabled them to achieve their published target dates. This has given them an edge which has not been understood or appreciated by most of the contributors to HotCopper.
Ease of financing is a complex issue. But it is clearly easier if a company has:
- A capex requirement less than one fifth of their market cap
- Major international banks as significant shareholders
- Lowest production cost in the world
- Very large reserves, with sufficient at 18% graphite, and higher, to provide for several decades of production without needing to consider lower grades
- Good infrastructure, with grid power, water, significant labour force, good road access to port, and port facilities all in place
- Formal government Mining Licence received
- Current MOUs for >200K tonnes graphite per year
Does this combination describe a company which is, in your view, likely to become a successful producer?
