Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
I ran some calculations on the HY23 and FY23 costs of production and they clearly demonstrate that in H2 2023 TGR's cost of production was running at £250/Mt when producing 3,039 tons.
They just produced 4,508 ton in the first 6 months of FY24. So even with inflation that £250 should be further under pressure. But at the very least it should be fairly stable.
So £658/Mt achieved prices is very healthy. hence the positivity from TGR management on progress and debt options. But its been completely lost because of fear of a discounted raise(still possible but I don't believe it) and production that is deemed to have gone backwards in Q2. Meaning forecasts were wrong.
@MasterMetro I wouldn't put down the current achieved prices as a negative.
If anything the £658/Mt was one of the biggest positives out of the update. It is well known that graphite prices have pulled back significantly this year. So still achieving such a figure between April to Sept given the majority of the world's manufacturing base has been in recession for over 12 months now was impressive. With shortages expected in 2024 graphite prices may now not be too far off from bottoming if they haven't already.
It must be said that TGR does still achieve a large discount to what it should given how much jumbo and large flake are in its basket. My theory for some time has been that TGR can close this gap as it improves the quality of its final products. This was indicated in the 4th April 2023 RNS ( completely ignored by the market) which talked about,
"TG's first container of 97% jumbo flakes >50 mesh size has now been produced for a German manufacturer of speciality graphite products;"
"Targeting c.10% uplift in basket price realisation from Madagascan production to between US$910 - US$935 per metric tonne in the fiscal year to March 2024."
A clear sign that whilst graphite prices in general fall back TGR as a new producer that is bedding in can counter this in part by improving the quality of its overall offering.
At those sorts of price levels or even 10-15% lower TGR can still progress and expand (wth debt agreed of course) and be ready for what will be an inevitable surge in graphite prices as manufacturing once again moves into expansion + EV demand rises + the hole left by delayed new one construction is felt in the supply/demand dynamic.
Aploogies fat fingers. I trust you understood what I had to say.
This news out of China only compounds my argument. Producing graphite mines are few and far between. New mines are trying to get built but finance is hard to come by and takes far longer to achieve. Plus, costs have gone through the roof. At some point in the near future that will start to show itself in ex-China graphite prices (driven by the call to find non-China supply) if not all graphite prices full stop.
TGR is one debt deal away from delivering +20,000tpa or even more and is saying it will be in place by March 2024. Yes it may take longe than that but who cares because even 20,000tpa is a big operation that should demand a MC 3x what we see today.
This is a crazy market doing crazy things with valuations and there lies the opportunity if one is prepared to read and understand things properly.
Morning all,
Here's a thread I have put together that highlights just how insignificant the cost would be to introduce two more PCUs. Plus, it (hopefully) demonstrates just how much room TGR production has to grow without these units which would be designed to get TGR beyond 20ktpa.
It certainly isn't easy being a TGR holder or believer these days. Yes they have let shareholders down with their forecasts but I am strong in me belief that it is not down to a lack of effort. That shows itself in the limited CAPEX and costs it has taken TGR to reach 30,000tpa capacity. In hindsight perhaps more spend would have led to less problems but that is the past now. It is also certainly not down to bleeding shareholders dry through large placements.
These guys run a right ship costs wise and have now finally reached a plateau that allows them to leverage their revenues to fund the next stage. Which is why I find the idea of a big discounted placement so unlikely. It simply does not fit the MO here. Especially when it isn't required to keep the lights on or deliver first production. It is for future higher production that is well beyond the point that TGR can be profitable.
I am happy to focus more time to this one for the foreseeable because I think TGR and their loyal shareholders are getting a rough time. The market has become very lazy and is too easily tarring companies with the same brush. That is not to say that TGR need to get its house in order and improve corporate governance and communication. 100% they do. But nor does it justify pushing the valuation down to such deflated levels when despite the shortcomings real progress is being made on a show string budget.
https://x.com/BigBiteNow/status/1715274521932968031?s=20
Don't forget the +£1m VAT refund that was overdue as of 31st July.
Receipt of those monies puts all concerns over cash on hand well and truly to bed.
(Apologies I have re-posted and changed to production because that is all that matters on the cost side of things).
@Andii.
I will chip in here if I may.
FY23 saw cost of sales running at £1.531m based on 4,770 tons of production.
Admin costs were £2.44m
Finance costs at c. £250,000 and depreciation at £1.024m were non-cash items
Production cost for FY23 was £321/MT but that gives a false impression of what TGR can achieve at higher production levels.
HY23 production costs were £787,312 against 1,731 MT of produciton. H2 2023 delivered 3,039 tons of production at a total production cost of £744,037.
Meaning H2 2023 unit cost of production was around £245/MT.
