Could the offtake deal go south?, page-12

Hi Romann,

Some interesting answers already to get thinking a bit I guess.....

I have to spoken to management briefly in regards to the off-takes. I'm not one to say this is exactly what I was told from the horses mouth, so do not interpret anything that way, purely my opinion derived from conversation, however the off-takes are legally binding. KNL is legally bound to supply the spoken for graphite, and the buyers are legally bound to purchase.

As with all legally binding contracts, there are always extenuating circumstances that may allow a party not to fulfil their obligations.

The reality of the off-takes to most of us is that we haven't seen the contracts and finer details of the off-takes to know exactly what extenuating circumstances may be. But I think we can safely conclude that should Kibaran produce the graphite, the off-take partners will purchase.

Could an off-take partner go bankrupt and not be able to fulfil their commitments? Sure. Looking at TK's profit from last year do I believe that's likely on their behalf? No.

Could Kibaran not be in a position to produce in 2017? Maybe. Are the off-take partners aware of where KNL currently is at in terms of mine development and potential production? Yes. There is mention in the TK off-take announcement that they will do what they can to assist KNL with financing. So I don't believe discussions and agreements were as simple as "we will produce X amount by this date for you".

As I said, without reading the contracts we will not know the exact answers to your questions. KNL is still a speculative stock, hence my non definite answers why it is priced how it is.

My understanding is that neither party can just walk away should they choose.

Not sure if this helps answer your questions at all... I'm sure there's other that can go into more detail.