Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Interesting article from Australia re: China's export controls.
https://www.thechronicle.com.au/business/stockhead/graphite-getting-its-groove-back-four-asx-stocks-explain-impact-of-chinas-export-restrictions/news-story/0a764bcccc6b0b889da21d7a61d8bc64
I would say easily into the £3 range. If prices increase over £750/t (and cost of production stays at £320/t) then it's more like high £4's maybe even £5's.
There's a few assumptions in that around OPEX, Depreciation and Interest Costs - but I'm 100% sure the price will be a lot higher than where we are today.
No worries and agree on the upside potential. I've made an simple excel model for this, so will continue to tweak the valuation as things progress.
What's great about the business is that it's relatively easy to model. They produce x tonnes at x price and have fixed/variable costs of x. Graphite prices are obviously the major risk, but I'm comfortable with this given the demand picture over the coming decade (plus the Chinese export controls).
@Porthy - yes agreed and I do think there's upside for ex-China prices, which would have a positive impact for TGR and the valuation.
@HarChris - I've assumed TGR obtains new debt for the PCU's required to increase to 30,000tpa, so hence the doubling of interest costs to £500k (they were £250k at FYE23). Basically, I was keen to get a feel for where we should be at full production, as share prices should be forward looking.
Speaking of forward looking, the numbers get pretty exciting once you get up to 80,000tpa...
Ran a few quick numbers this morning to obtain a rough valuation for the business @ 30,000tpa. Comments on this are welcome:
Production: 30,000 tonnes
Avg Price: £650/tonne
Cost of Production: £320/tonne
Revenue: £19.5M
COGS: £9.6M
Gross Profit: £9.9M
Admin Expesnes: £2.5M (I've assumed this is in line with FYE23)
Operating Income/EBITDA: £7.4M
Interest: £500k (doubled on FYE23 to account for an increase in debt for the new PCU's to improve yield)
Depreciation: £1.2M (slightly higher than FYE23 given new PCU's)
NPBT: £5.7M
Tax: £0 (given prior losses carried forward)
NPAT: £5.7M
Shares in issue: 108M
EPS: 0.053p
Share price @ 20x EPS: 106p
For what it's worth, I think that's a conservative multiple for a growing mining operation in a highly sought after commodity - especially with the uncertainty now around Chinese graphite supply.
I do think patience will be highly rewarded here and good luck to all longs.
Think this is just weak longs taking their profits and moving on, which needs to happen if we are to continue higher on a sustainable basis. The recent rally was sharp and only happened over a few days, so the price will need to find a new floor before it can move higher again.
I did end up selling ~10% of my holding at 25p (although I said I wouldn't!) so I'm happy to take that profit and wait for the next move higher. Difficult not to bank something after I was up 90% on my 14p tranche.
Agreed with you there @tomorrowtoday.
What we might find is TGR is now able to obtain development funding from a Gov backed institution (think UK Export Finance or British International Investment) or perhaps get a guarantee from one of these entities so a traditional lender can get more comfort to lend to TGR.
That would be great but it all depends on when TGR started engaging with lenders. If it was only recently then I would be amazed if they close anything this side of Christmas. However, if the DD has been underway for a month or two then it might be possible.
I’ve worked in corporate lending for over 10 years, so have a pretty good handle on how long these deals tend to take.
If I had to put a timeframe on it, I’d expect something in Q1 next year. I’d love to be proven wrong though!
Timing is indeed everything. My first purchase was 90p just before the brief run up to ~150p; however I ended up holding all the way back down to a £1 before selling with a small profit. Kept a close eye on the company ever since and I only recently bought back in after the prepayment announcement. Managed to average down at the right time last week and now sitting with a 18p average.
Haven't sold any yet and won't think about doing so for the foreseeable future. The company is only just starting to churn out regular production and the current valuation (IMO) is still far below where it should be.
As one of the only ex-China miners that is actually producing and selling , TGR will be in hot demand given the recent news out of China.
Also, it feels to me like larger buyers have been accumulating over the past week. Every dip seems to be bought and upwards we continue to go. Would love to see a TR1 from a notable investment firm or strategic investor.
Not sure if it's a lack of confidence, but more that a lot of people bought this in the 12-13p range and are now taking some profits after the recent rally.
Hopefully we can settle here for a day or two and churn out most of those lower buyers. That should help to provide a new floor and allow the price to push higher into the mid-20's.
Good point re: the flake size Gallmat and this is why the recent acquisition was so important for TGR management.
They will need capital to build out Montepuez and Balama Central, so I would expect there would be interest from various parties (governments included) to assist with funding this.
This is only the beginning for TGR and it's all about managing the growth sensibly from here. As the business scales they will need more internal expertise and corporate governance, which I know is important for many current shareholders (including myself).
Genghis - the China news is a gamechanger.
They produce 90% of the worlds graphite and any disruption to that supply is major problem for companies that rely on the material. Hence the reason that every non-China based graphite company is suddenly in demand.
Anode and battery manufacturers need security of supply, and any ex-China producer will now be being courted for access to their production. TGR is therefore in the prime position to negotiate further prepayments (to secure access to product) or even strategic investment to increase their output (both in Madagascar & Mozambique).
Respectfully, you're mad if you don't think this has changed the landscape for non-China producers.
Thought this was a good post on Twitter - https://twitter.com/MHMembers/status/1716718822579646551
"I am looking forward to attending the @Tirupatiuk #TGR AGM this week and hearing more on funding options and the board’s plan for restoring confidence to a share that is completely dislocated from the underlying value of the assets and the progress the company has made. The #TGR Chairman took the non-traditional step of inviting individual investors to meet with him during his time in London a few weeks ago. I was one of those lucky enough to spend some more time discussing the business with him. His passion for the business and continued tenacity in growing without diluting shareholders is impressive and differentiated. The company continues to adjust its operations to achieve growth within its current means while exploring every available non-dilutive funding option to accelerate plans. There are many boards who would have continued to plough on and take the ‘easy’ option of a dilutive equity raise with no concern for shareholder value. We give the board credit for acting rationally and hope the AGM (and pre AGM presentation) goes some way to further addressing shareholder concerns."
Strong rise the past two days and I'm here for it. Glad I doubled my position when it was in the 13p range.
People will trade this on the way up (which is fair) but personally I'm holding for gold here. The market cap remains ridiculously low for the size of TGR's resource base and their future production potential. Plus this news re: China will have definitely got institutional buyers (and financiers) interested in TGR.
There much, much more to come in terms of the share price. In time, this will easily be into pound territory and beyond.
All IMO and GLA.
New corporate presentation up on the company website.
https://tirupatigraphite.co.uk/images/Corp%20PPT%201123%20FV.pptx.pdf
Agree with many of the comments here and I doubled my position yesterday. Feeling quite comfortable with the investment and believe the risk/reward is compelling at these levels.
The business is clearly ramping up production and has settled into a more steady rhythm, with healthy margins being maintained along with prices per tonne.
Crazy that the market cap is where it is, when the business is producing far more than this time last year. Obviously BAT selling has a lot to do with that, combined with the issues around the financials/temporary suspension, but from a production perspective the business is only now starting to hit its straps.
Even if they don't increase the yield with the new PCU's, they will still be on track for between 12k - 13k tonnes of production this year, which I believe is enough to generate profits for the period. If that is the case, these funds can be used for reinvestment into the business to fund organic growth.
They do need to improve their corporate communications but that should be a relatively easy fix. Seems like Shishir and the senior team have been so hands on with the mine that they haven't had the headspace to work on the corporate side of the business. Hopefully that improves now that production is more steady state.