Very good report, with some new tasty information. We learned from the latest BSM news release that Graphmada graphite mine produced 1500tpa of graphite in 2015. The patterson report is providing us with new important information, particularly that Graphmada mine is now achieving 3000tpa and 60% recovery throughput and Bass intends to upgrade the mine to 6000tpa and 85% recovery.
So not only the increased production rate will decrease average costs per tonne but higher recovery rates will also contribute to decreasing costs.
The flake distribution is simply out of this world (65% large and jumbo flake, and only 35% medium and small flakes, extremely impressive, currently at 94% purity), which explains why they succeeded in getting Asbury Carbon on board to buy their product. Large flakes command a premium in the market and they are and difficult to achieve by graphite producers.
The capital requirement to get the plant up to 6000tpa, 85% recovery is so small, only 1.5M$. But the more impressive number is the low capital requirement to build the new 12.000tpa plant with up to 96% purity : only 4.5M$ (in 18 months) ! If successful, the new plant could be a game changer for the company.
"It is expected that the additional plant would dramatically reduce total operating costs from US$249/t to US$211/t, and total costs from US$432/t to US$331/t." This would simply make Graphmada not only the lowest cost producer of graphite in the world, but also the most profitable producer with out of this world margins, with one of the highest purity (96%) and best flakes distribution that could be sold at 1500$+ per tonne.
Finally : "Management hold the view that a staged expansion in production capacity to be the prudent approach, given market dynamics. The current planned expansion from 6,000tpa of production capacity to 18,000tpa (with the Mahefadok processing plant), could be expanded again at some point in the future to 30,000tpa, dependent on market demand for its products."
It is understandable why the market got excited yesterday after reading the patterson report.
BSM Price at posting:
1.4¢ Sentiment: Buy Disclosure: Held
