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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.

@Genghis15

I hear you but TGR management has always tried to squeeze the maximum out of their cash resources and avoid dilution where they can. They can be criticised for many things but not wasting cash or new shares.

What matters now is does the share price reflect the progress and from my detailed review the answer for me is a resounding no. In this current market mistakes and lack of trust are being punished hard. But there's room for optimism here and if TGR do indeed begin to demonstrate significant progress in production then many of then their past mistakes can begin to be forgiven. A significant re-rate is not out of the question if they hit their Q2/Q3 targets.

3/3

The BOD has made a number of big errors along the way and corporate governance has been poor at times but there's no denying the tenacity of the team in charge and their desire to squeeze maximum value out of their meagre cash balances.

Hit anywhere close to 75% utilisation in the next 3-4 months and those skills can likely be applied to a (relatively) much greater cash balance. Debt options will open up and further expansion can once again be focussed upon. meaning investors can begin to look up rather than so down.

There is plenty of slack for TGR here to fall short of their Q2/Q3 goals and still deliver a far better picture than is being priced by the market today. So I can afford to forgive the BOD their failings at this sort of valuation with the chance they may actually deliver what they say this time. If so then there is big upside to be had here safe in the knowledge that TGR is priced to fail on all fronts as things stand today.

And I haven't even mentioned the Suni assets and what their value means for the overall TGR EV at 14p a share.

2/3

That would see TGR running at c. 8,200 tons above their positive operating cash flow position which even in a softened graphite price environment is a big deal vs. today's valuation.

The other thing I am drawn to here is the production cost.

FY23 delivered an average production cost of £321/MT but that included a much higher HY23 cost of £454/MT.

Stripping out H2 2023 numbers on their own we see 3,039 tons produced for a total cost of £744,037 = £245/MT.

That is what TGR could do when producing just 3,039MT in a 6-month period.

Their guidance as of 10th August is that they expect to fulfil c. 9,500 MT of orders likely in H2 FY24. Some production costs will rise accordingly but they are unlikely to outstrip the gains made from what would be a 212% increase in output.

Now some of those sales could be from inventory but I measure that running at best case c. 721 MT post the Q1 401MT drawdown. So the vast majority of those sales need to be produced. Meaning production has to rise markedly.

That brings me on to the messaging around production in the 8th Aug Q1 FY24 update.

"Tirupati is managing its operations within the available resources while ramping up sales and production, and expects to reach c.50% capacity utilisation in the current quarter and c.75% in Q3 FY24."

It is notable that 5 weeks into TGR's Q2 they are stating they will hit 50% capacity utilization. Equal to 15,000 tons per annum or 3,750 tons per quarter. That would place TGR at just 2,000 tons short of their sales goal during that 6 month period.

Again, if we tie this into the "executing annual orders with average monthly volumes of c.1200 tons, in addition to various short-term and spot orders it receives on a regular basis" statement then it's further evidence that 50% capacity utilisation is being hit in Q2. Unless TGR has pulled a load of inventory out of somewhere but even then I don't care too much because this is a figure that delivers positive operating cash flows.

Now it could be that the 50% capacity only gets hit at some point during Q2 but that doesn't matter because twhat's most important is it has been reached. That progress is happening and the fears around cash resources and funding can begin to dissipate. That's base case with everything else a lovely bonus because in my view that'll be the bottom in the share price if not before.

The 75% utilisation in Q3 still has to be proven but even if they deliver half of the additional (62.5%) we are at an annual rate of 18,750 tons and TGR at likely sub 250/MT costs is well on its way even if graphite prices drop further.

Why? Because by that stage, TGR is likely the cheapest producer outside of China if not worldwide.

1/3

Afternoon everyone,

Having finally had a chance to review the detail more closely I've started adding more shares in TGR at 14p.

Lots of talk about funding raises but those saying as much haven't done enough homework because the evidence does not point towards on being required. Even if graphite prices have softened significantly this year.

With such tight control of costs limited debt servicing and an expansion to 30,000tpa already paid for this investment remains all about achieving sufficient production to drive positive cash flows. If TGR can get there then the goodwill around further Madagascar expansion and indeed Mozambique can begin to be added back in.

The thing is TGR are telling the market what they are going to achieve in the coming months but at the moment that market isn't looking close enough at the detail.

From the FY23 results going concern statement,

"According to the Company's estimates, it achieves positive operating cash flows at the corporate level at an estimated 800-900 tons of sales per month."

Let's say it is 900 tons reflecting softening graphite prices = 10,800 tons per annum.

That statement driven by the auditors must have been based on pricing forecasts that take into account price softening up to and including the end of July. Likely with some further softening allowed for other wise, it likely wouldn't have been signed off upon.

