Member Info for Cigam

You do you Astro. Tbh I was thinking of topping up...

The weather is Madagascar has been relatively good recently (which is positive for production) and the graphite controls in China are now in effect. In addition, a trading update is due shortly from the company which will more than likely show their highest production numbers to date.

Western graphite consumers will be laser focused on securing their supply ex-China and TGR is very well placed to meet that demand. The comments from the Fed yesterday should also support stocks in general, which is likely why we are getting a lift today. Let's hope the BOE follows suit...

Genghis - nice to see you back and full of positivity.

I mentioned the gross margins earlier as these are important for when the business will be start to turn a profit, which based on my calculations will be from 13,000tpa onwards.

What would be useful to understand is the cash cycle of the company - i.e. what is the timeframe from production through to the eventual collection of cash from customers. Then you can assess what level of working capital facility the company needs to operate.

TGR would clearly benefit from a revolving credit facility and I would expect this is what they are speaking to financiers about (plus some future capex funding).

In terms of the management of the company this year - I agree that they need to sharpen up and I wasn't happy about the recent CLN payment and missed filing deadline/suspension. I actually emailed the company about this and told them that they have to get an experienced CFO asap, as clearly the current management team are stretched.

They responded quickly and noted my comments, while also stating that they are aware of various hires that need to be brought into the business (i.e. they know they need more C-Level executives). So let's see if we get any news on that in 2024.

It's crazy how much sentiment can affect share prices. Here we are back in the 15p range again at a circa £16M market cap, which is mad considering the business is growing production and generating sales with 45-50% gross margins.

As a comparison, Quadrise (QED) is a zero revenue business but is currently trading at a market cap of £44M after a recent rally. They don't even have a customer yet but are triple our market cap (although they have just completed a successful trial in Morocco).

It's time for TGR to hire an experienced CFO who can take care of the PLC side of the business. Obviously being an efficient graphite miner is key, but just as important is having strong corporate governance which includes expertise from outside of the Poddar family.

Shishir cannot do everything and expect the business to flourish - especially when it's growing quickly. It's high time he started to let go of the reins and let others contribute to the TGR journey.

All IMO and GLA.

AJ - apologies for doubting you on this one. However, my next question is how do you know this?

Assume you have a portion of the 2022 CLN? Did you vote for the share proposal?

AJ - yes that is correct and I'm aware of that.

However, there is always a section at the end of the accounts whereby the auditor comments on matters relating to after balance date. If you go back and read this section (Note 25 to be exact), there is a mention of the 2019 CLN's being extended to Dec-24. Here is the exact quote:

" The Company has in issue 900,900 2019CLN’s in issue as at 31 March 2023. The maturity of these were pegged

at third anniversary from the date of issue and conversion price pegged at £0.45 per ordinary share. The Company

engaged with its Brokers Optiva Securities Limited to agree to extending the maturity of the 2019CLN’s up to 31

December 2024 so that the Company conserves its resources for its business being in formative stage and so that

the investors retain the opportunity to convert for a further period. Optiva has confirmed that it has received

consent from all holders of the 2019CLN’s for the extension and the Company has agreed to pay a fee of 2% to

Optiva for the arrangements. Accordingly, the maturity of 2019CLN’s is now considered extended to 31

December 2024."

As the accounts were issued after 31st July, the auditors would be required to report on the failed coupon payment in this section.

In terms of proof - how about a document from TGR's broker (Optiva Securities) which details the proposal for extra shares in lieu of the July interest payment? I assume you're a noteholder?

AJ - if you are going to make these kind of statements then please provide evidence to back up your claims.

The audited accounts were signed off on 2nd August and made no mention of a missed coupon payment for July.

Topped up at 16.0p. Nothing has changed since we were at 27.0p a few weeks ago so it's a no brainer for me.

Think I'll start trading one position and holding one long term. Until there's more consistent volume the share will be prone to spikes on news and then a drift lower - much like we've seen over the past month.

In more important news, the China export controls come into force on Friday. It'll be interesting to see what effect this has on the market over the next few months.

Lots to look forward to Andii! Let's hope some positive sentiment can also return to the markets next year.

The icing on the cake would be a resolution to the TSG acquisition or the setting up of a new downstream business in the UK. My two cents is that a UK downstream business would be better for TGR and for us as shareholders. It would open up numerous funding pathways (DFI's and potentially UK Gov grants) given the critical nature of graphite for the energy transition and the exports controls coming into force in China.

Plenty still to play for here and I'm excited for the journey.

I don't filter many people but had to pull the trigger on tomorrowtoday. I'm all for a debate but can't be dealing with the caps and ranting.

Agree Skeletor - suddenly the bears come out of their cave when the price pulls back.

On a more positive front, it looks like the weather in Madagascar is clear this week which is good for production. We are in the rainy season from now until April, so it will be interesting to see how the business navigates this period. I believe they were underprepared in prior seasons but have now improved their infrastructure.

Being able to keep production consistent throughout the year will be a key indiciator of the company's progress.

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

Thanks Nth - after doing a bit of research on established miners, it’s best to peg back the multiple to 10-12x.

Have a good weekend all and hopefully another push higher next week.

Hi Gallmat - what would you consider is a reasonable multiple?

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!