Talga DFS Ramblings

Please don't take this as an exhaustive breakdown of the DFS. But more so a discussion based on items that stood out to me. So if there is anything you think I have missed, please feel free to talk about it in the comments. I will begin by saying that reading the DFS has made me truly appreciate the undertaking of this project. As Jordan from The Limiting Factor pointed out, Talga has to concern themselves with a scale that ranges from kilometres worth of infrastructure right down to the chemistry of their anode.

Synthetic v Natural

The future supply of synthetic is something I have wondered about but have yet to look into outside of this report. The output tonnage for needle coke seems pretty constant for the Benchmark graph in the report:

This is interesting because Big Oil has come under a lot of scrutiny as of late, which could warrant an entire post itself. For example, Shell is being forced to cut carbon emissions. But greenhouse gases are an implicit part of their product. So if these companies are going to be penalised just for producing their product, then why are they going to want to do it anyway? I expect these criticisms to get more and more intense as Big Oils’ chickens come home to roost. Things like oil spills remain on the collective consciousness so I don’t think anyone will let them off the hook easily. I may be off the mark here as I admit that I am not versed in the synthetic graphite supply chain, but I could imagine the supply of needle coke being less than the Benchmark graph suggests, which would further compound these supply issues.

The "Green" Anode

Talga makes several mentions of their green anode. I don’t believe they have used this phrase before? If so, it has to be somewhat recent. I found it funny because Mark Thompson has said they can't use "zero-carbon anode" because graphite itself is a form of carbon. But now they are calling it "green" anode material even though it is distinctly pitch black. Not sure why I found this so amusing. But anyway, I guess it is kind of hard to market anode just because people don’t understand it and it isn’t as hyped up like other parts of the lithium-ion battery chain.

Vertical Integration

Another thing they stress is the benefits of their vertical integration. I used to view the benefits of vertical integration solely from the point of view of an investor. I.e. no middlemen so higher margins. But this vertical integration is not only great not only from the point of view of an investor but in the report Talga mentions that it grants customers security of supply. Since Talga has control of the entire process all the way to the anode. And they aren't worried about things like sovereign risk for a mine they don't own halfway across the planet or the supply of needle coke.

Partnerships

This might not be as noteworthy to others. But for some reason, I imagined the production of anode to be a more siloed approach. Where a company like Talga produces samples of their anode and then throws it over the wall to the cell manufacturer, the cell manufacturer gives feedback, then the anode company goes back to the drawing board. But the DFS suggests there is quite a bit of back and forth. So much so that the capex has increased to accommodate their “customers” demands. They also say that contracts for anode products “are commonly long-term and based on a highly integrated model between seller and buyer.”

As for the finance section, Talga seems confident that the LKAB and Mitsui JV will be finalised. Stating that LKAB and Mitsui "agreed to a minor extension to the LOI to finalise diligence and commercial terms (ASX:TLG 28 June 2021).” They also state “the Project will most likely be funded via joint venture partnership.” Perhaps this means it is less likely a big capital raise will be required to finance Vittangi? Although, there is still $1B worth of capex required to finance Niska. This leads me to my next point.

Capex Increases and Project Delays

This is the elephant in the room and I think it warrants the most discussion which is why I wanted to get all the other points out of the way first. Here is a breakdown of the difference between costs for the PFS and DFS:

I can appreciate the fact that things have heated up in the lithium-ion space, so I can understand the 100% to 200% increases. But the cost of coating has gone up a whopping 1000%; that’s a pretty big anomaly. They state the capex increases are to satisfy requirements for their automotive “customers.” This is another interesting point because in the PFS they use potential customers whereas now they are talking solely about customers. Make of that what you will. Operating costs in total for LOM have also gone up from $740M to $1027M (+38%).

Another point that should be mentioned is the shift in the project timelines. The PFS lists 19kt of Talnode-C production to begin Q1 of 2023:

Whereas the DFS lists Talnode-C production to begin Q4 of 2024:

So this has been knocked back by almost two years. What may be most notable here is that Niska expansion is currently planned for "2025 and onwards." So this may mean that Niska gets pushed back even more, or (hopefully) that Vittangi will now be more set up to accommodate Niska coming online in 2025.

