Short Term Trading Week Starting: 14th Dec, page-193

STTCOMP FGR, FA LONG

Graphene mining in Sri Lanka.
271,849,713 fpo
mc = $14.9M @ 5.5c
Cash ~$4.5M
ev = ~$10M

- Near-term producers (Q1 2016) of very high grade crystalline vein graphite.
- Refurbishing historical mine site shafts, with each one costing only ~$200k, with very low above ground processing costs, once extracted. Will ramp up to 20 shafts, yielding ~5,000tpa
- Production CAPEX ~$4-5M
- Strong metallurgy outcomes from Adelaide University testing, confirming a range of premium applications
- See this report for details on NPV, ebit margins, etc, based on various production scenarios. http://www.mrltd.com.au/attachments/article/127/20150821-MRLReasearch-FEC.pdf
- Awaiting a second industrial mining license to be granted, with all suggestions being it won't be an issue and the SL govt and keen to encourage investment, given legacy issues
- Like scandium and other niche metals, the main issue for FGR will not be proving-up a massive resource but finding sufficient end users in a developing niche market. The premiums for their product will be well above prices for flake graphite but investors will want to see some sort of certainty of revenue before really re-rating the stock.
- Mining veteran, Warwick Grigor, has taken the position of Chairman recently and has purchased around 13M fpo, at an average of ~5.5c, making him the largest shareholder on the register. His holding company, Gregorach only held 5M in the last Annual Report, so he has been steadily buying.
- Twynam Agriculsture Group have just turned up on the register, showing a $1M investment at 5.5c. This is John Kahlbetzer's investment vehicle. Very successful investor over many decades.
- Agency theory would suggest 5.5c should be a fairly solid entry, based on the $4M placement at 5.5c and directors and associates having good skin in the game.