I wonder how many have even bothered to run that calculation when presented with an average sale price in HY24 of £658/MT. Because having produced 4,508 MT in HY24 (as disappointing as it is given we were promised more) that cost must surely be being pressured to the downside. At the very least even with yearly inflationary cost pressures (which were much higher last year remember) it should be standing still.
So £245 vs. £658. Hence why TGR's statement that 800-900 tons of sales per month leads to the company being cash flow breakeven at the corporate level.
Also, because the 18,000 epxansion at Vamtomina has been in production for all of this calendar year so far it is likely that the running costs were also already in play.
This is why TGR doesn't need 30,000 tons nor even better than 3% grades. Because they have more than enough capacity even with this slower ramp up to amake solid enough posiitve cash flows to ensure a debt package can be agreed and financed moving forward.
It is mystfying to me that these numbers aren't better understood because they eradicate the majority of the negative arguments and concerns being put forward by persons who haven't researched TGR enough.
TGR management have guided too high and promised too much in the past but nobody should be doubting their commitment to cost controls and ability to produce graphite profitably. This company is safe at 15ktpa and that is where they are today. That should be clear for those that are prepared to run the numbers properly.
@Andii.
I will chip in here if I may.
FY23 saw cost of sales running at £1.531m based on 3,982 tons of sales.
Admin costs were £2.44m
Finance costs at c. £250,000 and depreciation at £1.024m were non-cash items
Production cost for FY23 was £321/MT but that gives a false impression of what TGR can achieve at higher production levels.
HY23 production costs were £787,312 against 1,731 MT of produciton. H2 2023 delivered 3,039 tons of production at a total production cost of £744,037.
Meaning H2 2023 unit cost of production was around £245/MT.
I wonder how many have even bothered to run that calculation when presented with an average sale price in HY24 of £658/MT. Because having produced 4,508 MT in HY24 (as disappointing as it is given we were promised more) that cost must surely be being pressured to the downside. At the very least even with yearly inflationary cost pressures (which were much higher last year remember) it should be standing still.
So £245 vs. £658. Hence why TGR's statement that 800-900 tons of sales per month leads to the company being cash flow breakeven at the corporate level.
Also, because the 18,000 epxansion at Vamtomina has been in production for all of this calendar year so far it is likely that the running costs were also already in play.
This is why TGR doesn't need 30,000 tons nor even better than 3% grades. Because they have more than enough capacity even with this slower ramp up to amake solid enough posiitve cash flows to ensure a debt package can be agreed and financed moving forward.
It is mystfying to me that these numbers aren't better understood because they eradicate the majority of the negative arguments and concerns being put forward by persons who haven't researched TGR enough.
TGR management have guided too high and promised too much in the past but nobody should be doubting their commitment to cost controls and ability to produce graphite profitably. This company is safe at 15ktpa and that is where they are today. That should be clear for those that are prepared to run the numbers properly.
But you've been told today that TGR is producing at 40-45 tons per day. So my question to you is why are you ignoring that? Because that substantially affects cash flows now and going forward. Even a rudimentary review of the FY23 accounts will demonstrate that.
That news has pushed the SP to below 15p. Is it better or worse to be producing at +70% more than you were in Q2?
Agreed ID78. It is not a blockbuster RNS by any means but when read carefully and compared to previous available info it clearly demonstrates that cash is not an issue.
The focus seems to be on Q2 when the costs associated with that time are already behind us. We are now well into Q3 and production is already at a completely different level. Not blockbuster. But not problematic enough to warrant a 16% drop from such deflated levels either.
The head grade issue is not new news. It was being highlighted in RNSs as far back as last year.
It is not a reduction because they have never achieved it. So the production and indeed financials to date are based on that level of grade. After all the feed capacity is running at 75% of the nameplate and rising and the plant is designed for 30,000 tons. So there are no problems with the overall operation. It is merely the grades.
But even with that issue in play TGR can produce 15,000 tons rising to 20,000 tons and can counter it with additional pre-concentrate units which if you look back at TGR's history do not cost very much to install. So whilst disappointing it is not an unmitigated disaster which is highly inflammatory wording.
15,000 tons easily deliver positive cash flows and so a debt package. This is as I have said a producing company. Not a junior going cap in hand to keep the lights on. I am flabbergasted as the response and the comments here. But it is where this market is right now. Nobody trusts anything they read. Positives are ignored and certainly drowned out by an interest to only find what is a potential problem or negative.
That time will pass though and then the real influences on graphite and ex-China producers will once again come through, and despite what so many wish to strongly indicate TGR will be around to take advantage of it be it they ave work to do to counter the long-standing issue they have had with lower grades.
Agreed production in Q2 was down slightly. 2,137 tons vs. 2,371 tons in Q1. That is disappointing.
But even at that lower figure combined, that looks sufficient to deliver TGR a positive cash flow outcome even based on FY23 costs per ton. However, that cost per ton figure must be lower because TGR has nearly produced in 6 months what it did in a full year. Economies of scale.