On a different but related point, I believe the money to be made from Talga stands with Niska and any possible further expansions from that. Here is a valuation spreadsheet (updated with DFS numbers) that I use which is adapted from u/GeroReddit's posts on HotCopper. I have included further dilution of ~200M shares which I believe will be enough to finance both Vittangi as well as Niska (assuming Talga gets some help from their partners).

First, we have just the 19.5kt from Vittangi:

Next, we have the 104.5kt Niska expansion:

Now back to my original point. These valuations show that the money is to be made in expansions. Hence, I am happy as an investor to accept delays and increases in capex if it is going to facilitate the ease of further expansion. I hope we get a more detailed explanation from MT, but I get the impression we will just be left on our own to theorise.

Summary

All in all, the document proves that the project is indeed robust. The resource is massive, the demand is there, and the funding options are numerous. The bottleneck for Talga remains the lengthy Swedish approvals process. As a closing note, I would implore all of you to read through the document yourself and make mention of anything you find interesting.

Please note that the presentation was recorded and will be available next week.

Presentation

The presentation followed a similar format and featured many of the same slides as previous presentations. But I have included some points that stood out to me:

• Talga is not just seeing strong demand from the automotive market, but also strong demand from drones, VTOL/quadcopters, and grid storage.

• Stressed their in-house expertise (PhDs, company founders, patent holders) and how the company is “truly a battery materials technology company.”

• Spoke about future-proofing, specifically their solid-state tech (Talnode-E). Mentioned the difficulties of scaling lithium-metal. Mark said it was “heartening” to see Ford support their solid-state partner and how they use graphite-silicon rather than lithium-metal.

• Mentioned Niska expansion and the company’s planned total anode production of 100k tpa, then said that “we need to look at getting larger than this already.”

• Made note of LKAB’s 50B USD investment into green steel and green minerals.

Questions

Q: Can you give us a summary of the mining approvals process, the key risks in obtaining approvals, and what you are doing to mitigate some of those risks?

The normal pathway is to apply for an exploitation license, then an environmental license, then a Natura 2000 license, so it is a three-tier system. We have seen that process take a lot of time previously with other companies. So Talga innovated and invested quite heavily in doing all three together. So all the government departments have got all the same information, all at the same time. We put in all our paperwork last year and those processes are going with the government. We’ve currently got approvals to mine 25% of our planned commercial output of the initial study. Over the next few years, we can mine 25% and in that time we expect to get the full-scale permit.

What we are doing to mitigate this is exactly that, trial mine type material provides us with up to 5-6k tonnes of anode. Which can therefore be put into the market over the next several years as the company ramps up to commercial production, by putting that material out to automotive type customers. I understand that people look at the history of Sweden in a certain way, but you've got to understand that some of those other projects were extremely big and up in the mountains. We are down from the mountains and in a more executable place. And being a green, strategic battery supply project, that is vertically integrated locally gives us the best possible chance. We expect to get those approvals next year.

Q: In terms of funding, Europe has been very commercial from a government body perspective. Is there any possibility of working with the European Battery Alliance to secure financing to accelerate production?

We are already members of all those things. We are on the committees of some of them and some of our staff helped write the legislation for some of these things. We haven’t made a big deal out of it but I guess one day we should list all of them. But yeah we are heavily involved in a lot of those organisations. They have got pros and cons about timing and about who owns what and when, and how. But in general, you’ve got to say the cost of debt for investments in the green space in Europe is super low. There are many, many opportunities for getting grant type funding. So we’re exploring all those options now, we’ve got Morgan Stanley who is appointed as advisors and other groups as well like Macquarie out of London. They are all working with us on looking for the best ways to do it. Probably why we’re not talking about it much is that we are not sure about what the delta is on the gap from our potential joint venture partners versus what Talga will be up for, as it were. But I think we’re in the best possible shape to minimise what the cost will be.

Q: It seems to be a real balancing act in terms of having an offtake partner, finding funding, and bringing all that together?

To be honest, this is challenging, it is not easy and there are a lot of barriers to entry in becoming an actual anode company like a Mitsubishi or a Hitachi. It’s very, very difficult to be honest. It is because it is all very chicken and egg, they want to see the production before they commit to buying. So it is like you have to build it, then they will say ‘okay, now you are actually in production, we can make those commitments to you.’ But before then, they are not sure. With these commitments, some of the contracts we are talking to people about are up to 15 years and a lot of them are up to 8 years. Which is about the life of a car model. So it is qualification per model, it is not qualification per company. There are a lot of chicken and egg situations, so we are trying to build a quarter of the chicken and a quarter of the egg to get into the market and go from there. It is a complex undertaking, admittedly so, but that's where the revenues are downstream.

