An overview

It has been an interesting few days. So let us consider how we arrived where we are and whether we need we need to change our perception of TLG and its path ahead, and therefore whether the reassessment of the whole investment proposition still makes TLG a valid and viable proposal.

I will stick to recent events in the interests of brevity. The Limiting Factor blog on TLG, particularly after its analysis of NVX, got every body's attention. How do I know this? The simple fact that trading volume over the counter in the US and on the Frankfurt Stock exchange took off, not hitting the bid relentlessly in an effort to subdue the share price, but rather hitting the offer at whatever level leaving market makers to scramble to meet the demand. Where would those market makers source stock? They would do so mainly on the Australian ASX and in the Singapore market to some extent. The share price jumped outside trading hours. The situation was further exacerbated when the spurious limiting sell orders all vanished into thin air. I suspect that TLG would have been talking with institutional investors over the last few weeks since the release of the quarterly cash flow report at the end of July 2020, which clearly showed that more equity would be required to bridge the gap to meet the new deadlines now out to 2021. Those institutional investors would have applied pressure on TLG to have a trading halt so that the VWAP would not run away from them. Had I been one of those investments managers, that is exactly what I would do, deal now or the money is off the table.

Let us now assess whether the investment proposal still stands. We know from company announcements that TLG have strong interest for 300% of the production volume in the Pre Feasibility Study announced last year. TLG has demonstrated that it is able to deliver tonnage. How do we know this? The JV with Mitsui & Co of Japan tells us that the financing of the plant is all but in the bag, Mitsui would not want its name associated with a small cap like TLG unless it felt it could deliver. I have looked at the most recent investor presentation released today and two things stand out. The first is that immediate demand from 2023 is now looking like 200,000 tons of anode product and counting. The second is that the example of EV battery used to illustrate the graphite anode component is a TESLA cell. One might argue that this is all circumstantial evidence, except that the number of proposed giga factories in Europe continues to grow and that the Europeans are very much focussed on the clean green aspect of the product. The proposed production facility in Sweden ticks all the boxes on the environmental foot print compared with alternatives whether it be synthetic material out of China or natural material out of East Africa, which are looking more and more like stranded assets with poor recoverability. Elon Musk has also made clear the modus operandi of TESLA is to focus on product quality to maintain a strong competitive advantage. Moreover German car manufacturers like VW and Mercedes among others will not want a repeat of the disastrous diesel emissions manipulation scandal. The Swedish Government has recognised the importance of the Vitangi deposit by granting it a project of strategic national importance. TLG has mentioned that some of the funds will be used for additional drilling. This might well confirm that all the deposits at Vitangi are linked. This cannot be stated by the company unless they have drill results to back it up. I would also assume they would extent the depth of those exploration efforts whilst they were at it. TLG have done this before and it is how they discover the Kiska deposit.

Let us now turn our attention to whether TLG has in fact met deadlines. Clearly it has not as the date for the DFS is now first quarter 2021. How can this be explained? My assessment is that the stage 1 and stage 2 production timelines have now been merged and that in fact much more material is now going to be required, hence the additional drilling. What about the lack of any formal takeoff agreement? TLG are a small cap who are dealing with multinational corporations, who invariably feel they hold all the cards. How would such an organisation deal with an emerging company like TLG? I suspect that they would want to lock in very long term supply agreements at current prices. Normally the smaller company may agree to this as it might suddenly find itself competing with an alternative supplier. As has been discussed above there is no alternative supplier that meets the environmental and cost advantages that TLG enjoys. A Mexican standoff is currently playing out until one of the end users blinks and signs on the dotted line at which point there will be a stampede among its competitors to secure there own needs. Every week that goes by strengthens TLG's position as the cost of delay increases the regulatory cost of internal combustion engines. How do I know this? An analysis of TESLA's consistent profitability shows that a considerable proportion of those profits are from credits it sells to other manufacturers.

Finally, what about the small retail shareholder? I count myself among them. We had an opportunity in the last 12 months to participate at $ 0.44. Moreover there has been ample opportunity to load up at levels half that during the pandemic panic, and also at levels below the current issue price of $ 0.50 in the last few weeks or so.

This assessment is my own view of where we are and is not a recommendation so please do your own research.

I continue to hold.