In my opinion, Magnis Resources may be the TON of Tanzania for the following reasons:
1) There is only$AUD6.066 million left in cash;
2) No battery-grade graphite off-takes have occurred;
3) Directors Cobb & Len are leaving;
4) The feasibility study's US$1.69 billion NPV requires 240,000 tons of graphite to be sold p.a. to justify the number; with no offtakes the NPV is currently negative.
5) The project relies on lithium-ion batteries remaining technologically supreme; this cannot be guaranteed, so, which bank would lend funds to such a high risk project vulnerable to technological change? Likewise, which shareholders would provide the required funds with such technological risk present?
6) The mine requires US$259m/AUD$340m in capital expenditure.
7) Consumers are largely indifferent as to whether their graphite is chemically processed or not.
8) Magnis Resources' graphite has a tap density of 0.9-1.2 g/cc (Syrah 1.07; the higher the better) and a BET ranging from 1.5-6m2/g (Syrah 2.01; the lower the better).
Benchmark minerals forecasts that spherical graphite demand will increase from 80,000 tpa to 250,000 in tpa by 2020; an increase of 170,000 tons p.a.; Syrah has already committed to providing 59,000 tons of spherical graphite (50,000 for Marubeni & 9,000 for Morgan Hairong who appear indifferent to chemical processing) leaving a potential 111,000 tons on the table "up for grabs".
Magnis Resources are in a competitively weak position with no mine and no material customers. If Syrah Resources procures offtakes for a significant chunk of the remaining 111,000 tons in spherical graphite to 2020 (using its new 20-year-BHP salesman), Magnis' NPV will decrease. As things stand, 141,000 tpa from Magnis' proposed mine will be allocated to battery-grade feedstock, assuming a Process Recovery rate of 92% (Feasibility Study) would see 129,720 of battery-grade graphite produced (19,720 above the current forecast deficit).
Magnis Resources and Syrah Resources are in direct competition with each other (despite all the cult-like claims to chemical-free superiority that no empirical-offtake-evidence has supported) much like Triton Minerals was previously. Magnis' management team made a bold strategy change to target batteries and high end uses, the problem, is that the feasibility study falls over if there's a technological change to lithium-metal batteries or something else; in this environment and with informed investors, I believe it is unlikely that Magnis will reach production because AUD$340 million is too large a figure to raise with such technological risk present. As such I think that Magnis will fall by the wayside much like Triton did.
Finally, this is all in my opinion, lots of my opinions have been wrong in the past, and no doubt more will be in the future. Besides the inevitable ad hominem arguments to come, I'd be interested in reading why Magnis will succeed and whether there are any compelling reasons to invest in Magnis beyond it's chemical-free value proposition?
(20min delay)