From 8th Aug Q1 FY24 RNS,

"Tirupati is now holding and executing annual orders with average monthly volumes of c.1200 tons, in addition to various short-term and spot orders it receives on a regular basis."

So as of early August TGR is running at +3,600 tons of sales. That places them a full 900 tons above their own positive operating cash flow point already.

A small portion of those sales could be from inventory so that doesn't guarantee a big production on its own.

But there are more clues in the $1m net prepayment RNS.

"These orders represent c.15% of the quantum of sales the Company expects to make over the six-month period.

A discount of between 7 - 15% has been applied to the price in return for the pre-payments and which also reflects recent market price softening."

The interesting thing with this insight is either the tonnage is high (meaning production is growing faster than thought) and the price is low or vice versa. Meaning if nothing else prices remain healthy.

My estimate is that its somewhere in the middle given the 7-15% discount.

At $700/ton (bear in mind that TGR H2 2023 average sale price was $903/ton = 22.5% reduction) that pre-payment delivers 1,428 tons.

At 15% of total sales volume expected over the 6-month period (which I take to be Sept 2023 to Feb 2024) that equates to total sales of 9,520 tons. Equivalent to c. 19,000 tons per annum. Such a sum if reached is going to turn heads.

That is a key point here for me. Growth in sales is not just about the sales team going out and winning new work. It is also about the passage of time and physicians gaining confidence in the product so that they make it their go-to product.

In turn that allows those reps to focus on new avenues where the product hasn't been tried or experienced yet.

This is as much about the product evolving as it is about driving a traditional sale and STX just bought themselves 10-12 months more time to drive it all.

Hi Shandypants2.

I agree the prescription growth numbers don't look a stretch given the fact that each month that passes the product becomes more and more well-known and demonstrates its effectiveness in more and more patients.

I also think the market is underestimating the higher impact that is expected from Q4 2023 as the full sales team becomes fully bedded in. This was always pointed out as being the quarter where things really start to happen for STX.

On the pricing side, I agree but as I explained demand demonstrated through prior authorisations drives market access and that demand is clearly coming through. The process just needs time to play out.

HY23 pricing in my view has also been affected by promotions to bed the product into new sales areas.

Since the end of HY23 STX has secured 23m more covered lives which increases coverage from 40% to 50%. As a stand-alone update that would be more impactful but it has been somewhat lost in the equity and interim update. That alone on a sliding scale from $240 to $25 cash cost would add $21.50 to the average achieved price. But as I said in my posts 100% coverage isn't possible. So $240 doesn't represent 100%. So the sliding scale has to be adjusted higher.

In addition, STX clearly see an opportunity already in the 50/50 share of covered and cash cost sales. Combined that should be enough to push prices up significantly.

It is also worth noting that the 23m additional covered lives came into force on 1st Sept. So they were won during the first 6-8 months of the year only. That means the progress made in the final 4 months of the year (which will be the largest at c. 62,000 out of c. 106,000 minimum sales) + 2024 should deliver even more coverage. Again it is not difficult to appreciate that under a new revised prior authorisation system, STX and Viatris can ensure the vast majority are recorded as insured sales at the full $240-$250 price.

Still, I have deliberately been cautious by only employing a $160 average price for 2024 which is low given the fact that the majority of sales come later in the year.

But at the end of the day, this investment is all about growth. Is the product being prescribed and are physicians happy enough with the results to come back and prescribe more? The evidence so far says that is a resounding yes. c 55,000 prescriptions YTD tells that story and another 45,000 - 55,000 in Q4 will only compound it further.

So the journey is well and truly underway and now STX has 10-12 months of extra firepower to demonstrate it further and even under a slower rollout will highly likely start hitting Viatris milestone payments in Q2 2025.

I would expect the trigger payment to be paid when the milestone is hit but even if it isn't STX can likely leverage it

in some shape or form until it is.

"My conservative numbers call for $130 average sale price in H2 2023 and 80,000 sales delivering an FY 23 US sales of c. $13.5m (Cavendish $13.6m). Bear in mind that Q4 sales would make up 62.5% of that and it is from Oct that the prior new authorisation regime begins.

For 2024 STX should deliver $160 average achieved prices @ 350,000 in sales = $56m.

That equates to $69.5m in total US sales at YE24.

At 350,000 FY24 sales by the time STX reaches Q4 2024, they would be running at c. 116,000 and likely minimum $180 pricing.

Just a 10% further increase in sales in Q1 2025 would deliver 127,600 sales which if still delivered at $180 would mean c.$23m in further US sales. The total then would be up to $82.5m. Thus demonstrating that Q2 2025 should see the first Viatris milestone beaten."