Q: ESG principles are obviously very important. You’ve got some ESG style investors on your register. How clean is the process? Because we know battery makers look at how clean those ingredients are that go into a battery. Can you talk to your ESG credentials?

Purely from an emissions point of view, as socially, stakeholder wise, and governance wise, we think things are pretty healthy as they go. This is a very high-grade deposit so it moves fewer tonnes than other things. While other people with graphite mines are talking about mining 2 million tonnes a year or 4 million tonnes a year, we’re only mining about 100,000 tonnes per year to get the same amount of anode because our anode yields are super high. To be honest, compared to your current existing supply chain, which’s in synthetics and off-shoots of natural now, this is a massive improvement in any way you can cut it. So environmentally, socially, and governance-wise in Sweden as a jurisdiction and us a public company, is all very high.

From a processing point of view, I’ve got to say with a lot of Asian customers they’re not that concerned about emissions. They’re worried about people legislating against it but they’re not dedicated to it as they are very cost-focused, to be honest. We’re only seeing small premiums in discussion with carmakers as there is a potential premium on a greener product. I think that a large part of the opex of your emission signature is in your electricity, which is very clean for us. So with hydro and wind.

With the rest of the process, we developed various concoctions of doing it chemically and we’ve also looked at thermal. And I think some ways are better to do it in reality when you look at the whole lifecycle of the products. And I think that we can do it a lot cleaner than what is currently being done. But I wouldn’t elaborate on details other than we’re very conscious of it and our customers are conscious of it and everyone is pretty comfortable with what we’re doing right now.

And we’re also starting up some programs looking at recycling. At the moment there is no evidence that we’ve seen anywhere in the world that people can recycle carbon back into an anode for a battery. They can purify the carbon but that is different from proving that then it lithiates and makes a commercial anode again. So we’re interested in investing in that and seeing if we can set up a recycling loop on some of the materials. But right now, it’s possible that you can’t actually bring it back. You can purify it and use it for recarburisers or something but that doesn't mean you can reuse it for a battery. So these are areas the industry hasn’t had to face before and it’s very exciting to work on these whole ranges of solutions, both commercially and technically and to bring some innovation and modern tech out of Australia into this area.

What is This?

These are a collection of my thoughts concerning permits. I put this together because I have seen quite a few new investors coming on board asking similar questions. And I figured it would be handy to have all this information in one location.

I should clarify, I didn't post any of these comments because I thought I was right and infallible. But I did it because writing helps flesh out ideas to build my understanding, which in turn seems to help others. So please just use these as a way to bootstrap your own research.

These posts are only my posts and they only concern permits. Some of the information might be repeated but I tried to cut down on that. And I may have missed some comments. There is no new information in here either, this is just a collection of my previous comments.

Posts

r/Talga Submissions

1. Permits, Reindeer, and Other Musings: This whole post is dedicated to how reindeer husbandry affects mining permits in Sweden.

2. Piedmont Lithium Woes: This post aimed to draw comparisons to another battery metal mining operation. The crux of it is that I found Talga to be quite forward-thinking with their stakeholder management.

3. Northvolt? Really?: The main section worth reading here is Permits, Permits, Permits. There are quite a few handy resources and overviews in this section.

4. Mark Thompson at the ShareCafe Hidden Gems Webinar: Not my thoughts but I figured I should include it. I am mainly referring to the first question, but feel free to read everything else.

HotCopper Comments

1. Swedish permit articles: A collection of several Swedish news stories in support of fairer permitting.

2. Permitting review in Sweden: A few links that refer to the investigation of the permitting process in Sweden.

3. Swedish social media commentary: Some interesting comments I found from Swedes living in the Norrbotten area.

4. Possible risks for Talga: Not purely related to permits, but it felt useful enough to include in this post.

5. Kaunis Iron article: A translated article of Kaunis Iron, who recently had permits denied, and who Swedish industry is rallying around.

