TLG - Media, page-11453

Perhaps we could discuss this binding contract with ACC and try to understand "why the deadline slippage" without the vitriol of allocating blame.

I can start with a few general comments as I see it.
There would be 4 main components to be agreed on by Talga and ACC
1. Timing. Start and finish year. Easy to agree. No problems here.
2. Quantity. Year by year. Easy to agree. No problems here.
3. Quality. Easy to agree. No problems here.
4. Price. I suspect: Extremely difficult to find agreement

PRICE Talga believes it is entitled to capture all the margin for all years of the contract. Like spot prices for metals and energy.
ACC would argue for a simple fixed price contract for the length of the contract (as per Syrah and Tesla)
These are the two extremes and I see Talga's wish as very hard to define (more argument below) and ACC's wish
as a bonanza for SCC and a potential disaster for Talga (and for Syrah) in an inflationary environment.

There are a couple of well proven models to consider.

1. The commercial property development model
Rental agreements are a blend of fixed price rental adjusted for inflation each year and often with a price reset every 3 years or so
This price reset or rent review is based on the spot prices of similar properties and carried out by an independent arbiter nominated
in the contract.

2. Do what other resource companies do and ride off the back of LME spot prices for any desired blend of fixed and spot.

The big problem for either model is that there is no acceptable and recognised provider of spot prices.
Firstly, all graphites are very different. Firstly by flake size and with anode material it goes a whole lot deeper than that.
Secondly, China currently has complete control of the World market for anode material and would be able to manipulate said
spot prices to suit their own marketing and profitability ambitions. We can already see that in play, with them relocating
some of their synthetic graphite production from the North (where all the Coal fired power is used) to the South
(where there is some hydro power). It appears they are well ahead of Europe with their taxes designed to penalise imports
with "non green" energy content.


Enough of this nonsense of mine. I'm hoping that someone out there can see all this with a much clearer focus than me.