There were many great topics covered, but these were the parts that stood out the most to me. It’s a mixture of paraphrasing and direct quotes.
Mark noted the difficult macro conditions for the battery sector with lithium’s collapse and negative media coverage but stated that Talga’s side of things “are frankly very good.”
He stated that he’s not in Stockholm for a conference but “we actually have car companies here, we have customers here, there are politicians here and policy makers from Europe, so doing a whole bunch of things.”
“One thing the outside world is not being reminded much of is, we’re not actually a one project company, we’re actually developing a whole range of battery materials. There’s diversity to our products, different technologies, different markets. All being developed parallel. Of course our main project is Vittangi, which is a mine to battery project here in north Sweden, which is drawing very close. But do not forget we are exposing ourselves to many other parts of the market as well that is growing in electrification. The growth rates may change a little up and down, but overall is still growing really strongly. Just a reminder that your company, if you’re a shareholder, is not just about a single project, it's created a lot of value that’s probably on the verge of coming out in various ways.”
“The big thing was in the last quarter, the news that the Chinese were looking at export restrictions from December 1, that news was announced in October, the day after it was announced, I had to fly to a different country every single day meeting auto makers. For the first time we’re seeing auto OEMs much more interested in anode supply chains, than the cell makers ever were.”
"What this news from China did was, the end users realised that they were much more exposed than they thought. It wasn’t the fact that China have exported restrictions to zero, it’s that they suddenly realised that, particularly on the graphite side, they hadn’t been paying attention and that they had to do something about it strategically. We’re now inundated with site visits and interests not just from within Europe, but in America as well. To be honest it’s been fantastic for business. It essentially did a lot of the heavy lifting that we’ve been talking to these customers about for a long time, and now they’ve got an accelerated attitude towards these things. The localisation of supply chains is no longer theoretical, the increase in deglobalisation, a much harsher geopolitical landscape, it’s not going back to what it was before where you can import disinflation from China. Everyone is realising that if you don’t have your own thing, you will possibly come to an end.”
Mark also goes on to state how the EU must protect their automotive industry and why the destruction of the automotive industry would be far worse than what happened to the solar panel industry.
“The difference is you’ve already got millions of people employed in the industry, been going for a hundred years in countries like Germany and France, so they’ve got a lot more to protect. They’ve got billions of dollars of debt in pension fund payments for all these workers, they’ve got a much higher level of investment that they’re trying to protect. Its a different motivation, otherwise you could just say sure, cheap BYDs come on in. There is a fight they’re looking at having to support their industries, whether that’s through tariffs, going against free trade principles, whether it’s through increasing subsidies to local providers, either way it’s supportive of what Talga’s doing, which is setting up a non-Asian replacement of Asian battery supply chains.
For us internally, business has never been better. Fundamentals of the interest from where the customers are at has expanded from cell making and going beyond to the autos, the final customers who were happy just to let the cell makers do whatever they want, now actually strategically the auto OEMs are much more concerned about it now. “
“Customer off takes, some of them have already been advanced as far as they can go, and they’re waiting on some of the things around the project, new ones are continuously underway. The customers you have visibility on are not the only customers, that’s for sure. There's a whole heap and that’s accelerating after these recent events."
Mark mentions that the company had hoped that the appeals decision would have wrapped up by Christmas, that hasn’t happened yet but states that it is getting very very close. Says that we have reason to be confident that it is nearby.
“We don’t get official detailed information before the announcement is made publicly. Certainly from working with policy makers and local politicians and people within government here, everyone is confident and with fingers crossed.” He mentions that if the appeals go against the company, they can still apply for an execution order and potentially start the project anyway.
On the financing of the project, which I was most happy about. Note the talk about project finance, not equity in the company as well as strategic partners with prepayment purchase agreements.
“We’ve stated our target for 60% debt funding and 40% equity for a long time now. What people, particularly research analysts have to do, is they say well I don’t know where the 40% equity is, but I guess you’re going to issue shares for it and that’s going to be hundreds and hundreds of millions of dollars, and of course, we say no that’s not the case.
We have a whole range of options. For example, there are EU and different member state grants and state aid available. Now you would think we would be applying for these, and we are, but unlike the American system where you talk about it from the beginning, in Europe you can’t actually talk about it until the end. So when they’re fully approved and granted, but during the process you’re not allowed to say how much you’ve applied for and who with.
We’ve got pretty good chances, you would imagine. We’re a critical mineral, Critical Raw Materials Act has just come out, it’s going into force in the next few months. As part of that they designate strategic projects for Europe, which can also facilitate access to various funds.
Essentially if you look at our package, the equity component of financing the project can be broken down into as much aid as you can get from somewhere else. There’s Australian companies, they get up to $200m in some sort of aid from either the Australian or US government. We haven’t done that yet, you haven’t heard us because you can’t talk about it until it’s finished. But of course those things are underway with us to decrease any other funding requirement on the equity side.
Then what’s left? You’ve got two things to do. Number one you could pay for it yourself if the shares are $5 and it’s not going to hurt you too much in the company’s dilution. But times are not like that, so you look at strategic partners. What does that mean? Pre-payments or off takes. Strategic investment, not necessarily into the company, but into the project by a player or an actor, that can help continue to decrease your funding requirements going forward.
Times are tough, but that’s okay. We are asset rich. We have many things to sell and work with, with various partners. It’s not even in the project, there are other parts of the business as well. The lithium discoveries, the cobalt deposits, quarter of a billion tons of iron ore in resources, copper projects including resources. Then of course silicon and other battery technologies, that separately can also attract state aid aid strategic investors and who’s money could essentially be paying for parts of the company and forming part of that equity. We don’t sit around in corporate-land thinking about just dashing shares away. We’re under no pressure, we have options and time. The point is, there’s a whole bunch of solutions. It isn’t that we’re going to issue a quarter of a billion dollars of shares for equity.”
On the new members of the team:
Per-Inge Kruse is heading up business development and strategic alliance. “He’s ripping into that at a rate of knots, I can tell you. We’ve been on the road already and we’re hitting the road again this weekend for a very exciting trip to some customers while here.”
Eva Nordmark, Mark says she’s very well connected and interested in the nation building part of what Talga is doing as well as the environment cleanup part.
For those that are thinking that a positive appeals decision will be brushed off by the market or the current shorts with 17.2m shorted, Mark once again stated that the finalisation of the permit “allows for the finalisation of the finance and the off takes, basically. Plus we’re looking at off takes for other products from silicon, to underwrite those things as well. We’ve obviously got a bigger focus on strategic partners now and government funding. So both of those things will be coming out as well.”
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