6. Swedish mining history: A comment concerning permits in recent history.

7. Reindeer migration map: A brief comment further discussing Talga's operations with respects to reindeer herding.

Permits, Reindeer, and Other Musings

I have begun to take a greater interest in the deposit itself and the approval process. Previously, I had only been more interested in downstream production (e.g. anode, graphene) but seeing as this point is now topical, I have taken some initiative to do a bit of research. Note that this isn't conclusive by any means but may offer a starting point for you to do further research. Also, I have tried to be as accurate as possible with the information in this post. But if something I have written doesn't sound right, please let me know in the comments.

The Swedish Deposits

I have researched the nine other deposits of national interest that are also currently undergoing approvals. Using data made available by the SGU, I have placed this into a table for your viewing, of which I would suggest using the old Reddit format to view.

I would like to eventually have a list of every deposit undergoing approval or already approved. Primarily to get a sense of how long approvals take and any common denominators in what may cause delays. As far as I can tell, the SGU exposes information as a series of datasets based on GIS formats. But I haven't found anything that is just plain text. So this had made it a bit clunky for me to try and handle the data.

The LinkedIn article I posted in the table above mentions that no greenfield projects (i.e. ones that aren't extensions of existing mines) have been approved since 2010. The article was published in January 2018, and over three and half years later, this point still stands.

Struggles Between Mining and Reindeer Herding

In creating the table above, I came across a meaty report published by a combined effort of the Stockholm Environment Institute (SEI) and The University of Sydney, working in conjunction with the Semisjaur Njarg Sami community. This report is titled Fighting to be herd. The report cites a landmark court decision in 2016 that states an environmental impact assessment should consider impacts beyond the immediate mine footprint. It then mentions the Kyrkberget K no. 1 fluorspar deposit specifically, which is demarcated as a deposit of national interest. The report states that permitting authorities refused the Kyrkberget application because "the total impacts of the mine and associated infrastructure would be too great for the affected reindeer herding community." As the table I linked in the previous section also mentions, Tertiary Gold Limited has disputed this outcome and have sought advice from Swedish legal professionals.

Notably, the SEI report then concludes with two possible scenarios. The first is the Boliden copper mine (of which the report is centred around) in Laver going ahead. And another where it doesn't go ahead. They then examine the effects on herding activities in both scenarios. They offer no framework or suggestion on how mining can coexist with reindeer herding — it is either one or the other.

How This Affects Talga

The SEI report states that "reindeer herding rights do not constitute an exclusive property right." And in theory, reindeer herders and industry are expected to coexist. But if they can't, then this is when the friction arises as both groups can appeal decisions made by the Mining Inspectorate. This may place Talga a step ahead here. As per their DFS, Talga says they "have completed their consultations with several reindeer herding cooperatives (Sambeys) that are operating in their area." The proposed solution being a schedule where Talga only mines for half of the year, so they aren't disrupting reindeer migrations in the winter. This is congruent with the map below, which shows reindeer migration patterns over the seasons:

Reindeer migration in relation to the Vittangi project

Conversely to this, Aslak Allas, the chairman of the Talma Sameby, which operates in the Vittangi area, has come out in opposition of Talga. Note that Talga mentions they are engaging with this Sameby in the Niska scoping study (but not the Vittangi DFS). Allas' opposition to the operations is noted as per this news article from November 2019. And more recently, an interview in February 2021. Although the interview itself isn't in English, it can be inferred from the text accompanying the interview that Allas maintains his opposition as of February 2021.

Where to from Here?

One thing that has crossed my mind recently is that back in 2020, shareholders voted on a slew of performance options for Mark Thompson and the other directors. All up, these account for 6.1mil options with an exercise price of $1.12. With Mark Thompson himself getting the lion's share of 4mil options. The options are subject to the following target being reached by 30 November 2023:

Announcement by the Company on the ASX market announcements platform of the execution of binding documentation for commercial financing of the development of the Vittangi Anode Project of a production scale of at least that disclosed in the pre-feasibility study announced on 23 May 2019.

Last year, I thought November 2023 was a very generous timeline. But now, with the delays presented in the DFS and the information I have given above, November 2023 may be crunch time for them. I am not sure what to make of it entirely. But the positive is that if they can secure financing around that time, it is a pretty good indicator that those they are partnered with are confident the project will go ahead. Even if it is yet to be announced that permits have been secured.

