I posted around my views around graphite and RNU in January 2021 - see post
Post #: 50380153. I see a positive future for RNU, and especially given it holds a large graphite deposit outside China, but risks are still there. Helping RNU, is for Europe to get a EV industry up, especially battery production, they need to be able to source the required battery feedstocks, and graphite is a key one, and there are few large deposit outside China that are potentially prospective, with RNU having, as they continually state, the world's second largest Proven Reserve of graphite - noting in defining a Proven Reserve you have to run financial and technical parameters over such a resource (i.e. so they must have confidence they will get to production is my point, so the question is timeframe to production). The JORC picture below explains what a Proven Reserve is:
Obviously graphite's principal use currently is in steel, but with the growing EV market well graphite is going to play a key role in the EV market and the EV market will be in time the biggest graphite demand component for the industry. As per again the embedded post above, I also think the market is starting to wake up that the predominant battery types going forward in EVs will be NCM 8:1:1, and these batteries require graphite in the anode. Even the latest presentation by RNU implies the dominant go-forward EV batteries are NCM 8:1:1 for the foreseeable future. My embedded post above talks further on these battery types, and makes some comments on solid state batteries (which I suspect the market is coming to grips with will not be the dominant EV battery going forward - noting SSBs do not need graphite in the anode).
The embedded post above provides this image below, and obviously there is scope for a lot of new players in the market, especially ones with decent graphite deposits - the calcs below rely on EV demand btw obviously, and don't include other uses of graphite. RNU has essentially been saying this as well, and I will say management here has improved because initially well I won't say but my embedded post implies more positivity now than when I initially held.
Another way to put if we think about lithium, well growth in graphite will be very similar to lithium (because for example a NCM 8:1:1 battery requires about 1kg of graphite and 0.9kg of lithium per kWh). Now in this post - on lithium - I talked about the growth in supply required to meet 3 TWh capacity, which translated to about 8 - 10 times greater lithium supply need than today - so noting on a kg to kWh basis the input of lithium/graphite is similar you are expecting at least the same growth, so RNU has opportunity IMO to enter the market this side of 2025 (and possibly well before that) if the ducks line up - the lithium example here -
Post #: 47799612 . But it needs the binding offtakes for the funding, and then for FID to occur and construction to start in that order. RNU has been making these points in its own Anns, and I think now the market is starting to wake up that lithium ion batteries are not just about lithium.
In terms of the latest MOU RNU announced, I will say I would have preferred it to be with Europe, but IMO RNU has opportunities to get itself established for supply into Europe -
Post #: 50462353. Joining the European Battery Alliance can only be viewed as a positive IMO as well.
Given the Ann around the ability to produce purified spherical graphite (i.e the Zeto one recently) again this is indicative of the good quality graphite RNU has. The proprietary technology held by RNU appearing to be recently validated by Dorfner (another recent Ann) is also very positive - especially for supply into Europe given the ESG requirements Europe appears to be placing on potential EV/battery producers there and on the inputs that are sourced from miners. The vertical intergration proposed by RNU can also be a positive than just selling graphite flake alone for example because you make more money selling spherical graphite than graphite flake (provided you meet you DFS/FID assumptions is my point)- here referring to RNU looking at producing purified spherical graphite.
I guess the key for RNU is getting binding offtake agreements, as these will provide the market confidence that funding will be attained to progress development, noting there are players possibly already in RNU's 'quarter' willing to provide funding (i.e. that Netherlands entity back in 2019 for example) provide I presume boxes remain ticked. Reading the DFS dated November 2019 a lot has also happened since that and essentially, I guess in time they will detail changes, if any, around costs, configuration and timelines (i.e. part of FID maybe I guess) but I suspect that the correlation would be around the staging of the project as well as what type of binding Offtakes are signed etc etc. Obviously I am positive, hence why I am invested, but risks are always apparent this side of the market.
Certainly I see RNU more derisked than last year and the year before, but risks are still there - having a large graphite deposit and possibly been the only spherical graphite producer outside China, instead of just selling graphite flake, is a big plus here on a speculatative basis IMO. But obviously RNU is still a risky project is my point, and obviously the market cap is indicative of that, albeit rising significantly last month or so. Albeit when you think about market cap compared to lithium plays there seems a mismatch between potential lithium projects and graphite projects at this point in time (and I just wonder whether the uninformed perception around solid state batteries has played a part with graphite plays).
I haven't looked at RNU's other projects - invested here for the graphite - but in time I will have a look at them and post any comments thereof. Obviously my post probably contains a lot of errors as well, but in summary they are my perceptions above. It is essentially now for RNU to get the project up - the SA government appears supportive of the project so the building blocks are there, 1st step is binding is offtakes.
Correct any factual errors as I am still catching up here.
VB emptied.
All IMO
