Balance Sheet & Funding Commitments

I wanted to start a new thread here, dedicated to TLG's financials and in particular the Balance Sheet (BC) and what it might look like going forward.

This is purely investment finance. We have had some very strong and incisive opinions express in the other threads and IMO there is considerable depth into the company, its strategy, its differentiators and its future that has been shared and I'm thankful for that. It's also motherhood and apple pie and while I like that it can be expensive!!!

Nothing in this thread is cross promotion and I'll try and stay as relevant and as close to our space as I can. If I happen to own the stock I'll say so but for the most part I'll try and use stocks I do not own - no emotional attachment.

I want to start this off by first looking at the BS of SYR and then the Capital raising that they are now doing. Another post will follow up with TLG
The SYR BS as at June 30, 2020 is as follows:

This should be in a format that is familiar. Also there is 414,846.073 shares outstanding (not accounting for the C-Note at this time). That makes the Book Value of Equity (BVE) = $0.997/sh. This is a very important number in Aussie's investing world and is driven by Common Shareholder Equity (CSE) in the business



I'd make the observation that SYR has a conservative balance sheet
Leverage Ratio = D/(D+E) = 19.5% (this is more the academic view ... analysts might only consider "D" as long term debt, whereas I'm considering the whole BS)
Debt/Equity Ratio = D/E = 28.1% ... or 28 cents of Debt for every $1 of Equity.
Plenty of room for expansion of the balance sheet.

I'm going to rearrange the BS to a different presentation style which may be a little unfamiliar. 2 step process



Important intermediate step to separate "operating" assets and liabilities simply because I want to be focused on "continuing operations". SYR is a simple BS ... no financial assets (i.e investments in other companies or holding Gov't bonds or other debts ... cash, receivables, inventory are all operating assets ... can't operate the business without working capital).

And then finally we get to



Note that the CSE has not changed but we have a clearer picture of what the operating assets of the business are and who has what claim on them.

At this point you would look closely at the CHANGE in items like NOA & CSE from the previous reporting periods. I won't bother doing that but you would learn some things like at Dec'2018 CSE was $445.210M ... so a reduction of ~$120M in the shareholders ownership of the business. You would also see a reduction in the Net Operating Assets (there is no free lunch) due to asset impairments and write down in value of inventory.

Anyway, moving forward to this capital raising ... co-incidentally (? ) right off the back of a completed BFS, which showed a scaled up 40 Ktpa advance Battery Anode Material (BAM) plant in the USA (Louisiana) .... initially at 10 Ktpa. Rather small numbers given the Balama mine can produce at 180,000 ktpa ... all I can infer from that is that SYR remains predominantly a miner of natural graphite ... so low on the value chain for a while longer.

And these pictures are hardly "inspiring" if we are talking seriously about a low carbon footprint product (right @pabs )





Ok ... back to the BS ...and the CR.
Placement of 62.2M shares raising US$42M
SPP targeting to raise US$9M (issuing ~13.3M shares)
C-Note with 2 tranches, each of US$21M

Pro-Forma Balance sheet, changing only those values directly impacted by the CR


Current Assets increased by US$51M of equity capital held as cash and reinvested into long term assets over time. PLUS I've drawn down US$42M of debt (which wont actually happen until 2021). Total increase US$93M
Liabilities goes up by US$42M (the C-Notes)
Leverage Ratio goes up and = D/(D+E) = 24.2%
Debt/Equity Ratio goes up = D/E = 35.5% ... or 35.5 cents of Debt for every $1 of Equity.
Still considered conservative on those metrics ... but we haven't looked at any debt serviceability ratios.

Reformulating we see the BS looking like



and finally



This BS has total shares issued of ~490M with the BVE = $0.765 (it was at $0.997) ...

But in reality, the fully diluted effect of the C-Notes has not been included. If they are held to maturity and NOT redeemed for cash (and interest not paid but added to principal during the term) each note matures at about $28.26M or about 28.16M shares. So both tranches totals 56.32M shares. Were that to happen CSE rises to US$416.63M as NFO reduces to US$56.351M (just using the original C-Note face value) and BVE = ~$0.762

Compare that to if the C-Note wasn't convertible but straight debt that is repaid (and interest was paid Qtrly) then we end up with BVE =~$0.905 ... which is a big difference... and shows why those C-Notes would be "unnecessary dilution". Clear the warpath for pabs in that case.

After this CR, SYR is appears to be funded for completion of a 10ktpa BAM ... but would caution that is not a given considering SYR has negative CFO presently due to low graphite prices.


There is obviously a chasm between the projects which needs no discussion (IMO) as we've covered why TLG's project is a winner when it is funded.

I'll leave it there for the moment ... and discuss the TLG "options" in a later post ... assuming this stuff is of interest.