This company is the most exciting prospect in the graphite...

This company is the most exciting prospect in the graphite sphere at the moment.

I have my money on the table just waiting for the right time to jump in.

The compelling investment report by IRR Research paints quite a rosy future for the company if all goes well. This spreadsheet (produced by myself) seems to encapsulate the story they presented coming to the same conclusion of a return of A$25m per year after paying off the initial loans.

However, depending on your degree of optimism or pessimism there are a number of other combinations of realisable sale price, operating costs, production volumes, mine life and US$/A$ exchange rates that are equally prospective. I ran a few different combinations through the same spreadsheet and came up with these results. The share price calculation uses the same methodology as IRR Research.

Looking further into the likely path forward from here there have been very few new graphite mines come into operation ex China in the last decade so it is possible to quickly look at them all to see what happened in their cases from completion of construction.

Valance Industries - Uley Mine - 14ktpa - South Australia - 2016

This mine was the next great thing at the time but the processing plant never worked, about 2kt of graphite was produced but none sold and the company crashed and burned within a year. The company has since been resurrected as Quantum Graphite Limited

Syrah Resources - Balama Mine - 350ktpa - Mozambique - 2017

Syrah had a difficult time getting their mine commissioned and into production and have been through every headwind imaginable since. The mine is massively oversized and overcapitalised for the market that eventuated and is still losing money. However their market is for battery anodes, a completely different segment of the market to Walkabout so any possible comparison is probably not meaningful.

Tiriputi Graphite - Sahamana & Vatomina Mines - Madagascar - 2018/2022

With a combined production capacity of 30ktpa actual production has slowly ramped up to about 8ktpa in 2023. Whether the reasons for the shortfall are production or market related are unclear but having sufficient working capital available has been a continuing problem.

Nextsource Materials Inc - Molo Mine - 17ktpa - Madagascar - 2023

Very experienced directors and no capital availability problems for this company. All was going well until commissioning when severe bottlenecking became apparent in the processing chain necessitating a redesign and rebuild of parts of the plant. This is ongoing and commissioning is expected to restart in the next few months.

South Star Battery Metals Corp - Santa Cruz Mine - 5ktpa - Brazil - 2024

Construction is expected to be completed shortly, commissioning is yet to start so a bit early to see how they go. They got financing on the back of an off-take agreement with Graphex for their USA battery anode plant. That plant has not yet commenced construction and is unlikely to any time soon so it is unclear at the moment what South Star’s sales prospects are.

Possible Future Competition

There seems to be a prospective major competitor just up the road in Tanzania.

https://godmwangagem.com/graphite

According to USGS this company produced about 6ktpa in 2022 and 2023 so their plans represent a major expansion. They are being financed by a group of Chinese companies fronted by Shandong Sungraph Carbons Co.

https://www.linkedin.com/company/shandong-sungarf-carbons-co-ltd

There is a distinct similarity to Etablissement Gallois in Madagascar which was a similarly small operation before the Chinese took over in 2016 and it subsequently became the largest mine in the world supplying the refractory/industrial graphite market. They seem a bit confused about the actual capacity of the Kwamsisi mine even within their own website so it remains to be seen how serious they are although the early construction photos seem to suggest a rather large plant.

Disclaimer

I have limited understanding of mine geology, metallurgy, process engineering, graphite marketing or end user specifications so my ability to assess the business case here is quite limited. It has been said that more than 60% of everything written by or about graphite mining, processing and marketing companies is exaggerated or untrue so the assumption could be made that anything I contribute could fall into that category. I am very enthusiastic about Walkabout’s prospects and have my money on the table waiting to invest, however I will wait a little longer to see how things eventuate. For sure I probably won’t get in at $0.11c but I will have a little more certainty about how things are likely to pan out.