Hi all,
It’s Christmas Eve here in Henley Beach, Adelaide (Australia), and the sun is shining (28c) with not a cloud in the sky. You really couldn’t get better weather and a place to be for Christmas if you ask me. I am officially on holiday after a crazy year (understatement), and plan to spend some time up on the beautiful Airlie Beach Queensland snorkelling with the fishies, sipping pina coladas and soaking up the rays. I thought it would be worthwhile to recap the year that has been for Talga, as much for myself, as for others on this forum who I have very much enjoyed reading over the last year. I won’t name names but you know who you are (except you Beach42).
I started investing in Talga at the beginning of this year and have slowly brought my average down. I may have been late to the party, as I was busy with a few other things, but I saw the EV global megatrend really starting to take hold and though I’d better get involved. I spent many many many hours scouring the web looking for the best companies and innovations. I came across Talga surprisingly quickly given the lack of market attention she has received. It may have something to do with an old friend Pabs whose “enthusiastic” posts led me to research more.
I realised a few things….
EV’s had become mainstream and the technology was ready for mass adoption. 50% of a battery was anode and 90+% was being generated from China. Supply chains were a strategic risk (exacerbated by the pandemic) and this was an area of concern for governments, particularly the EU as a global leader in auto manufacturing. A booming EV industry and increasing demand from consumers would cause an upcoming supply crunch on battery raw materials, specifically anode. There was a social focus on everything green to combat global warming, thanks in part, to our little (annoying blah blah blah) Swedish friend Greta. There was an abundance and increasing supply of cheapy money (for better or for worse) to fund green initiatives such as the EU green deal. There was political support off the back of global initiatives such as the Paris climate agreement and COP gatherings.
Given the above Talga stuck out like a sore thumb.
Europe were planning to transition to the global leader in electric vehicles. Talga were strategically placed in Sweden with green operations, low costs, low emissions, cutting edge tech, and an absolute freak of nature, which occurred roughly 2 billion years ago creating the highest grade JORC resource in the world. The Cyanobacteria literally pulled carbon dioxide out of the atmosphere and produced oxygen to fundamentally change the atmosphere of the earth (the great oxygenation). Now 2 billion years later Talga are extracting these same Cyanobacteria from the earth in the form of Graphite to reduce our carbon dioxide emissions and decarbonise the earth. Absolutely amazing.
So what’s happened (non exhaustive and just to name a few):
- Talga released their DFS (Bankable) which showed conservativley just how good the first stage of the project is. I won’t bore you with the details but just compare it to our friends over at Syrah (who I give congratulations to for securing an offtake with Tesla)
- SYR Costs = $3,149 US/T
- Talga Costs = $2,363 US/T
- SYR Grade = 16%
- Talga Grade = 24%- LCA results showing 96% less carbon emissions than the incumbent anode (Novonix were happy with 60%). Is Talga the greenest in the world? Looks like it
- EVA Plant procurement completed and construction on track for commissioning Q1 2022. No official figure of capacity but 25ktpa trial mine assumes at least ~5ktpa anode.
- Drilling completed with initial results showing grades of 30%+ at depth of 90m (25m @ 40+%). Ridiculous. New amazing resource at Nunasvaara East too (no problem with the resource)
- MOUs with FREYR and LTC (yeah yeah MOUs I get it but better than nothing)
- New pro mining government in Sweden (no Greens) and a new minister for Industry (Karl-Petter Thorwaldsson) who is ex LKAB and pro mining
- Support from the EU with EU member of parliament, Anna-Michelle (heavy hitter), and European Commission Head of Raw Materials, Peter Handley joining call with Mark Thompson
- EU funding under EIT Kava 8 announced in December, which funds no less than 30% of total project costs (project GGBM1000, Green graphite to enable users of graphite to decarbonize). Is this Talga? Who else could it be?
Now the elephant in the room…why no JV or offtakes?
I’m not a CEO and take everything I say with a grain of salt. I view everything through my own lense which is sales in the tech industry. I try to put myself in the shoes of the other party to understand the risks/interests/drivers. It’s all about the deal.
There’s obviously a very big risk with Sweden which is the permits. Having said that, Vulcan are way behind Talga, no permits, no commercial plant, but have been able to secure $100+ million in funding and multiple offtakes with auto OEMs. Permits are obviously not a factor as the offtakes are all conditional on successful start of operations and product qualification.
There’s also a lot of talk about product qualification of anode being very different to Lithium as it's a battery ready product. However, Syrah have just proved it’s possible. They have a permitted mine and have just secured an offtake subject to product qualification (they appear to be at least two years behind Talga for qualaification).
So what is the deal with Talga?
Well MT is the largest shareholder. He has been at this for over a decade and has built this up from the ground (literally). He has had incredible foresight and an ability to pivot the business from graphene to batteries for the market demand. He knows, as is obvious, that there is a massive supply crunch coming up for graphite anode. Benchmark Minerals have been saying this for a long time but the number of articles coming out in recent weeks has confirmed it’s really starting to hit home. Look at Tesla asking the US to relax tariffs for Chinese graphite into the US this month. They haven’t event started production at Giga Berlin. Where will they get the anode?
My view, it’s all about the deal (and I could be completely way off). Forget permits for a minute, MT knows what he’s sitting on. As other have alluded to, it’s a game of musical chairs, why lock in prices now when you can wait to see who is the first to sit down at a great price and who will be left without a chair.
Syrah have forecasted spot prices in their BFS of ~US$5,000/tonne whereas Talga (and Benchmark Mineral Intelligence) have forecasted ~US$12,000/tonne for Talga’s anode material. The mind boggles at the business case, low cost, high prices, big profits.
On a final note, there have been a few personal comments towards MT on here recently. I’m not going to lie, I’m disappointed with the communication to shareholders and share price performance compared to peers. Having said that, my position is unchanged and I understand the difficult nature of multi stakeholder negotiations. I believe MT is the right man for the job and has all the right people in his corner (Macquarie and Morgan Stanley). He has skin the game (more than any of the keyboard warriors on here), knows his shit, and conducts himself like a true professional.
I hope to come back to this post in a few years time and that it has aged well. Also, please add anything I have missed.
I wish you all a merry Christmas and prosperous 2022! Go Talga.
(20min delay)