I have received many calls from friends here and overseas who are holders and have been asked to make a post.
As most know I have been just having a bit of fu on HC lately as the thread has been hijacked IMO by a handful of posters. I understand people get frustrated, angry etc if their investment doesn't work out the way they hoped it would and having the odd frustrated post once in a while on investment forums such as HC is fine, what I don't buy is there is a good dozen of posters, and I'm not talking about those fly byes with their one-line comments here and there, but supposed holders, supposedly never sell ie long term holders, and posting defamatory posts about Directors including personal insults and close to over 1 year now, I have them all on ignore but as suggested it might help some potential new holders but also current holders who don't post much.
So here is a short summary, hope people can add something constructive and find some of my thoughts useful.
Understandably a lot are disappointed that construction of the 5ktp plant is not proceeding, I share MY views and thoughts, which are obviously different to those how have a shorter investment timeframe and are happy with smaller potential profits and have had a very decent run over the past ~2yrs, especially since the shorters have moved in, this has allowed the traders fairly easy ~10% trades multiple times a year thanks due to the predictability of the shorters SP control after any SP gains, they were hoping for another nice >10% gain as they bought up with knowing when roughly the approvals were due, so now understandably they are very upset.
Obviously most other investors who have a longer-term outlook are also bit disappointed initially, myself included, however once you sit back and consider what could have possibly entice the whole board to agree to the change, things look very good.
A bit of background for some of the Investors standing on the sidelines:
* Epanko Business idea was created ~10 years ago with a view to supply a quality non-China Graphite to the ROW
* Lot of work/time and money was spent and Epanko was on the cusp of getting German Bank finance when the 'Black Swan' event happened in TANZ where the then president put a hold on all mining activities in TANZ overnight, completely out of EGR control and the only thing investors could do was sell at a significant loss or hold until the situation gets resolved, the situation took much longer to get resolved, much longer than even the most pessimistic spectators suggested.
* EGR management continued to explore other business opportunities and again, via spending lots of time and money they developed the EcoGraf HF Free purification method, all the while hoping that Tanz/Epanko will get sorted and can be used as supply for EGR PSG Plant. PSG plant progressed but TANZ frustratingly slow and no clear progress from the Gov, so the 2nd best option had to be considered by EGR, look into 3rd party supply, so more time/money was spent pre-qualifying 9 different suppliers of flake graphite, which in-itself is not a complete waist because it gives added confidence to any EGR customer that in the instance something should happen with EPANKO (after/if we get approval from TANZ) there is a backup.
* During the past 2-3 years EGR continued to explore further opportunities, Anode Recycling + Anode Coating. Cotain is done via a JV with FYI and ALCOA as a potential large backer if they decide to commercialize the process.
* EGR now had a very solid business proposition. EPANKO + EcoGraf Plant + Anode Recycling + Anode Coating
* However, Epanko was still stuck within the Tanz Gov roadblocks, so a decision had to be made, commence Kwinana approval process with a view of having 3rd party Graphite feedstock, not optimal, however still a potentially very lucrative business proposition.
* Kwinan approval took twice as long as originally hinted by authorities and was also prolonged due to some objections which thanks to COVID lockdowns and staff shortages and work backlog in a lot of GOV and Engineering departments EGR was working with added t the prolonged approval process.
* Feb 2022 Russia invades Ukraine and that gave a nice boost to our shorters and EGR's SP was finally broken past the long held $0.60 support line however, this drop in SP was not EGR specific, but across most stocks.
* With the start of the war there have now been some significant changes in Western Politics, which will have very positive impacts on Co's wo can supply materials needed for the EV/ Renewable/ Steel and Construction Sectors and have a Western Customers target base. EGR is one of those potential companies and has been negotiating with various Western Companies for some time.
