HAZER GROUP LIMITED (ASX:HZR) - Hazer - Steps to Success, 35426899, page-9 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Originally posted by Michaeljob ↑

Have been re-running some numbers to try and get a bit of a handle on the potential should Hazer get a single full scale plant up and running and though that others may find them interesting. The assumptions are my workings only and could be well off although I have tried to match as well as I can with known data. A plant of this size would produce 25,000 tonnes per year of Hydrogen and 100,000 tonnes of graphite. On a world market scale this represents 0.05% of the existing hydrogen market and 4.1% of the graphite market so quite easy to imagine that any products produced have a pathway to market.

Assumptions:

Hazer process OPEX will be similar to Steam Methane Reforming plant (in reality the Hazer process should be less expensive due to the lack of steam raising equipment required and lower comparative process pressure)

Purification OPEX not included nor known therefore assumed as a cost per ton and on the high side

Graphite produced will purified to battery grade therefore attracting around AU$8300/tonne (as per MIN announcement stating US$6000)

Hydrogen is priced at $1/kg which is around half the price of the closest competing method

Methane feed will be purchased at market rate (if landfill or stranded methane are utilised this will be lower). Many ASX listed explorers have stranded gas assets which require a pathway to commercial application. Think AJQ NT, RLE north, GLL Galilee, BUL etc

Plant depreciation factored over 30 years

Royalty rate 15% as per state one research report https://www.stateone.com.au/Download/Download?file=HZR_20180530.pdf&downloadType=PUBLICATIONS

Graphite market size 2450 ktpa as per SYR presentation https://www.asx.com.au/asxpdf/20170428/pdf/43ht60ld8yvyyd.pdf

Hydrogen market 50m TPA as per https://www.hydrogen.energy.gov/pdfs/hpep_report_2013.pdf

View attachment 1276202
The plant depicted above I speculate would be profitable to the tune of around $530m with a 15% royalty providing HZR with ~$80m p.a for capturing 4% of the graphite market and hardly denting the hydrogen market. This would value the company at somewhere around $1b EV.

It’s a genuine possibility that we get there over 3-5 years but the point I’d like to make is that at this stage valuation growth is all about improving the probability that we get to this scale. With each, engineering study, each process scale up, each quality management decision, each successful JV, each product test and vertical study the probability of reaching this valuation increases. As these pieces fit together the the barriers to success diminish at an increasing rate.

Today at 34c the EV is $23.9m (undiluted) or $25.3m including in the money options

Fully diluted at $1b EV the SP would be $6.57 or 19 times current.

To get to that 100ktpa plant we there's scale, quality and economics to overcome.

MIN have committed to a 3 stage scale up with a nominal end goal of 10kpta with the first stage to be delivered in the next few months. A 4th MIN scale up stage would take us to 100ktpa. MIN have finalised stage 1 design and are currently performing the concept engineering for the stage 2 plant. Later this year when operational MIN intend to test the produced and purified graphite to ascertain a more accurate market value and potential offtake routes.

Hazer have internally completed 4 scale up stages to get to the current 14tpa pilot plant with planning underway for a demonstration plant at 146tpa with a commercial 10ktpa plant the stage to follow. A 4th HZR scale up stage would take us to 100ktpa. Another significant derisking point is the FEED and concept engineering study commissioned which will deliver a level of certainty regarding the build and operational costs involved with a commercial plant.
View attachment 1276205
While it's important to keep in mind the challenges that face any new technology the potential that HZR has is pretty hard to match and the de-risking steps are now coming thick and fast, as the reasons that prevent a highly profitable business being established are removed one by one it is my expectation that we begin to price in success in a stock that has for the last few months clearly been priced for failure.

Expand

Thanks for that Michaeljob!

One thing that has me wondering is that a single commercial scale plant could provide 4% of current worldwide graphite market while barely scratching the surface of the Hydrogen market. By the time there are enough Hazer plants to start eating in to the current SMR dominance of hydrogen production, the graphite market could be flooded with Hazer Process-produced graphite, and prices crash.

So I think the challenge for Hazer and Min will be to identify other uses for graphite to expand the market.

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(20min delay)
Last 31.5¢		Change 0.005(1.61%)		Mkt cap ! $79.79M

Open	High	Low	Value	Volume
31.0¢	32.5¢	31.0¢	$55.27K	174.5K

Thanks for that Michaeljob! One thing that has me wondering is...

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