Just another dud!, page-29

Captain Morgan,

It appears that you are the lone wolf in the pack of wolves? While there are some wolves happy to sell off this meaty fat carcass of a deposit first opportunity they get, you perhaps see feasting off something with binding offtakes as more satisfying to the belly?

I certainly am not here waiting for a takeover. If a takeover happens, TON eventually goes backwards - more importantly, it fails to meet come anywhere near anyone's upside targets. Binding agreements to sell on the other hand, and it's on its path, the very beginning of a path to print money for a generation..

There is a competitor graphite company here in Australia that recently announced it was going to take a slightly different contract model for selling graphite. Current model is fixed fee price lists for various categories (2D, expanded, etc) sizes (across different sized small, large, vein, etc), purity levels and whether it's natural/synthetic. This competitor is apparently going to use certain price "collars" in its sale contracts - details are yet to be released but it certainly is a more suited pricing model for something like graphite given the fluidity in price movements it guarantees a customers.

However, I don't think collar pricing is the 'best' approach. To me, collar pricing is simply a way to cap your gains as well as capping your losses when you're investing. The losses part is my problem. Y'see, although I like the concept of fluidity in determining a sale price for a product - determining a lower price you'd be willing to let your graphite go for is not a loss - it is a lower margin to your bottom line. So the benefit of collar pricing (i.e: the advantage it is meant to provide), the risk of "losses" is not a benefit when your a seller of a product like graphite in the same way it is a benefit to an investor.

The path forward is clear to me. The Chinese and Canadians (and rapidly many others) believe that the model for selling graphite must have a fluid price - a price that can move relatively easily. This is why I believe that the talk of a spot market has surfaced. Many believe a spot price will create the reassurance and confidence in purchasers of graphite to lock in longer term contracts. I agree by and large with that point of view.

If a customer believes that in signing a contract they are paying the lowest possible price for whatever it is they are buying, then they don't care what the price is. It's all about how much the other guy has to pay y'see - the price I'm paying is a secondary consideration. The price the other guy has to pay is front of mind to a buyer - always. If they give them a graphite spot price in a contract, a customer will have more confidence to sign it.

But lot's of problems with spot markets Mr Wolf. The house can get blown down very easily by virtually anyone with enough money to do so. Or enough product in graphite's case.

But we need fluid pricing - that is clear. Captain - there's a lot of sunlight between the cost to extract and the lowest possible sale price forecasts out there for various forms of graphite.

If you have the managements ears, then you must whisper in it - "most favoured customer pricing clause".

MFC clauses. Lawyers know them well. There is a craft to writing such clauses. And we draft in the same vain as Mr Musk - obligate the use of such to be in 'good faith'. Graphite miners aren't miners in the same way 'oils ain't oils' - the oil thing is a TV add that all Aussie petrol heads know well fyi.

Tell the customers that the price they pay will be as low as the lowest price you're actually selling something for - and the buyers will be lining up to sign those contracts in droves.

And telling people like Musk that he must use such a clause 'in good faith' when trying to barter a lower purchase price - kind imposes an obligation to find "commercially reasonable" ways to resolve disagreements over price wouldn't you say.

A graphite play on this planet must set itself ahead of the pack. The timeline to production, MOU's, JORC's - all of that stuff - none of that will make one graphite miner stand out over and above the rest. Not for a generation of profits.

MFC clause. It's the logical and next step forward.

And before I forget - rah rah.