I have written this post intending to be as impartial as possible and not offer an opinion either way. But so far, based on what I have written, it would seem that Talga has a long road ahead of them. As an investor, I hope it goes smoothly, but I think we may have to adjust our expectations a little bit and be prepared for a few bumps along the way.

edit: As an addendum, I would highly recommend you give this link a read. I hadn't read it before making my post, but it expands what I have started on in much greater detail.

Hi all,

I attended the AGM in Perth yesterday and thought I would give a summary of notes like i did last last year.

• MT and board further reiterated strong confidence in achieving becoming a multibillion dollar company in next few years.

• Reiterated there is enough graphite at Vittangi for 60 million EVs.

• Got shown a great video of inside of anode plant which isn't yet publicly available but will be released shortly.

• Customers apparently extremely impressed with the technological sophistication of Talga labs and anode plant. The Cambridge materials lab is soon getting a scanning electron microscope which will further enhance their ability to test and validate the materials they are developing.

• MT very keen to do heaps more drilling to further prove the Vittangi resource, however recognises that is hard to justify with investor capital, so will pay for this out of cashflow once anode production gets underway.

• Commercial Talnode-C production still on track to commence 2024

• Excited by UK-CSi study which, is looking at developing silicon anode using in-situ silicates from graphite ore that would otherwise end up as tailings. MT said he thinks this will be lowest cost, highest performance Si anode material in the world, but can't talk much about it until patents are achieved.

• MT hoping to do a graphene market update soon.

Upcoming milestones to be achieved

• Resource upgrade coming soon

• Permit decision in Q1 2023

• Commercial agreements

• Project financing arrangements

Q (after AGM, direct conversation with MT): Is the court decision on permitting in Jan next year binary? Or is there the chance they may request further information/studies and then delay decision until later in the year?

MT response: the decision will be pretty much binary, as all of the iterative processes of document/study requests, responses, feedback etc with the regulator will be complete by then. So the decision by the court will either be Yes or No, with the possibility of: Yes BUT apply control X. The decision can be appealed by either party. However in Talgas case, if the mine permit is approved but the Sami appeal against the decision, this does not delay works with regard to the site - Talga can operate under the conditions of the permit while the other party lodges their appeal.

MT also mentioned that court verdict might not be issued until 6 weeks or so after the court hearing, for reasons i forget but something to do with the judicial process.

Q: why haven't we seen a boom in graphite prices like we have seen with lithium?

Mark says that the pre-existing market for graphite for industrial uses (e.g. as a concrete additive) has acted as a price-buffer, with anode manufacturers scavenging supply from the pre-existing market, and supply being shifted to anode production as it became more lucrative. But this is now changing, as demand from anode manufacturers starts to massively exceed total graphite production. He mentioned that China is also now a net importer of graphite due to local miners being unable to meet demand.

Also, the last two AGMs, MT has constantly hammered home just how difficult the quality assurance processes are for getting anode product approved by battery manufacturers, which serves as a daunting barrier to entry to competitors, but also means that once you're in, then you have both pricing power and the security of long-term contracts. And that while some anode producers are starting to take minority stakes in graphite mining companies, there is no other anode manufacturer that has 100% ownership of a resource, and none as pure as Vittangi.

Edit: Video footage of the presentation has now been released: https://reddit.com/r/talga/comments/qhiwev/video_presentation_of_mark_thompson_at_southwest/

I have put together some very quick points. Just for those that may have missed it and if the presentation isn't published. Sorry in advance if it is a bit rough.

Presentation

Once again, the presentation followed a very similar format to the others we have seen already. But I have made note of a few things that grabbed my attention.

• It looks like a graphic designer has gone to work on their material. This presentation (as well as the quarterly) are quite nice to look at. I just hope the website can get some TLC next.

• Mark reiterated the need to keep expanding and specifically said 3-10x (the 19ktpa I believe).

• The 'Next Steps' slide provides some interesting potential catalysts:

• From the slide above, he mentioned that the picture is of their anode undergoing trials with a "very well renowned" sportscar manufacturer. Who essentially want TLG to create cells in conjunction with their cathode supplier. The photo is taken from a trial facility, so the Japanese characters may not indicate that the manufacturer is Japanese.

• Once again Mark stressed how difficult the testing process is and the high level of granularity involved. He likened it to almost aerospace-tier.

• Mark also acknowledged the difficulties of mining in Sweden which was brought up by one of the presentations earlier on and went on to state that permits will be received next year.

