General Discussions, page-20575

Hmmm ... I'm just a bit confused - not unusual of course.

The article that SaddleTramp helpfully alerted us to had this in it:

"Renascor managing director David Christensen said upstream development would be the company’s initial focus as that’s where he sees market demand.“The gap in (graphite) material right now is really on the upstream" DC is quoted as saying, and later goes on"“And [China has] really built up their processing capacity, both on the midstream … and on the anode side, ... [] ...There even maybe overcapacity there, but there’s undercapacity certainly in China on the flake graphite, so China has now become a net importer of flake graphite".

Ok, what I got from all of that is that demand is greater than supply for upstream graphite but that in China (which is currently the only producer of midstream spherical graphite for EVs) there is more than enough midstream graphite to meet current demand. What DC seems to be suggesting is that because there is a shortage of upstream graphite Renascor should move to supply that segment of the market but because there is a surplus of midstream graphite in China Renascor should hold back on producing midstream graphite for the time being.

... but then I listened to a couple of recent Matt Fernley interviews. For those who do not know of him MF is one of the few analysts who have specialised in battery materials (I think he said he has been doing this for about six years now). Personally I pay attention to anything he says. One feature of MF is that unlike the few other battery materials specialists he holds graphite up there with lithium and has a very solid working understanding of the graphite market. In these two interviews the line MF takes is that actually upstream graphite supplies are relatively okay but the big issue is that there is virtually no midstream graphite being produced in the "western world" ie not China, and that the downstream users and financiers would much prefer to source their midstream graphite from western countries like Australia and Canada. MF said that there are about 10 graphite projects in western countries under development that could produce midstream graphite but none of them look to be close to going into production (case in point: Siviour).

https://www.you tube.com/watch?v=96_ETJiOmlc (remove the space between you and tube and go to about the 19:40 minute mark)

https://www.you tube.com/watch?v=eFEC7HgeUrM (remove the space between you and tube and go to about the 13:20 minute mark)

To reiterate: DC says that there is a shortage of upstream graphite and a surplus of midstream graphite in China so Renascor will first start producing into the upstream graphite market

but

MF says there is actually not much of a shortage of upstream graphite but there is clearly a shortage of midstream graphite in ex-China.

I guess it all depends where DC thinks any midstream graphite that Renascor produces would be sold to. If he thinks that the destination is China then his logic makes sense as there is already of oversupply of midstream graphite in China but if he thinks Renascor midstream graphite will go perhaps via POSCO into ex-China Asia or into North America then his move to put off the midstream graphite production does not make sense in itself. From memory only about 25% of Renascor upstream production is tentatively locked up by a Chinese offtaker (Korean POSCO 50%, and Japanese 25%).

I go back to my thesis I threw out there a little while ago: the rampant inflation and supply chain shortages in the Australian mining sector are putting a wrecking ball through development projects - not many can survive a sudden 40% or higher cost blow-out - and to get some revenue traction Renascor has to go with whatever option has the lowest capex. My guess is that the lowest capex option would be filling the Korean and Japanese orders but only for upstream graphite, and looking to expand the upstream graphite production and introduce the midstream graphite production when the Chinese ease back on the squirrel grip they have on the graphite market. Same outcome as DC's, just for different reasons.