Undiluted market cap is 75 million. As can be seen shares are 377 million shares. Options and performance rights are around 10% more at around 38 million. So taking around 10% more for dilution, we get diluted market cap of some 82-83 million.
I'm still here and haven't gone anywhere. I have not been commenting much lately because I feel kind of silly telling people that TON has great prospects to be a good investment at this market cap.It should be self evident, and if anyone can't understand that, then, these are not the investors that I would like to attract to TON. Obviously, TON would be on the insto radar at this market cap.
Considering the fact that one super pit peer has diluted market cap of around $ 800 million and another has diluted market cap of around AUD 200 million (although it has fallen dramatically since the high a few months back), TON is still dirt cheap and requires no further commenting.
Peer analysis for me is FA 101. I like TON not just because it is has IMO the best fundamentals but also because it is most undervalued compared to peers which IMO gives the best risk – reward ratio
Nice pic showing the various projects and infrastructure. Further info on Pg 7 showing the main facts of the 2 main projects –
a) Nicanda Hill - world’s largest graphite deposit. Note that not only is it the world’s largest but also has high grade at 10.7% TGC
b) Ancuabe – world’s best graphite floatation characteristics. Great comment from @Pauldola today as always, in which he described Ancuabe graphite as the holy grail of graphite.
So, the company which has 2 of the world’s best graphite deposits is currently valued at something like just AUD 80 million.Obviously, in time, sanity will return to the share price.
3) Different from other graphite companies (PG 5)
TON shows in its objectives and development strategy how it is very different from the other graphite companies
a) Unlike others, we are seeking near term revenue streams through our alliances with AMG and YXGC
We have a very long term binding offtake (20 years)
b) We are dealing with one of the most respected graphite companies AMG and a pure graphiteer YXGC
c) Access to patented technology, infrastructure and expertise through our dealings and alliances with respected graphite companies – very important difference compared to other graphite companies which have no experienced graphite experts in their midst.
d) Access to established global network of diverse off-take customers and clients through alliances with above graphite companies - AMG is very prestigious and YXGC too have an existing network in China and several other countries. Again, other graphite companies have neither of these
e) Access into building, energy, automotive & technology growth sectors – Once more, through our associations with AMG and YXGC, we have potential access in so many sectors which other graphite companies would not even have considered and are laying all their hopes on the battery hype, which is just one avenue of growth for us. Superb to see that we barely even mentioned batteries in our presentation, showing how different TON is as compared to all other graphite companies.
f) Minimise capex and scaled production – TON has very wisely decided to scale up production gradually according to market demand and offtakes. It makes little sense to go in for 300,000 tonnes of production if there is no offtake to support it. TON still remains a super pit and can always dramatically increase production once we have later cash and funding, commodities recover, YXGC grows, graphite demand increases with battery demand, etc.
Think in terms of Saudi and oil. Whether Saudi increases or decreases production dramatically, it still has its massive oil reserves and is the undisputed king of oil. Similarly, whether TON increases or decreases production, it still has the world’s largest graphite deposit
I was considering an entire comment on scaled production last week but thought of taking a break from commenting on graphite for a while, and moved on to some other analysis of gold, oil, etc. since there were no TON announcements, in any case. I might do a comment later on scaled production, as it really deserves an entire detailed comment
4) Scaled up growth (Pg 6)
Pic shows how we are going to start small and gradually grow more and more each year. As can be seen, we’ll be starting with out top quality graphite of P66 and Ancuabe T12. This has again been mentioned on Pg 8 where they mentioned that these 2 deposits would have initial focus. Some questions were recently asked about why TON is bothering with these 2 deposits, defining further resources, etc. despite having the world's largest deposit As can be seen, it is all part of a much bigger plan, with initial focus on these jumbo flake deposits. I elaborated a little more in my last comment on TON before today as to how each resource and each project will make more sense when one makes a better attempt to understand TON from an overall view rather than seeing TON’s individual parts in isolation.Again, nothing is set in stone, and there will obviously be changes along the way, if the situation requires it. http://hotcopper.com.au/threads/dfs-delay-pros-and-cons.2618858/page-41?post_id=16216342
YXGC incentive in dealing with TON as we scale up production: YXGC thus have a massive incentive to continue their dealing with TON as it seems they would be getting our finest quality graphite. I’ve seen some comments on other graphite companies forums as to how because some other Chinese offtakes are having problems, it automatically means that TON will have problems. Those points don’t make any sense to me as they clearly don’t take into consideration the massive benefits that YXGC is also getting by dealing with TON and growing together with TON, in the years to come, and YXGC has massive incentive to have a long term relationship with TON.
