The met results announcement might have been expected, but in...

The met results announcement might have been expected, but in terms of the FA, the content of the announcement wasn't really expected, as the broader expectation would have been for confirmation of the previous results. This announcement is both a confirmation and an improvement on previous results. Overall average flake distribution has improved from when the initial scoping study was undertaken on the then preliminary results. Some key points:

- Flake distribution improved, with less of the "unsaleable" stuff. This then flows into:
- Basket price improvement. We need to bear in mind that KNL is still working off one of the most conservative (and more realistic) flake price distributions. A number of other ASX graphite companies have posited higher basket prices (than KNL) even though they have worse flake distribution and worse purity.
- KNL is also going to be one of (if not the first) the first ASX companies to release a detailed BFS that is actually going to be a robust document that will satisfy lenders (in the next 6 weeks or so). Most other companies haven't even done enough drill holes to get the level of knowledge required for their BFS, and are well behind the 8 ball in terms of planning to produce. (I could add that many other graphite companies don't actually have a plan to produce, as they their actions indicate they are planning to drill and drill and hope someone comes along and buy them, so that the boards don't actually have to do any real hard work of planning for production, but that's a whole other subject).
- Something I hadn't really seriously investigated previously is the AUD/USD impact. Initial studies and feasibilities done a couple of years ago would have had AUD/USD at higher levels than now, including my own. I'd suggest that the AUD/USD is going to remain at lower levels than previously assumed, and this will flow into a significantly better bottom line.
- "KNL ... is pleased to provide the final flotation results from the current Bankable Feasibility Study (BFS) testwork program." Basically, the BFS is done. The company will review, and review again, but the official announcements (as opposed to rumour and conjecture) indicates that a material improvement of the feasibility will be shown in the BFS.

We've got some good announcements coming up to get Epanko into production, and in my last discussion with management I note that every one of these remains on track:

- Mining licence application. Environmental is all complete, and the final box of the full mining application is expected to be issued in the near future (I'd expect this before the BFS).
- TK off-take conversion. This is all but complete from KNL's and TK's viewpoint, but my understanding is that there are a few legal jurisdictions that need to be satisfied in relation to EU trade requirements. This has been time consuming from our point of view, because it's a box that needs to be ticked, but it's not a material concern for either KNL or TK (think of our ACCC assessing ALDI or LIDL coming into Oz Market. They'll want the right paperwork and procedures followed, but they won't be putting up any serious roadblocks to new supply coming into the market that isn't already controlled by a major conglomerate).
- BFS - As mentioned, it's basically finished from a technical information gathering point of view, and it's just about finalising the model and numbers. Irrespective of the final numbers, they are going to be better than the scoping study, so the deposit has been proved to be not only economically viable, but extremely profitable.
- Finance - my discussions with management indicate all is well on track in this (most important) aspect. While the finance is obviously waiting on the BFS, I understand that the work with the lender and TK has been extremely positive, and our finance is likely on a better basis than initially envisaged, and this also flows back into a better BFS number too. I expect the finance announcement to flow fairly promptly after the BFS.
- Finally, I asked the direct question of whether we are on track to order equipment (after finance, of course) and make sure we are in production next year, and the most emphatic answer was "yes".

KNL will be one of a very select few global (not just ASX) companies that will actually get into production, with a buyer to take it's product. There is only one other ASX graphite company that can beat us, and it's highly unlikely to do so. Let's call it the perils of dealing with non-genuine and non-European buyers....