Ann: Exploration and Analysis Update, page-7

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Byond_Zen

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20/08/21

19:53

Post #: 55456570
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Originally posted by J_Lamb93: ↑

There are a few issue with it.

Covid is still pretty rampant in Madagascar so they can't get their full operations team back on deck.
The infrastructure isn't in place to have the plant operating at enough capacity to meet bills. It's a while ago now but i don't remember the plant ever producing more than 1,250 tonnes in a quarter, let alone the 5,000 needed to get to the previously quoted 20,000 tpa capacity. Even at 20,000 tpa (admittedly at the lower price per tonne) it was barely enough to cover costs on paper. The money came at 40,000 tpa+ which isn't possible yet.
When they closed the plant it was running at a loss even though it was selling the stock without penalty. That was due to lower than expected graphite prices and low head grade. Both of which have improved on paper but it's a matter of seeing if that has improved enough to run profitably.

By pulling the trigger now and getting the plant going again they risk it running at a loss again and blowing their exploration budget even quicker.

Better off to continue the exploration, build the resource base, make improvements on the plant and process when possible and wait for improved graphite prices before turning it back on.

Expand

Lamb93, thank you for your considerations, points 2 and 3 make sense. It is a sensible strategy if the opex doesn't meet current graphite prices.

Only point 1 is nonsense:
Madagascar's population is over 25 million and at its peak had less than 10 deaths/day due to COVID (WHO stats). For the past two months that has been near zero. Tirupati Graphite, also based in Madagascar and LSE listed, has been producing uninterruptedly.

We investors should not allow management to hide behind the tragedy of this pandemic while collecting their fat-checks as if it is all business as usual.
GW1 Price at posting: 27.5¢ Sentiment: Sell Disclosure: Not Held
6 Upvote

1 Great analysis

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