* There must have been a significant shift by some of those prospective parties and with the imminent approval for Kwinana due any week, which would have meant that EGR would have to make an FID for the planed 5ktpa facility, and they must have asked EGR for a delay, this would all have been in conjunction with EPANKO timeline and works behind the scenes. My conviction is that whoever the potential partner/s, the aim is to get a fully integrated supply chain. EPANKO + EcoGraf Plant
So, why do I think this change is positive?
* Having EPANKO operational will at least double my SP prediction, as I believe that the mine, after starting @60ktpa, will scale up within the first year of full production to anywhere from 150-200ktpa
* Having the mechanical shaping done in TANZ instead of in Kwinana and in each future EcoGraf location, this alone will save multiple millions in one off Capex costs an also yearly in running costs nd of equal importance it will simplify the approval process for any further EcoGraf Plants as a lot less water will be needed!! As most of you would be aware that Water will be a major obstacle in US and EU for anyone trying to build something. And EGR has done some very good work already in designing the plant and it's re-use of the water. Anyone interested can look up EGR announcement mentioning this, sorry don't have the time to look it up now.
a) shipping costs, assuming EGR ends up with 4 separate EcoGraf Plants
b) CAPEX and OPEX reduction in each EcoGraf plant
c) TANZ mechanical shaping operation will be significantly more effective as it will have the all-important economies of scale
d) Investors need to remember that Graphite is and will not only be needed for EV's, but also in Construction, Lubrication, Military, Steel etc, and as mentioned above, all these sectors will be very busy, especially since the war and subsequent Gov changes.
e) So having the mine close to a mechanical shaping facility b4 shipping the Graphite to EcoGraf Plants and different customers will allow to cater for all needs and ship the appropriate product, which also means EGR will be able to have a wider customer base and sell all of its various flake sizes ie once again improve economies of scale.
f) This last-minute change would only have been considered by EGR if there is a high level of confidence of EPANKO getting the green light from the TANZ GOV and strong signs for finance and end user ready to commit.
Why do I think EGR is severely undervalued and that if EPANKO gets the green light, my $2 price target will get overrun pretty quickly:
* I am convinced that EPANKO will come online, when is the only unknown.
* When Epanko is confirmed, the shorters will be very close to concluding their business and will have to hope that they will get enough time to cover which will be extremely difficult, but they would have already achieved their goal and make their money that way, paying a bit more to cover will not make a big problem form them.
* EGR being very conservative in all aspects of the business, a huge upside is building due to the universally agreed looming Supply Crunch one good and very easy example is look at what selling price EGR is using in their BFS for Spherical Graphite and then compare that to one of our peers RNU, make sure you are sitting down b4 commencing the comparison. You will find one Co has enormous upside and the other one is not quite there yet===important===EGR is profitable at lower sale price, the other one is not, as we know commodity prices like to go up and down.
* The war will come to a conclusion within the next 6 months IMO due to either one of these possibilities:
- Regime change in Russia from within as Russia's last hope that the winter will get the EU to fall apart will fail
- The sanctions, combined with the significant number of working aged Russians fleeing or getting conscribed into the army will put an overwhelming pressure on their economy.
- Oil Price cap almost a certainty now combined with the EU's seizing of purchasing anymore oil from Russia from Dec5 (I think?)
- China and India will expand pressure on Russia as (especially China) their economies will get impacted as much as the wests if the war just allowed to drag on, it has become clear that Ukraine is not just going to give up and like mentioned, if the EU doesn't get weak in the next 2-3 months it's all over, there will be no point for Russia to try any further.
- Once war ends, markets will fly and EGR will be in a prime position (assuming EPANKO is a go)
- Within the next 6 months EV and Storage will take another big slice of the market and even the most sceptic out here will understand they need to invest in the supply chain, there will be significant sector wide rally (which is overdue and has been overshadowed by the war IMO) combined with a general market rebounce and ~11mil shorts that need to be covered in a low liquidity stock ==== I dare say, it will not take 12 years to reach my price target.
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) there is a backup.
(20min delay)
