@cazz69, each to their own,
The last time that graphite was hit with a significant supply response, $500-$700 was the price range for +80 mesh:
View attachment 303692
The lowest-cost producer(s) in economics can dictate the market (i.e. BHP & Rio Tinto with iron ore, Saudi Arabia with Oil etc.). Syrah will be the lowest cost producer at ~USD200-250 Opex; building their own power plant (with cash) will lower their Opex from the Feasibility Study:
View attachment 303695
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And unconfirmed reports from Deutsche Bank suggests that transport costs are expected to be 30% lower than outlined in the Feasibility Study.
View attachment 303701
KNL's Opex is too high relative to Syrah's:
View attachment 303716
If graphite prices return to the 1999-2004 average (when there was a supply response from the Chinese then as opposed to Syrah and Co. today), Kibaran's NPV will be negative; I'm amazed that people here can brush this off so easily because it's a live-risk (you'd think from the posts here that TanzGraphite has the brand cachet of Apple or CocaCola).
Furthermore, there is a large information asymmetry between shareholders and management; shareholders haven't seen the offtake agreements or pricing, don't know the "get-out" clauses of each contract or required production dates, don't know what changes had to be made after the independent due diligence ordered by KfW-Ipex bank, don't know what is happening with financing, and don't know what will happen with the RAP.
Economically, Syrah as the low cost producer could even expand output with FCFE in the years to come which makes business sense to crush the competition (as BHP and Rio have been doing with iron ore).
But as many people say, "Syrah will never sell their graphite" ... well ... they've just employed a 20 year BHP sales veteran to do just that;
Shaun Verner. Plus they do already have offtakes lined up:
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50,000 tonnes of spherical with Marubeni (Japan)
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20,000 tonnes of flake graphite with Marubeni (Japan)
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80,000 tonnes with Chalieco (China)
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100,000-150,000 with Asmet (MOU - UK)
Perhaps some of these will fall through, I don't know. But with the mine up and running, 100+ years of supply, the general understanding that it's easier to sell product when your mine is up and running, no debt on the balance sheet, and millions of dollars in spare cash from the last equity raise, and about to send Shaun Verner to work, 10 years from now Syrah will be an FCFE machine.
I have no idea what will happen with KNL's share price and am just watching it and you all as an educational experience now. If the Chinese cut output with graphite like they have recently with coal it could spike the graphite price, but if they don't and a supply response of graphite from Syrah and others drives the price lower, KNL's NPV is vulnerable. It's a shame for Mr Spinks who as I said previously is a really nice guy but he is at the mercy of graphite economics where only the lowest-cost producer has a
sustainable competitive advantage.
Rather than
just telling me that I'm wrong, why don't you produce some
post-tax NPV calculations to
show me why I'm wrong; I'm open to changing my mind.
Offtakes only matter if they're economic offtakes. Non-profitable offtakes destroy value.
I don't want to argue and I know how annoying it is to have people talk negatively about your shares. But saying that "
Patient man was right about one thing only" is pretty strong.
(20min delay)