More importantly, the current run rate of 40 to 45 tons of flake production per day easily carries them beyond that point and the market is supposed to be forward-looking.
The lower head grade is not new. It has been a thorn in TGR's side for some time. But even with it in toe TGR is as we speak currently running at 15,000 tons per annum. That will generate positive cash flows for the company and allow debt finance to be secured. Hence they are able to talk about it and as they say it's due to "expecting strong financial."
"As perhaps the only Graphite Company to have had positive operating margins since inception, and with the scale of operations now reaching the point where the Company is expecting a strong financial, we are furthering potential debt engagements with institutional providers."
The market is continuing to pound TGR management for missed targets and promises. So I can understand a discount but we are talking about a £15.5m MC for a company that just spent £6.8m on advanced-stage Mozambique assets. Those assets have had + £20m spent on them to get them fully permitted and partially built.
Despite their setbacks, this is a growing producer in a mineral that is about to hit a big supply deficit. As an is ex-China supply of which there really aren't very many their product will be well sort after and with that comes financial (debt/investment) and pricing support.
If TGR was getting hammered today from a 30-40m MC then yes I could buy the justification for the disappointment. But it's already priced below the total spend to achieve where it is today.
The market immediately (again) thinks cash shortfall but that is not the message in the update and a far as I can see non of the positives about where TGR has reached and has before it are in this MC.
That is a much stronger update from TGR than the market reaction gives credit for.
By my calculations, cash flow breakeven is already being achieved. H2 at the current run rate of 7,500 tons will compound that even if graphite prices weaken more. Yes, they indicated more production would come through but what's key is where are they now and what it means for their cash on hand and future options.
The message is clear.
"As perhaps the only Graphite Company to have had positive operating margins since inception, and with the scale of operations now reaching the point where the Company is expecting a strong financial, we are furthering potential debt engagements with institutional providers."
Positive enough margins and production going forward to allow a debt package to be agreed. Which is obvious really when one considers that this is a producer and not a junior. Be it that it is priced today as an early phase one. A crazy reaction by a market that is fearful of everything right now and blinded to what is clear (be it yes less than wished for) progress of this business.
https://x.com/BigBiteNow/status/1714903698399281220?s=20
As I highlighted already on this BB I believe. That update from BM on their TGR holding indicates that they stepped selling when the TR1 was announced. Otherwise, why show your cards to the market before you are finished?
What it also demonstrates is that they don't need funds for an acquisition because it's being paid for in new shares and they simply cannot afford more than one right now. So its all about working capital and exploration funding.
I do suspect the other 1.6m will go also be sold at some point but that in itself could well deliver them another 6 months of funding and so the idea they sell it all (right now) looks to be the wrong conclusion. 1.6m shares is nothing and will be gobbled up if over the next 3-6 months TGR delivers on what they say they would in the Q1 and pre-payment updates.
Starting to get interesting at these levels.
https://x.com/BigBiteNow/status/1714194434110136753?s=20
Note he was never made a director which perhaps also supports the argument that his appointment was never meant to be long-term.
Or perhaps having secured the latest debt financing and funding and having steered the company through its initial set-up phase, his task was done.
The next stage is rapid growth and STX may well feel their days of securing difficult funding are behind them. That may well be a phase that Hans Peter feels does not suit his skill set. A bean counter vs troubleshooter. Horse for courses.
It's all just opinionating of course. I quite liked his approach in the limited number of presentations I saw him take part in. It will be interesting to now see who takes his place.
I suspect somewhere in the middle of both your conclusions is perhaps more realistic.
BAT spent c. AUD$1.6m in HY23. They had c. $1.66m left in cash. £1m in realised sales = AUD$1.9m today.
BAT spending on exploration was somewhat curtailed in HY23 vs. the previous year so perhaps they will up that but still
the figures demonstrate that BAT has likely created a window for itself without the need to sell the next batch. That doesn't mean they won't but logic says they will appreciate just how discounted their sells have been and so allow TGR time to report through until FY24 end (March 2024) before making their next move.
The first set of sales was certainly an emergency. The second isn't when they are released in December.
But at the end of the day, the most important thing is progress on the ground for TGR. Start delivering on the capacity and those 6.5m shares really won't matter anymore.
Minimum TGR can deliver its Q2 and the half-year report before BAT can begin to sell. More likely they will be able to demonstrate Q3 also. By that point I expect production to be markedly higher with cash levels finally starting to grow. Even in this atrocious market that should mean a valuation significantly higher than 14p a share whatever BAT does or does not do with their shares.
@shandypants2
The beauty of investing is that everyone sees things differently which creates the market. If everyone thought the same there would be no market. No opportunity.