Pg 23 lists down many benefits for YXGC including premium graphite, guaranteed long term supply of top quality graphite, potential new products to replace established markets like asbestos, etc. TON and YXGC are the best match to ensure both can grow. Also TON is not dependent on just jumbo flake and top prices and has a full range of graphite flake sizes, and is thus not just reliant on hoping for jumbo flake to reach astronomical values, for it to succeed.
5) Differentiating points (Pg 7)
All points show how TON is completely different and unique from other graphite companies – we have not one but 2 of the world’s best graphite deposits, potential near term (2016) revenue stream and guarantee not only long term supply but supply of premium quality graphite
6) Low capex (Pg 8)
It is so important to see how little capex is really needed in our initial stage which gives me a lot of hope that TON will manage to secure a lot of debt funding. TON is not making claims of producing 300 tonnes without any offtaker; thus our DFS will reflect our current state based on current offtakes based on current graphite market conditions.This does not mean that debt funding is guaranteed but it should be obvious that any lender has low risk in recovering its loan, as capex and the loan should be recovered quickly. Any funds from initial revenue streams could also used towards paying back loans and / or keeping a cash buffer.
7) Low opex (Pg 8)
I mentioned long ago that in case graphite goes into oversupply, then low costs would be key http://hotcopper.com.au/threads/graphite-oversupply-leading-to-price-crash.2550716/?post_id=15609422 At USD 350/t FOB to Pemba, TON is still going to be one of the lowest cost producers out there.
IMO, low costs are going to be one of the key areas in the coming years
Important also to note that TON is not going to flood the world with graphite in a non existent market with no offtakes. So, maybe graphite itself might not go into an oversupply if all the other graphite super pits do the same, which IMO, they most likely will. It does not make sense to me that any of the super pits will produce more than they can sell.
8) Staged development in sync with ground realities (Pg 8)
I’ve already mentioned earlier as to how TON is not attempting to do anything crazy like produce 300 tonnes with no offtakes but is producing according to offtakes like I mentioned earlier.
Again, its later Moz factory JV is also in line with Moz government aspirations, as I’ve discussed in the Moz Jv analysis earlier
TON again shows how it will focus on lower production of graphite from Nicanda P66/ 100 (50-80000 tonnes) with generator power and will ramp up in later years when grid power becomes available.
It seems a lot of focus will be given on Ancuabe production initially, as grid power is available immediately.
In coming few months, a lot of things will be clear with Ancuabe once our resource is defined, potential strengthening of alliance with AMG, etc.
9) High grade zones (Pg 20)
As can be seen we have several higher grade zones. Note that TON’s grade is already one of the best among the ASX graphiteers even at 10.7% TGC. Better grade means reduced mining costs and as can be seen, we have higher grade zones too
10) Recent price falls
Just a short note on recent price falls. I'm not a TA guy but I do try to read charts and apply basic common sense.
Many falls each day were just half cent falls. Most of those falls were just "bot" created falls of very low meaningless volumes.
Price might be falling a bit last month but volume is falling too https://au.finance.yahoo.com/echarts?s=ton.ax
Volume itself can’t be seen in isolation. Higher volume could also mean new investors and new buying. A quick look for example at today’s chart shows the highest volume bar at 13:46 taking price to 20.5 cents (higher rate than the closing value, which is a good thing).
This does not mean that price can’t fall but like we’ve always said – investors aren’t selling. The top 20 is still mostly the same. The TON regulars on HC with their great comments, are still the same.
11) Conclusion
Not much more to say folks. Happy with the direction that TON is taking.
Lots more potential good news to come as I mentioned in the analysis of the last presentation.
TON is in a great position to sell itself to instos at this dirt cheap market cap and obviously TON would be on the radar of several instos. TON needs to continue giving a lot of priority to this at this stage, and take full advantage of the low market cap to sell itself.When the insto big boys have had their fill, IMO TON would be marked up automatically as it moves on ahead, and ticks off more boxes.
Cheers
TON Price at posting:
20.0¢ Sentiment: Buy Disclosure: Held
Obviously, in time, sanity will return to the share price.
(20min delay)