It has turned into a full time job (one that I enjoy, however) for me @chalkstar.
I’ll give it my best effort below -
Hi guys,
I’ll express some thoughts on today’s announcement. I’ll copy-paste some points straight from the announcement as always.
1) Summary
TON has done a good job again with its key highlights at the start and conclusion at end. Please read the same.
We have 4 main projects – Nicanda Hill, Ancuabe, Moz JV with YXGC and China JV with YXGC. Today’s announcement seems to be mainly focusing on the Mozambique JV with YXGC (as opposed to the China JV which we also have with YXGC).
Today’s announcement also gives us further clarity on the direction of the company. As we have discussed many times, the main thing separating TON from all other graphite companies is its vertical integration with a pure graphite specialist, YXGC. While other graphite companies are thinking of selling graphite, TON is 1 step ahead thinking of selling not just graphite but graphite products.
Today’s announcement goes even 1 step further and talks of vertical integration at the original point itself – (on site at Nicanda Hill) and talks of production of spherical graphite and enhanced graphite products at site itself, and thus is thus a value adding strategy, rather than just focusing on the export of graphite concentrate from Mozambique.
We always knew about this JV and had some idea of what was to come, and TON has today clearly explained the benefits and synergies of value adding from Mozambique. There would be some unique synergies in the Moz JV (since it is also the location of the mine and graphite), which would not be available in the China JV and today’s announcement does a good job at elaborating.
2) Profitability from value adding and vertical integration
This point applies to both the China and Moz JV’s
I’ve mentioned some extracts below, taken from announcement, which all refer to future profitability. Our DFS it seems is going to consider the value added prices and take into account not just sale of graphite but sale of graphite products.
“Production and export of high value products, such as graphite composite material, graphite sheets and foils, spherical graphite and possibility graphene, which are currently in high demand in the broader and larger energy storage and electronics markets offers the Company the opportunity to enjoy stronger financial returns several quantum higher than the export of graphite concentrates alone.
Integrated DFS financial modelling will incorporate value-added sales prices which can be greater than US$2,500/tonne for expanded graphite, US$6,000/tonne for composite graphite material and up to US$50,000/tonne for graphite foils
While the export of graphite concentrate alone can be very profitable in ideal future market circumstances, the financial returns from in-country value adding, by contrast, provides for a more rapid return on investment and vastly increased profit margins in the near (1-2 year) term, by a factor up to 5 to 10 times, in the corresponding graphite market conditions” – extracts from announcement
My comments –The extracts from the announcement are self explanatory. Just think of the impact on profits if we manage to sell a lot of those USD 50,000 /tonne graphite foils
It is great that our DFS is going to incorporate all this because as we have discussed a million times, vertical integration really separates TON from all other graphite companies, and many risks applicable to other graphite companies are simply not applicable to TON.
3) Synergies of value adding - spherical and enhanced graphite product facilities
So many benefits and synergies in various aspects (of value adding through vertical integration vs just selling of graphite concentrate) – sharing of water and energy, sharing of established mine infrastructure,the facilities will be incorporated in Environment Impact Assessment (EIA) application, incorporated in Nicanda Hill DUAT application, etc.
This point seems to be applicable to the Moz JV only (and not the China JV)
4) One stop shop for all things graphite
This point from announcement is applicable to the company as a whole
“The recent confirmation that TMG can produce a wide range of high quality graphite products, including a full range of high grade flake graphite concentrates, graphite composite material, graphite sheets and foils, spherical graphite and graphene, places Triton in a unique position to supply a broad and diverse market base” – taken from announcement
@king louie has recently and often referred to TON as a one stop shop for all things graphite. TON is just highlighting the same over here.
5) Customisation This point is applicable to company as a whole
“Ability to produce a high quality, competitively-priced, full range of flake graphite concentrate grades and sizes that can be customised for end user requirements.
Ability to produce high quality enhanced graphite products that can be customised for end user requirements
Ability to produce competitively-priced spherical graphite on site at production levels that can customised to suit market requirements and demand.” – taken from announcement
As mentioned earlier, TON is a one stop shop for all things graphite and we have the ability to provide graphite of all types for all purposes needed by all customers.
With our Moz and China JV’s we go one step ahead, and we now also have the ability to customize graphite end products based on the requirements of the end user.
There has been much talk in graphite articles of how the graphite industry is different from other mining industries in terms of how graphite cannot just be shipped out and how it should suit the end user needs. Well, TON goes 1 step ahead and would be aiming to suit the needs of not just graphite concentrate purchasers (with our exceptional product) but actually users of final enhanced graphite products (thanks to our association with pure graphite specialist YXGC and vertical integration).
