TON (ASX) Graphite oversupply leading to price crash

Originally posted by earlyrise ↑

Hi Ozpolarbear

Thanks for your considered post and main topic of discussion.

I'll start with a summary of the macro concerns I've gleaned from news sources:

Macro

Except for the Chinese market, major world equity markets have been fairly orderly for the past year and a half.

The Chinese market, after climbing a hefty 144% from the beginning of 2014 through mid-June, 2015, the Shanghai Composite has dropped 32% in the past four weeks. Following this "correction", the Shanghai composite is still up about 66% - far better than any of the other major world markets.

Big falls are big headlines and the World seems to have taken notice.

The Chinese market still plays a surprisingly small role in China. The free-float value of Chinese markets—the amount available for trading—is just about a third of GDP, compared with more than 100% in developed economies.

Less than 15% of household financial assets are invested in the Chinese stockmarket: which is why soaring shares did little to boost consumption and crashing prices will do little to hurt it.

The “correction” has been unwelcomed by Chinese authorities and are pulling out all the stops in an attempt to avoid any further stock-market losses. Many stocks were bought on debt, and the unwinding of these loans helps explain why the government has been unable to stop the rout. This financing is not a systemic risk; it is just about 1.5% of total assets in the banking system. We may see the Chinese central bank start to buy shares directly.

In Europe, this crazy game of brinkmanship is coming to some form of end with reports Greece has made a new ‘formal’ request for a 3 year rescue deal.

The European, Japanese and Chinese central banks are all fighting the same ‘support markets’ fight. Whether by central bank or national treasury, governments around the world are eager to support world markets and economies.

Hard to call a bottom and will experience continued volatility

Micro

Management - buying quality companies, quality management teams and enduring businesses at times of market distress is a good long-term strategy. Triton has one of the best management teams on the ASX, strengthened recently with the appointment of Mr Catlow as Chairman. Management have plenty of skin in the game, an added bonus.

Significantly, TON has a $2BN, 20 year off-take agreement and 2 JVs with Yichang Xincheng Co., Ltd (YXGC), the largest private graphite supply company in China. The YXGC off-take is a demand for 100T of graphite concentrate per year minimum. The vertically integrated JVs will add to this demand, another 60T per annum of graphite concentrate when ramped up, maybe more (company announcement).

TON has a vested interest and have an active involvement through the JV's, to ensure there is demand. There is an immediate demand and TON could sell to YXGC tomorrow if there was the supply and may come to fruition this year through AMG strategic relationship.

TON also has an LOI for a $200M funding and another 200T of graphite concentrate through Shenzhen Qianhai Zhongjin Group Co., Ltd (SQZG). SQZG have up to 5 months to form a legally binding funding and off-take agreement and BB is visiting SQZG in July with this agreement in mind.

Other off-take agreements are in the pipeline.

Future demand should not be a problem.

My opinion only and please DYOR.

Expand

Great post ER and to you too OzPB- keing it real and taking the mindset back to the end game which is often clouded by fear and greed. ER some great points in a writing style I've seen before..nice work...OzPB u truely r a legand and I can't wait to make lots of money on your wisdom in the future both here and elsewhere.

KL - look at the big picture.

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Last 0.9¢		Change -0.002(18.2%)		Mkt cap ! $14.11M

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1.0¢	1.0¢	0.9¢	$259	26.13K

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