Good post @FreeflyerNZ. It's always great to have some...

Good post @FreeflyerNZ. It's always great to have some discussion backed by actual research. This way we can all learn.

Some good points made in your post.

'Below is from the RNU DFS.

The flake distribution difference just by looking at it shows they weren't too conservative in their sales price either.'

These price forecasts were from Benchmark Minerals' advice so they're the ones being conservative or otherwise. I'm unsure whether the numbers are CIF or FOB sales prices used in the RNU DFS, but if they're FOB they seem to be pretty accurate.

Here is an excerpt from a recent Fastmarkets article which describes the forecast tightening of supply. Also indicating that, subequent to Syrah's latest sales numbers, the price rose:

Fastmarkets’ assessment of the price for graphite flake, 94% C, -100 mesh, fob China, rose by 8.43% to $830 per tonne on December 1 compared with the start of the year, when it was $760 per tonne. This was mainly driven by demand from spherical graphite production and supply concerns.

https://www.fastmarkets.com/insights/graphite-demand-recovery-uncertain

'This is where I differ in opinion. I don't believe the supply chain is tight or getting increasingly tight.'

Another snippet from the same Fastmarkets article:

'...Despite that, demand for flake fines used for anode production was expected to be approximately 470,000 tonnes in 2023, while total natural graphite demand from all sectors was forecast to exceed 1.5 million tonnes in 2023.

Chinese output of uncoated spherical graphite (uSPG) was expected to be around 300,000 tonnes in 2022.

To keep up with demand, expected uSPG output will need to be close to 450,000 tonnes in 2023, according to Amy Bennett, principal analyst at Fastmarkets Research. China’s annual output of flake graphite has averaged 707,400 tonnes over the past five years, according to data from the US Geological Survey (USGS). This, Fastmarkets understands, would mean a supply gap that needs to be filled with imported materials.

https://www.fastmarkets.com/insights/graphite-demand-recovery-uncertain

Benchmark Mineral Intelligence' senior analyst George Miller in a recent interview gave a forecast of '>$1000 /tonne by 2025' which makes the 2019 DFS look rather conservative.

On the subject of under supply of the fine -100 mesh material in 2025:

'... new mines should contribute 350,000 tonnes of new supply, in contrast we expect demand for those fines to grow by 800,000 tonnes in that timeline.'

It has even been suggested milling down of larger flake sizes may be an option to fill the fine flake supply gap, George says. This gives you an idea of where the market for fines vs coarse flake is beginning are heading in the coming years. And also how flawed comparing basket prices are IMO.

'Let's take a look at Syrah resources as a comparison, they have been slowly ramping up production and they have a similar flake size distribution to RNU. RNU 72% and Syrah 80% -100 mesh (fine) which is great for anode making feedstock but doesn't fetch a great price compared to large or jumbo flake. RNU may do slightly better in basket price theoretically but not much.

This subject matter is an aside from my original point, but from the 2019 DFS it's stated they were focusing on coarse flake recovery back then:

'The DFS flowsheet was optimised to maximise recovery of coarse flake whilst maintaining 94% to 96% TGC across all size fractions, including small flake (-150 μm)'

Last published in the 2019 DFS at 72% of flake size distribution, I can see -100 mesh content rising as a percentage of concentrate likely given a focus on finer flake recoveries. I'd say this will be the focus with the oversupply of coarse flake in the market at the moment.

I see little relevance in pointing to SYR and their current sales prices (or their recoveries) when we will be looking to produce earliest 2024 (when the 'Supply gap' or tightening will likely would likely occur) and potential offtake partners understand this.


On the subject of product qualification timelines, I agree it's an extended process but one we're 10 months into. By going down the Flake concentrate path, we can (possibly) reach FID/commence construction with the product qualification still ongoing. DC may well have a plan for avoiding the immediate need for binding Offtake agreements. Maybe a combination of green bonds, equity investment and COH may cover the ~A$150M+ CAPEX while the graphite market moves further towards undersupply, (and Siviour product to work it's way through the rigorous qualification period simultaneously) giving RNU a better position to negotiate from at a later date. At least that was the premise of my (speculative!) post just to give a different perspective.

'in terms of where the market's going supply is only getting tighter, so our position as a supplier only get's stronger with time' - DC


Again, nice post!

Cheers

GLA & again IMOO