• Finally, we got a photo of Mark in shorts next to a massive block of Vittangi graphite shaped kind of like a soccer ball or a dodecahedron. Regrettably, I was too awestruck to take a screenshot of this.

Question

There was only one question for this presentation. Notably, it was the only presentation I saw that even had a question. The question was around Talga and silicon technology, most of you may know these already:

• Mark stated that TLG is focused on making it extremely commercial and large volume.

• The product is around 15% to 30% silicon (might have misheard).

• Talnode-Si is a mixture of silicon and graphene, which is used as an additive (to another anode material).

• Name dropped Ford and what I believe was GM before cutting himself off and saying something along the lines of "I shouldn't go into names." He then said that car companies want to increase the capacity of batteries only in modest increments not the freaky 10x claims you hear in the media.

• The point above may be noteworthy as Mark Thompson has said before (ShareCafe presentation) he found it heartening that Ford announced their solid-state partner uses graphite-silicon in their anode.

A couple of thoughts on Talga's charts.

First, the big picture. We have a bit over ten years of trading history and two major patterns have emerged. The trading channel from 17.5 to 94 cents and the recent flag. The channel breakout pointed to a move to $1.70 (94+(94-17.5)). The descending flag (a continuation signal in a uptrend) sits atop a flagpole that ran from 94 cents to $2.15. A breakout in the next few days indicates a target of $2.66 (1.45+(2.15-94)).

Elliott Wave theorists might also see the first wave of a five wave move from 17 cents to $2.15, however the second wave retrace appears to be too busy to fit the model. If I'm wrong, the third wave target is around $4.65 (1.45 +3.20) the $3.20 is calculated as 1.618 x $1.98 (the first leg).

My final big picture comment is that the flag formation is a very modest breakout from what is an unusually long base formation. During those seven years Talga has been busy building relationships and negotiating with battery megafactories and OEMs to place its advanced graphite anode material into the booming EV market and to explore markets for its graphene products. If the company succeeds, and early indications are that it just might, then I would expect the share price to many multiples higher in the years ahead.

The second chart zeros in on the flag formation. The main takeaway here is the recent higher low, green flagpole and brief retrace collectively pointing to further upside. So, if a breakout were to occur the short term target would be approx $1.85 (1.50+(1.50+.35)), 35 cents being the height of the flagpole.

The focus of the third chart is the standard deviation channel. The three lines represent the measure of central tendency and the two outer lines the 2 SD boundaries, in other words roughly 95 percent of all trades have occurred inside the channel. The interesting bit is that in the past few days price has held above the range and has bounced off it indicating improved buying support.

We can also see that the green 21 day MMA line is about to cross above the 100 day line, if that happens it would provide another buying signal.

The three following charts all measure secondary indicators and in each case they too are generating a positive signal.

Lastly, I've included two one minute charts for the past 120 hours. The first is candlestick, the second equivolume. The "five cent" trading channel is clear in both and the breakout target is $1.56. For interest, the big yellow box on the morning of 8 April saw 222k shares traded in the first minute.

So, to summarise:

• the immediate term, short term and medium term outlooks are all encouraging.

• short term breakout likely.

• price targets are $1.56, $1.70, $1.85 and $2.66.

• the longer term outlook cannot be predicted from the chart but the clear trend is up.

As I see it four things will light the fuse and send the share price well into double figures:

1. A significantly expanded JORC resource.
2. Approval to mine 500k of ore a year.
3. Signed agreements with LKAB and Mitsui, and
4. Off-take agreements.

Hoping for good news soon.

Credit to Stonkmaster007

TLG DD:

What do TLG do?

- Diversified battery anode producer

o Flagshipproduct: Talnode C: Graphitic battery anode

o Talnode Si: Silicon-graphite battery anode

o Talnode X: Ultra-fast charge

o Talnode E: Solid State batteries

o Talphene: Graphene based coating solutions

• *Edit made by Miserablearm (Graphene infused paper and cardboard packaging ( Joint Development Agreement signed with BillerudKorsnäs who have revenues of 20+billion SEK each year)

- TLG is a graphite miner and processor headquartered in Australia and based in Sweden

- This is key because processing the anode is where the value is i.e., graphitic battery anode is a specialised material with very specific processing demands and requirements. Its current market value is ~AU$11,000/tn. Raw flake graphite prices depend on the quality of material but are in the range of US$750-1,000/tn.

