Proactive investors extract from their equity analyst report on TON is good read...as provides an independent view on the recent offtake deal and TON's prospects which I would rather refer to than a random poster on hotcopper......first of many offtake agreements they see.....and indeed a game changer...not ramping just quoting but found it useful to read analysts view. That with Pauldola's posts helping me to become a bit more bullish on FA (knowledge is power)
Triton Minerals receives buy recommendation, A$0.90 price target
Thursday, April 02, 2015 by
Proactive Investors
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Triton Minerals receives buy recommendation, A$0.90 price target
Triton Minerals (
ASX:TON) has received a Buy recommendation with a price target of $0.90 from GMP Securities.
This is up from the previous guidance of $0.87. Shares in TON are currently trading at $0.41.
The following is an extract from the report.
Long-term offtake de-risks TON’s Mozambique Graphite Project
A 20-year, >US$2bn contract that is exclusive through East Africa with one of the world’s significant graphite players, Yichang Xincheng Graphite Co., is arguably a game changer for Triton.
We see this as the first of several offtake agreements for the company’s flexible and likely low cost Triton’s Mozambique Graphite (TMG) product.
TMG looks likely to be produced from both the world’s largest resource at Nicanda Hill and from Ancuabe where extremely coarse flake has been discovered.
Significant de-risking
This is an excellent result for Triton and a potential game changer. It almost seems too good to be true, but we take comfort from the fact that this is a binding offtake agreement
The quantity and longevity of the offtake agreement is substantial and represents half the annual production modelled in TON’s recent Scoping Study.
The size and term of this contract also indicates that the sector spectators may be under estimating the actual size of the traditional and new graphite market demand.
Competitive pricing with exclusivity in East Africa
Importantly, pricing is competitive and has a stated floor price of US$1,000/t which looks set to provide very healthy margin’s given the scoping study forecast cost of US$315/t FOB to the Port of Pemba.
Unlike many offtake agreements held by fellow East African potential developers’ Triton is not restricted in selling its TMG product to other Chinese and global offtakers as well as YXGC.
In addition, YXGC represents a well-established graphite player and is not just starting out in the sector.
Strategic Alliance may fast-track project with further synergies
A strategic alliance with an experienced graphite producer and potential offtaker will assist the development of TMG and could lead to future offtake discussions with AMG.
One of the advantages with TMG is the ability to “cherry pick” the world’s largest resource at Nicanda Hill and very coarse flake at Ancuabe to suit a wide range of customers.
AMG’s expertise and granted mining concession at Ancuabe with a small plant on site provides opportunities to fast track production at TMG.
This is a good result for Triton.
The company plans to develop a low cost and diversified product range through “cherry picking” from the world’s largest graphite resource at Nicanda Hill and very coarse flake material from Ancuabe.
GK’s and parent AMG’s experience in the sector will be very beneficial to Triton and a growing relationship with a global critical materials company that produces graphite products certainly bodes well for future development and possible offtake.
The recently signed agreement with GK at Ancuabe may well open up additional offtake opportunities, but importantly, it could also provide a more rapid pathway to production with an operational production facility and permitted mining license already in existence.
Triton looks undervalued compared to Syrah Resources
Triton’s Nicanda Hill project is adjacent to fellow ASX listed
Syrah Resources’ Balama Project. Syrah (
ASX:SYR) is currently valued 3.33x Triton on the ASX.
We compare the two companies and conclude that this market valuation seems strange given TON’s larger resource at slightly better grade graphite and vanadium, better offtake agreement, strategic alliance with AMG and the otherwise similar qualities between the two projects.
Maintain BUY with an increased price target of A$0.90/sh
We have updated our SOTP valuation on Triton. Our target price has raised A$0.03/share.
This reflects a slight reduction in our risking to NAV (from 0.55x NAV to 0.6xNAV) as a result of reduced offtake risk.
We have also factored in a minimum price of US$1,000/t for large and jumbo flake pricing. Much of the upside from today’s announcement was already factored into our model as we believed offtake achievable at TMG.
Whilst fast-tracked and coarse flake production from Ancuabe is now a possibility, this has not yet been factored into our valuation.
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