Note - I made an error with the running total of US sales by close of play. It would be $92.5m and not $82.5m as written.

Meaning that based on those numbers STX would hit $100m in sales by April 2025. Triggering the first milestone payment. That further reduces the impact and size of any further final funding required in Q3 2024/late 2024. If of course, it isn't further debt.

Partnering with Viatris and splitting the costs so that a much larger team could be rolled out to pretty much all US states thereby reducing the sales areas for each rep and delivering much more focused and dedicated attention is the move in all of this.

Yes STX has had bumps and yes working capital remains key but the next phase of growth has just been paid for with c. 65% debt which is not convertible. ($20m SWK deal - $5.7m AOP payment = $14.3m of a total of $21.9m raised).

The interest for the next 2 years will be covered by ex-USA sales and milestones. By then Viatris's milestones should have well and truly kicked in.

That window of growth has yet to be appreciated by the market because we are still in the clear-the-decks phase which comes with a certain amount of emotion. But if the retail offer fails to get any traction (which I suspect given the current SP is the case will mainly be the case) then the total dilution will be c. 67.5m shares or 9.5%. That's not a very big story compared to the 10-12 months of growth it now should help deliver and that's coming from an investor who was really miffed when I first read it post that SP drop.

But my anger really is around the fact that someone knew something I didn't and made money off my back. However, it needs to be placed in perspective. Does it change the investment case here? No. Though it does make me more wary. But as I detailed yesterday even on a conservative growth basis we should now be talking about one more small raise in Q3 2024 and even then STX may avoid it if sales are demonstrating enough strength.

Morning Cyberhub,

Who says that Viatris aren't increasing their spend to meet this additional field team need that the partnership has decided upon?

The deal is fundamentally one of shared costs. From the 13th Dec 2022 RNS,

"Shield and Viatris will also deploy additional resources in digital marketing, market access, distribution and commercial operations via a shared cost model."

From the 28th Sept RNS,

"Shield in conjunction with Viatris plans to hire a Field Access Team to help support physician offices with prior authorizations."

That says to me that it was a team decision with Viatris and the costs will be split.

The question really should be what will this new field team really cost because $10m of the fundraising has reportedly been put aside for its rollout. A rollout that requires 12 people who will essentially chase prior authorisation forms and help set up the systems with participating prescribers. Does that really require $10m?

The reality is the funding whilst certainly required to support this rollout is more about extending STX's cash run to accommodate the time needed to deliver these adjustments to get the business to a cash-positive position. Viatris as an established multi-billion dollar outfit does not need such additional working capital and nor is it responsible for supporting STX with its need either.

My calculations and those of the brokers I have seen so far don't focus in on this particular element of the plan. The focus is and continues to be on how substantial a cash run STX has and what it can achieve with it.

I think it is also important not to lose sight of the fact that Shield would not have been able to achieve anywhere near as much progress in 2023 without the Viatris deal. There is no way they could have raised enough capital to drive an expanded sales team based on where the valuation sat in late 2022. In my eyes, it is the Viatris name that is delivering the new payer coverage so soon and likely getting this product noticed far quicker than STX could on their own. That comes with a price that under the current set up is well worth paying because the end game is so significant.

The two broker notes out to date are calling for 50p a share based on 2025 outcomes. STX is all about reaching that point right now at the least amount of dilutive cost to shareholders. But it is just the start. Post 2025 if the plan is continuing to be delivered (which I see no reason to doubt at this time) then the multiples vs. valuation start to really expand.

The main reason being that manufacturing and distribution costs are a fraction of the total sales price + all in administration costs whilst likely growing slightly simply won't outstrip the growth in revenues. Even with Viatris taking 45%.

Plus, what we also must not forget is that Viatris will pay STX $30m in milestone payments starting in 2025 and they won't be alone.

2/2

Both Edison and Cavendish are valuing STX today at 50p a share. So a $475m EV valuation vs. 890m shares in issue = $0.534 which equates to c. 44p a share.

I believe many more have worked this out than are showing their cards at the moment. The wider market is in poor shape. The equity raise discount hasn't gone down well and an overhang clearly needs to be removed. But it's all about entry price now because the debt finance coupled with the growth in demand creates a big opportunity for STX to grow over the next 10-12 months or so. Prior to its announcement greater equity dilution was on the cards. IT#s removal as a possibility is yet to be priced in but it will be once the expanding quarterly sales growth I have talked about is further demonstrated.

Lots of talk about endless dilution but it may already be at an end but worst-case scenario (on a conservative basis) STX is one last small raise short of unlocking its maximum valuation and with it sufficient milestone payments to render the debt raised to date immaterial.

Just keep delivering growth in US sales Shield and the rest will naturally all follow.