TLG, Haydale, ZEN and PPE

This is going to be a very long post .. so for those that are of the TL - DR camp my apologies. What I'm asking those that have an affinity with numbers and measurements to review and discuss if I've got it right or if I'm out by a order of magnitude or two with all the conversions.

I'm am addressing the PPE opportunity that (apparently) exists today with Graphene. The ZEN in the heading is ZEN Graphene solutions (a Canadian company on the TSX ... which I have a small position in) and this is not cross promotion as the "equivalent" solution from TLG is their partner - Haydale Graphene Industries Plc.

The background context can be found via these links:

https://www.haydale-ir.com/docs/librariesprovider23/archive/media/2015/haydale-talga-collaboration-agreement-9715-final.pdf
Excerpt & my bolding .... I know its from 2015.
"Talga is close to commencing trialproduction in Germany and once mining at full capacity, Talga expects to be oneof the worlds’ largest nominal cost producers of graphene nano platelets(“GNPs”). Pursuant to the Collaboration, Talga and Haydale will jointly explorebusiness cooperation opportunities through the supply of Talga graphiticcarbon nano-materials, graphite and GNP’sand testing thereof withHaydale’s value-add low temperature plasma treatment and end user demandchains."

MarkThompson, Managing Director of Talga Resources added:

“We aredelighted to enter into this collaboration with Haydale, who are positionedfurther down the supply chain from Talga and provide optimised grapheneproducts tailored for specific applications.

Now I'll fast forward to 2020/21 timeframe
https://haydale.com/news/haydale-signs-sole-distributor-agreement-for-graphene-nano-platelets-enhanced-icraft-ppe-mask/

"Haydale, (AIM: HAYD), the global advanced materials group, is pleased to announce that, further to its announcement on 9th September with reference to its graphene nano-platelets (GNPs) being incorporated into iCraft’s cosmetic face mask sheet, a further contract has been signed which makes Haydale the sole distributor of iCraft’s GNP enhanced, anti-bacterial, neoprene PPE face masks."

"These PPEface masks have been developed by iCraft using Haydale’s GNPs and haveachieved antibacterial activity of 99.9%."

and also we have
https://statnano.com/news/68350/Haydale-Graphene-Says-Partner-Starts-Face-Masks-Production
"Haydale Graphene Industries PLC has announcedthat its partner IRPC has now completed the development project with Haydaleand started production of its new washable functionalised graphene-enhancedfabric mask.

IRPC has placed a follow-on order for 200kilograms of Haydale's bespoke ink, with further orders anticipated, theadvanced materials group said.
The face masks are currently being produced foruse internally within the IRPC group, with a forecasted external order book for2021"

Between 2015 and 2020/21 there was further activity going on this collaboration



Worth looking at the supply agreement referenced.
https://www.talgagroup.com/irm/PDF/2163_0/CommercialSupplyandDevelopmentAgreementwithHaydale

Enough background …the question I have is simple “Is TLG supplying GNPs for those Haydale facemasks?”

I have a (small) position in ZEN who started life with ahigh grade graphite deposit (still have it) but changed focus to “industrialtech” … as in it can use easily source (cheap) Graphite and manufactureGraphene Oxides (GOs) to produce their GNPs. OK if you got this far stick with me because now I'm going to put some numbers out there based on what ZEN (and to some degree Haydale) is suggesting. These are straight out of ZEN's Aug 2021 presentation:




so that 3rd piece - "ZenGuard" is the graphene IP that goes into coating PPE and other future products. Not bothering to go into whether this works as advertised - in ZEN's case I'll let Health Canada make the ruling as whether "is compelling" and if so I could see lots of other countries Health Departments doing similar. Don't seek this as a wide moat either (I mean how hard can it be to coat the material for making face maks or filters ... probably harder than I think).

This leads to



and now the money slide from ZEN


What I want to know is how that translates into revenue and earnings on the basis of what was described. I come up with the following thought process ... which I think would apply directly to Talga/Haydale if indeed they are partners

For ease of calculations assume steady state PPE Mask (so nohat/gown/footwear) demand is 1T masks and ZEN captures 2% marketshare (doesn't seem like a big ask if it such a big improvement) whch means 20Bmasks and then assume the mid point gross margin is US$0.03/mask.

I’ve read that cost to manufacture disposable mask is~US$0.60. Assume adding Zenguard to the process costs US$0.04 .. (hence theGross Margin for Zen is $0.03/$0.04 = 75%) … on the basis that Graphite ischeap (~ $500/tonne) & Graphene is not (~$50/g … $50,000/tonne).These numbers are also fairly old TLG numbers ... anyone care to challenge

Gross Profit =1T (masks) x 0.02 marketshare) x $0.03 (gross margin per mask) = US$600,000,000 per year.
Thats a big $$$ number … but how much (grams) graphene does each maskrequire?

In my example if COGS = $0.01 … which is simply the costof graphene per mask. So 1c worth of graphene at $50/gram translates to 0.0002gor 2/10,000^th of a gram or 0.2mg

Beats the shit out of me how they deliver the mask material(presume it is some form of spray onto the material used to make the mask) soI basically need to figure out how much material (in sq mtrs) that this 0.2mgof Graphene coats.

IF truly just 1 C atom thick then single atom layer ofgraphite (i.e. graphene) is ~0.37 Angstroms (or 0.037 nanometers (nm)). TheVolume of this "flat" square metre 1 Angstrom thick is then 0.037 cubic millimetres. Thedensity of graphene has been measured at ~2.71g per cubic centimetre. Multiplytogether and its ~1 cubic metre that is 1 Angstrom thick …. in otherwords a flat 1 square metre (or 10,000 sq cm) per 0.1 mg of Graphene.

Net Net … if I have the calc correct, then 0.2mg ofGraphene coats 2 sq m of material at thickness of 1 atom. Since a mask doesn’tneed 2 sq m of material … maybe just 333 sq cm of material (0.0333 sq m) thatcould mean 30 masks ...or 1 mask ~30 C atoms thick.

If I am correct then I can extrapolate out

At 0.2mg graphene/mask (1c cost) to make 20B masksrequires approx 4,000Kg (4 tonnes) of Graphene raw material (less than 1% ofbelow scoping). 4 tonnes of graphene is not a big deal for TLG.

The less than 1% of scoping come from TLG's 2015 preso on Graphene ... pay close attention to the minimal Capex

I'm reasonably comfortable with the above story for ZEN and its PPE partner and I'm hopeful Health Canada see's the benefit and approves ... but I also think there is very little moat in making graphene and the IP must be in the coating process….but what’s happened with TLG and Haydale?

That implied Gross Profit number($600M) would have minimal Capex required from TLG

Obviously Haydale must have some IP and effortcontributed. Even if it was a JV split 50:50. I’ll call it $300M EBITDAX …which with ~300M SOI is $1 ofEBITDAX per share. Draw your own conclusion as to what an appropriate multiple would be for just this use.

I remember a deep discussion on TLG being valued as aspecialty chemicals company. So what has happened with Haydale JV that “IRPC has placed a “follow-on order for 200kilograms of Haydale's bespoke ink”… but no mention of TLG.

Has TLG let some low hangingfruit go by bye …???

Anyone know more and is the math right in terms of size of business opportunity

Thanks in advance.