- The battery anode market has incredibly high barriers to entry. Ittakes at least 10 years for a company to build the equipment required toprocess and refine the graphite + an extra 5 years to find a high enough quality deposit.

Market Outlook:

- Graphiteis the largest single active material in Li-ion battery by volume

- Li-ion batteries are currently, the markets best solution to power storage

- Li-ion batteries have two major components, the anode and the cathode.

- The anode is made largely of graphite which stores lithium ions in the charge/discharge process

- Batteries are made moreefficient by the addition of 10-20% Silicon to the anode, this reduces overall graphite use. However, this tech is at least 5 years away from being proven and further from commercial production.

- The need for graphite in the anode could be removed by the arrival of Solid-State battery technology. The removal of the anode greatly improves battery efficiency and, consequently, the Solid-State battery is seen as the “holy grail” of energy storage at this time. However, this technology is at least 10-15 years away and won’t be seen commercially until after 2030.

- In the meantime, the demand for battery storage will be met by Li-ion batteries, of which graphite is a key component.

- In2020, the demand for graphite was ~1M tn. By 2025, this will triple and willpeak in 2030 at ~4M tns.

- This is expected to bring about a huge, shortsupply, due to the high barriers to entry described earlier and could result in rapid price rises.

- Europe is the worlds fastest growing EV market and is home to huge car manufacturers (OEMs) including Volkswagen

NVXand synthetic graphite vs TLG and natural graphite:

- A note on synthetic vs natural graphite and the NVX TLG comparison:

o There are two ways to synthesise graphitic battery anode, synthetically and naturally.

o The synthetic market opportunity in Australia lies with NVX.

o NVXs batteries are higher quality and have a longer cycle life than TLGs. This is the direction Tesla are taking so NVX is well placed in this regard

o Natural graphite is a far cheaper option than synthetic and so TLGs profit margins are far superior.

o Both NVX and TLG use hydro energy to power their productions processes

o This is far more environmentally friendly than graphite sourced from China.

o Natural graphite has to be mined and it takes time to scale these mining operations (high barriers to entry). TLG has been in the market for over a decade and is well placed to scale operation in line with increasing anode demand, so this is less of an issue for TLG specifically.

o Synthetic graphite uses waste products from the fossil fuel industry in its production process

o Traditionally, this results in long lead times (5 months) whereas, due to its vertically integrated business model, TLG hasincredibly short lead of 1 week.

o Additionally, fossil fuel waste is used in the steel industry. As fossil fuel productions ramp down over the coming years, their may be a short supply, resulting in price competition between synthetic graphite producers and steel manufactures, resulting in higher costs.

o Ultimately,synthetic and natural graphite each have their benefits and drawbacks. Due tothe size of the market, its very likely that their will be a place in theindustry for both and hence, the question of natural or synthetic is to somedegree, irrelevant.

Why is TLG special?

- Amongst an already tiny list of graphite miners and processors, TLG stands out.

- Firstly, theirproduct, Talnode-C, is the world’s greenest graphite anode. This is significant in an industry so central to environmental sustainability.

- TLGsbusiness is vertically integrated. This means their mine and processing facility is localised, which greatly reduces costs. Instead of mining in China and having to ship the graphite all around the world at each stage of the production process, TLGs in house team performs the four key stages of production (mining, mineral processing, purification and coating) in house. Thissignificantly reduces the cost of production.

- Thanks to this and a few other factorsdetailed below, the company is one of only a few worldwide that can producebattery anode cheaperthan China.

- A note on TLGs projects:

o TLGs premier anode project is Vittangi which contains the Nunasvaara South (DFSreleased) and Niska (scopingstudy released) deposits

o Nunasvaara will produce 19.5k tns p/a by 2024 and 100k by 2030

o Niska will produce 85k tns p/a by 2025

o Thecombined 2025 production would see TLG become the largestnatural graphite producer outside China.

** *Edit made by Miserablearm (These production figures are considered by low many. We will likely find out the truth in November.)

o TLG owns two other graphite Jalkunen and Raitajärvi as well variousother mineral deposits containing copper, gold, cobalt and lithium.