Many things can help alter the way we all think and drive sentiment. Some are conscious others not so. The share price falls and everything is bad. Share price begins to rise and suddenly everything that is good is obvious and we chase.
Q3 will soon demonstrate +80% growth in sales. Q4 likely another 65% delivering c. 50,000 prescriptions. At that point, the product starts to look like it is getting real traction and suddenly investors start seeing things in a different light. The funding was necessary. It came with debt and will carry us through until Q3 2024. The partnership is a success. I can dream of bigger prizes and start to get greedy.
If so then how much the CEO gets paid or what he did with the last two raises will be of little consequence. His job is to deliver this product to the market whilst securing significant capital to increase group spending on the team that can ensure it is delivered. That comes with pain and curve balls. That's the art of growing a business from a standing start. Nothing ever runs smoothly enough.
What matters is the general direction. Are physicians beginning to use the product and are they coming back for more. The answer so far is a resounding yes and it is being driven by a partnership and sales force rollout that this CEO has driven.
So long as that growth path holds true (and there's no reason to doubt that to date) then everything else around gross to net etc comes with it meaning a final outcome that looks to be a very good one. The only details we need to then understand are how many shares is it going to take to get us over the line. Given the recent fundraise was mainly debt-driven that number shouldn't be too scary vs. the rewards that success will deliver.
I see no problem with trust. merely a need to see more numbers in a market that demands more in order to reward.
A Q4 that delivers almost as many prescriptions as the first three quarters together should be enough to convince even the biggest of sceptics. But like with many of the companies I own right now this is not new news. STX have said they will hit this but a marker full of fear cannot bring itself to see it before it is clearly written down on RNS paper. There's lies the opportunity in my eyes but as I said at the beginning everyone is different.
(I am re-posting part 2 simply because the grammar was too awful to ignore).
The market may be bearish but it loves re-rating investments it priced wrong. Even if past promises didn't happen. If the goods begin to be delivered at this sort of valuation then TGR will re-rate accordingly and I believe the company has already told the market enough to begin that journey. The trouble is the market is so bearish and so busy exiting right now that it has forgotten to read what it has been told and there lies the opportunity for those that would try to understand.
Rather than just ******** and moaning about what should have been time should be spent looking into the detail of these companies to understand what could or should about to be. Because in this heavily discounted market, that edge can be worth a lot of money.
2/2
the market may be bearish but it loves re-rating investments it priced wrong. even if past promises didn't happen. if the goods begin to be delivered at this sort of valuation then tgr will accordingly and i believe tgr has already told the market enough to begin that journey. the trouble is the market is so bearish and so busy exiting right now that it has forgotten to read what it has been told and there lies the opportunity for those that would try to understand.
rather than just ******** and moaning about what should have been time should be spent looking into the detail of these companies to understand what could or should about to be. because in this heavily discounted market, that edge can be worth a lot of money.
1/2
All that matters front end for the TGR share price right now is proof that they are able to stand on their own feet financially. They have said they can but past failings prevent this particular market from believing it and there I feel lies the opportunity.
TGR is not trying to refinance or service substantial existing CAPEX-driven debt. Nor is it about attempting to raise substantial capital to build a new mine. Those that are attempting to do so are going to find it difficult for the foreseeable future and most will fail or hurt their shareholders hard along the way.
TGR today is about demonstrating it can fill the capacity it has already completed. Costs are clearly well under control and will further improve with capacity utilisation but the market needs to see the production rising.
Small-caps and in particular miners are in a deep bear market and finance is hard to come by and expensive when it does. So funding is everything right now and where there is any doubt the market wants a significant discount. But any company that can demonstrate it is viable and can be believed that it requires no capital from the markets can very quickly re-rate as that discount unwinds. TGR's position is amplified by a significant holder (BAT) selling down into an illiquid and unloved TGR market.
Trust also plays its part and forecasts on production and indeed TSG has not materialised and in this market that a red rag to a bear. Especially when one throws in late accounts etc.
The key difference I see this time around is that TGR has already reported on what it is achieving (1,200 sales + spot sales in Q2) but the market has ignored it driven by BAT selling. My posts the other day attempted to analyse what these figures already mean even when applying a safety net to pricing and perhaps costs too which weren't a stretch.
Q2 is the first leg of the journey to recovery here. The further TGR gets away from 900 tons production/sales per month the wider that safety net becomes and the more the market will allow the discount to be worked off. A further demonstration of somewhere even close to 75% capacity utilisation in Q3 (which is still a forecast and not yet a reality) given what TGR has achieved cost-wise at 4,770 tons would then be the next even bigger kicker for a share price that has clearly been battered down lower than it should due to the reasons I have already given.
That's because even the most basic among us could calculate that it means a cash-positive TGR even in a market of softened prices. Confirming the ability to invest further without the need to raise further capital.