6) Alignment with Mozambique laws and regime
This point is mainly applicable to Moz JV
“Triton’s strategy aligns with the new fiscal and mining regimes of the Mozambique government and provides the Company the advantage of obtaining a number of development incentives and rebates which are associated with in-country value adding” –taken from announcement
We would be getting significant development, tax and import/export incentives that are not available to us if we were only in the business of mining graphite and exporting the graphite concentrate. Also, there was a lot of talk of compliance with new laws, etc. and TON is obviously taking all those into consideration and looking ahead as to how to fit in with the new laws completely. I’ve discussed Mozambique laws and regime,etc. in detail in points C-6 and C-7 of the detailed overall TON overview http://hotcopper.com.au/threads/ton-overview-aug-21.2577980/?post_id=15853778
7) Usage of wastage and competitive pricing of spherical graphite
This point is mainly applicable to Moz JV.
“Wastage of concentrate in processes, such spherical graphite production, can be as high as 50%. By producing spherical graphite on-site, only the high-value product will be transported to clients. The costs of transporting concentrate destined for off-shore spherical graphite production, of which up to half will be discarded as waste, are thus avoided.
The waste component from spherical graphite production at Nicanda Hill will be re-cycled into high-value composite graphite products, so that all components of TMG are used.” – taken from announcement
My comments - I’ve underlined some key parts.
We cut costs in transporting concentrate. A high percentage as can be seen would have been unnecessarily shipped (waste). Shipping costs in general would be cut completely as we would only be transporting the final product
We would also be recycling the wastage into other graphite products with YXGC’s help (and help of other JV partners??) , and this would form further revenue for the Moz JV with YXGC, which could offset the cost of production of spherical graphite.
It is clear from the above that TON might be able to produce spherical graphite at a competitive price due to above reasons and other synergies of producing on site
I wonder if we could have some sort of tie up with AMG for the spherical graphite factory aspect and/or some other JV with a battery maker, etc. This is a very interesting deveopment not discussed at all earlier.
8) Debt
This point is applicable to company as a whole
This is not discussed in today’s announcement.
I’ve expressed long ago that one of my main concerns is that TON should be careful of taking on too much debt.
I like the direction that TON is taking but TON must be careful IMO not to take on too much debt or if they do, then they need to have a thorough contingency plan evaluating all the options, safeguards to ensure that they can pay back comfortably, etc.. At the same time, of course the massive growth plans that TON has been putting forth are going to need debt.
I trust that TON will work out some middle ground. Ideally, as mentioned by me long ago, I would hope that any of our well cashed up current and future JV partners put in a better effort towards financing the projects initially.
9) Logistics
"Superior infrastructure and access compared to peers, including close proximity to regional capital of Montepuez (<20km to project), mains power, water and telecommunications, a new sealed public road within 8km of the Nicanda Hill deposit, directly connecting to Pemba and Nacala port facilities”
I’m not a logistic expert ..lol..but it sounds good
10) High Purity through simple floatation
This point is applicable to company as a whole.
Triton’s graphite readily liberates to very high purities through traditional flotation methods.
“Triton confirms the bulk sample test work being undertaken at SGS Lakefield, Perth on standard Nicanda Hill graphite material (100) has achieved high recovery and purity results. The latest test results have confirmed the Nicanda Hill graphite concentrate can be readily upgraded to 99% purity through simple flotation.
Both Nicanda Hill and Ancuabe graphite materials have achieved the highest levels of quality and purity without the need for chemical leaching, thus reducing the overall production costsand increasing TMG product options.” – taken from announcement
As @Names little mentioned, this seems very comparable to a recent announcement by another graphite company. Interesting that TON did not come out with a separate announcement for this but just included it as part of a regular announcement.
We’ve discussed TON’s purity in detail before. I also referred there to an Industrial Minerals article analyzing the entire graphite industry where TON got the best rating out of all the ASX companies , and even the TSX and AIM companies could not beat TON. TON's exceptional purity IMO was never in doubt.
11) Product range
This point is applicable to company as a whole.
There are some Pics on Page 4 which give some idea of Triton’s product range. As can be seen, we are not just selling graphite but through our vertical integration, we would also be selling enhanced products like composite graphite sheet, graphite foils, etc.
12) Expanded scope of DFS
"As a result of the encouraging recent results with TMG products, Triton is now reviewing options to expand the scope of the current DFS to include the P66 zone, the vertical integrated facilities at Nicanda Hill and subject to further exploration success, potentially include the Ancuabe project." - taken from announcement
Prima facie, it appears that the China JV which we have often been discussing, would be more from the point of just graphite products to be used in China and exported from China
Today’s announcement sheds some light on the Moz JV and it appears that there are serious thoughts of constructing factories for spherical graphite and enhanced graphite products.The spherical graphite factory at the point of origin at Nicanda Hill itself really makes a lot of sense when you consider all the points expressed in today’s announcement, and discussed above. I wonder if they have already had some discussions with some big battery maker in this regard as a JV partner of something of the sort.
Another very good clear announcement by the company, overall.
Pauldola has mentioned before that “clarity” is one of the main differentiating points between TON and other graphite companies and we can see the great clarity and vision today.
Cheers
TON Price at posting:
25.5¢ Sentiment: Buy Disclosure: Held
(20min delay)