China deal a 'game changer' for Triton as graphite demand grows
Triton said earlier this month its Mozambique graphite can be expanded up to 1000 times. Photo: Rama
Triton Minerals chief executive Brad Boyle said the company's $US2 billion offtake agreement puts the junior explorer in a strong position to benefit from increased demand for expanded graphite.
The Perth-based explorer announced on Wednesday it had signed a 20-year deal with Chinese graphite player Yichang Xincheng Graphite Co. Shares in Triton close to doubled before closing up 20¢ or 60 per cent at 53.5¢. Some of these gains started to fall off in Thursday morning trade. By 11.30am Triton was down 11¢ or 21 per cent to $42.5¢.
The agreement will net the company at least $US2 billion revenue over two decades, delivering 100,000 tonnes of its Mozambique graphite concentrate a year at a minimum sale price of $US1000 a tonne. The price will be determined by the market, Mr Boyle said, with the price clause a "protective floor".
But Mr Boyle believes the company shouldn't have to worry about a decline in prices from current levels of around $US1500 a tonne due to one of what he called "the key growth areas" – expanded graphite.
If graphite possesses the necessary physical properties it can be expanded by immersing the concentrate in a bath of chromic acid, then concentrated sulfuric acid. Expanded graphite is used in a variety of heat-resistant applications and Mr Boyle said he understood the Chinese government was planning to mandate the use of expanded graphite in insulation.
"I haven't seen the mandate but I have heard this is coming into force, probably July this year, where insulation has to use 10 per cent expanded graphite and if that is the case, imagine the size of the market," Mr Boyle said.
"Regardless, our offtake partners favoured our product because of its physical features. They see a genuine massive increase in demand from technology suppliers but they also see that if this insulation requirement does get mandated then that is going to have a huge impact on their ability to service a very large market in China."
Yichang Xincheng Graphite Co has specialised in expanded graphite products for 20 years and is the largest private producer of expanded graphite products in China. Triton said earlier this month its Mozambique graphite can be expanded up to 1000 times.
GMP Securities analyst Duncan Hughes said the deal with Yinchang was a "game changer" for Triton.
"We have long stated that binding offtake, once achieved, will significantly de-risk the project as it provides confidence of a market in a sector where future supply will outpace current demand," Mr Hughes said.
"The quantity and longevity of the offtake agreement is substantial and represents half the annual production modelled in Triton's recent scoping study. The size and term of this contract also indicates that the markets may be underestimating the actual size of the traditional and new graphite market demand."
PAC Partners analyst Andrew Schearer said he saw strong potential for expanded graphite demand growth.
"Today's [Wednesday's] announcement has the potential to open up a whole new graphite sector for Triton," he said.
"Electric vehicles are still in the early adaption stage and have not yet entered the mainstream whereas something like expanded graphite has potential to enter mainstream industrial consumption and increase its market share of overall graphite demand. Other graphite miners, including Kibaran Resources, are looking into the sector as well."
Mr Boyle said Triton's partnership with Netherlands-based AMG Advanced Metallurgical Group announced earlier this week could assist in rapidly developing the company's projects if it can prove a substantial resource at the Ancuabe project.
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TON Price at posting:
34.0¢ Sentiment: Buy Disclosure: Held
