The company: Talga is an Australian company, operating in northern Sweden. Talga owns 3 mining areas for the largest and highest grade graphite flake outside of China. Talga is vertically integrated natural graphite miner to battery anode producer. Talga would parnter with LKAB, a Swedish government controlled mining company to run the mines and Mitsui to provide mashines, distribution networks and CapEx support. A joint venture between the three is in negotiation [1, 2].
The product: Talga produces Talnode-C and develops Talnode-Si. Talnode-C is a pure graphite battery anode, -Si also has a silicon component. Its quality and consistency is comparable to synthetic anode [3] and vastly supperior to natural graphite from China. Talga owns the entire value chain from mine to anode and are engaged with about 50 customers, 11 of which are EV OEMs that are currently testing the product [4]. Talgas anode is the greenest on the planet, with electric mining planned and hydro power for the processing. Its CO2 footprint is less than 5% compared to anode from china [5]. Based on the recent Vittangi DFS [7], Talga filed for mining permits and expects a result early 2021 [6]. In the meantime, they have a trail mine permit [9] to mine 25000 t of graphite ore and a pilot concentrator and refinery is under construction [12]. The material from these facilities will be used for product qualification and to ramp up battery cell factories with Talgas product.
The market: The world is transitioning to green energy and batteries are a necessary component in both transport and stationary energy storage. The market for battery anode will expand by a factor of 20 by 2030 or more [10]. Europe does not want to rely on China for batteries to avoid an oil type dependency. Talga is the only potential producer with enough volume, its a one-horse race in Europe. Additionally, Europe will throttle battery imports in an attempt to limit CO2 footprint [11]. Both Northvolt and Tesla have stated they want to source battery material locally in Europe.
Production: Talga plans to produce 19.5 ktpa (kilo-tone per annum) Talnode-C by 2024/25 [7] sourced from its current Vittangi mining project with potential of 100 ktpa Talnode-C with an expansion from Niska South [8] by 2026. Talnode-C would be sold for about $12k [7], with production costs around $4k, and a profit of $8k per tonne. Implying a total profit of $800M per year, or about $2 per share, assuming a 1/3rd further offering in shares. Assuming a P/E ratio of 10, this would imply a company valuation of $8B, or about 20 times its current valuation of about $400M. The CapEx of building the mine, concentrator and refinery for Vittangi will be around $400M [7] and extrapolated $2B including the Niska expansion. The market would easily support 2 or 3 times this production in 2025. By 2030, the market could support 1 to 2 Mtpa Talnode-C/Si.
Catalysts and Risks: * Resource drilling under way and could expand Talgas JORC resource 10-fold. First results expected Q4 2021. * JV announcement or delay by end of November* Mining permits due early 2022. Risk of rejection. * Car OEM offtake agreements could hit any time* Potential US listing as Talga seems to be preparing for this step * Due to its low share price, there is a risk of a hostile takeover, no evidence for that however. * Talga has a unique graphene production line as a byproduct of the anode production. Economics and products unknown at this stage. * Everything about Talga sounds too good to be true.
References: [1] LOI LKAB and Mitsui: https://www.talgagroup.com/irm/PDF/1ab1c4a5-3f08-4120-8103-700d42467233/StateownedgiantLKABJoinsMitsuiinTalgaAnodeProject
[2] LOI extension LKAB and Mitsui: https://www.talgagroup.com/irm/PDF/0cbc48d7-7c1f-4df3-9cca-a07bcf0b79ad/LKABAndMitsuiSignLOIExtensionWithTalga
[10] Europe battery production study: https://www.fleeteurope.com/en/new-energies/europe/features/how-europe-aims-achieve-battery-independence-china?a=FJA05&t%5B0%5D=battery%20production&t%5B1%5D=Gigafactory&curl=1
[11] EU import to tax on CO2: https://sdg.iisd.org/commentary/policy-briefs/eu-unveils-planned-carbon-tax-on-imports-amid-u-s-japanese-concerns/
[12] EVA plant announcement: https://www.talgagroup.com/irm/PDF/6f9b1552-4f3c-492e-b71c-8d11c31ebe45/TalgaProgressesEVAnodePlant
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