Short MNS - Paragon Fund Managers, page-6

As Findingnemo asks, will the graphite market be "oversupplied", as Paragon suggests? With graphite having so many market segments, it is hard to give a generic response. But it is beyond dispute that, by the end of next year, with Balama then producing at a 360K tonnes per annum rate, competition will be very tough for small, high-cost graphite miners.

And, yes, mines do tend to be "huge earth-moving propositions". But some are distinctly more huge than others. Nachu, mining ore of 5% grade, needs to dig 5m tonnes of rock to produce 250k tonnes of graphite, while its neighbour to the south, mining ore containing 19-20% graphite, requires about 1.8m tonnes to yield 360K tonnes of graphite. Clearly as night follows day, that translates to a requirement for much larger mining equipment and processing facilities, and therefore to a higher capex. Size matters, and not always in the direction we might like.

There's an old saying: "Don't shoot the messenger!" John Deniz and Nick Reddaway, of Paragon, may be saying unpopular things, but they are the merely filling that messenger role.

Cheers,

Prime1