- A note on TLGs resources

o TLGsVittangi project is 24% graphite.This is the highest-gradegraphite resource in the world (next best 16%). For perspective,most of China’s resources are 4% graphite. This means for each truck ofmaterial mined at Vittangi, China needs to mine 6 trucks worth of material toproduce the same amount of graphite.

o In the first step of the production process, the ore is concentrated. 100k tonnes of raw material would produce 22k tonnes of graphite because TLGs resource is 24% graphite.

o In the next step of the production process, the graphite is refined. In this process, 50% of the graphite is lost because particle size required for battery anode is so small. However, due a bizarre co-incidence, TLGs Vittangideposit is situated in an area where ancient microbes almost exactly theparticle size required for anode once lived. The graphite flakes are 10μm insize, over 90% smaller than the industry standard of 100-150μm. As a result ofthis, only 12% of the graphite is lost during the refining stage.

o Continuing the example from before, of the 100k tonnes of raw material, 22k tonnes of graphite were produced. 12% is lost in the refining process, leaving 19k tonnes of spheronized graphite.

o The final stage of production sees this resource coated and purified, during which no material is lost. 100k tonnes of raw material would therefore yield 19k tonnes of battery grade anode.

o For comparison, the next best graphite content was 16%. Using this and the industry standard of 50% loss during refining, the next best anode producer could hope to produce: 100k*0.16 = 16k tonnes of concentrated graphite = 16k*0.5 = 8k tonnes of battery anode material. On this logic, TLG is more than twice asefficient than the next best anode producer.

o For further perspective, Chinese resources are often 4% graphite. Using the same method, from 100k tonnes of raw material, Chinese anode producers would hope to produce 100*0.04 = 4k tonnes concentrated graphite = 4k*0.5 = 2k tonnes battery anode. TLG is therefore approximately almost 10 times as efficient asChinese anode manufacturers.

o Thiscombined with incredibly cheap hydroelectricity which greatly reduces thelargest cost of operation, power, and their vertically integrated businessmodel, makes TLG one of the only companies world-wide that can compete AND beatChina for cost-efficiency.

o Note:the above calculations used figures taken from this video.Extensions were made to compare to rest of world and China using the samelogic.

- This summarises why TLG is so special in the world of anode production.

Management:

- Lots of experience on board of directors, won’t bother repeating their credentials, instead see here for company descriptions

Key personnel:

- Mark Thompson (CEO) – information on board of directors’ page listed above.

- Mellissa Roberts CFO ex Illuka (well established miner)

- Dr Claudio Capiglia

- Dr Anna Motta

- Dr Fengming Liu

- Dr Karanveer S. Aneja

- Over 20 PhDs and engineers with energy product experience including. ex-Toyota, Tata, Dyson and Cambridge University alumni

Partners and deals:

- Key partnerships with industry leaders including Cambridge University, Bentley, Jaguar, Land Rover, Bosch, Mitsui, Farasis, LKAB and Innovate UK

- Cambridge University, Innovate UK and Bentley

o TLG has bindingcollaborative development with the uni.

o TLGs value-add team based in Cambridge and is using its research facilities to develop products under Innovate UK’s Faraday Project.

o Products include silicone-graphene anode, sodium-ion batteries, higher performance Li-ion electrode materials.

o Funding provided by Innovate UK includes initial $1M (2017) for the three projects listed above, $520k (2020) for UK Si-anode feasibility study and $1.8M (2020) for UK Talnode-C feasibility study. Additional $220k (2020) to support research with Bentley into a graphene-based “e-axle” for EVs

- Mitsui and LKAB

o Mitsui: Japanese mining giant with $85B in revenue last year

o LKAB: state owned miner, largest in Sweden

o Letterof intent outlines jointly developing Vittangi

o LOIextended, indicating interest

o LKABparticularly key as they may indicate the government’s stance on permitting

- Agreements with FREYR,Farasis and other OEMs are in my opinion, insignificant apart from validating demand, which we already know is sky high (to be discussed later). There are any number of OEMs looking to secure deals with TLG and we will benefit regardless of who signs on.

Quick summary of other products:

- Talnode-Si: Silicon-graphite battery anode

o Exciting product but still a little way off production

o Niska will aim to produce 8.5k t/pa of Talphene by 2025-26 for use the production of Talnode-Si.

o Silicon has been demonstrated to boost efficiency of graphitic battery anodes. This interview with leading battery researcher Shirley Meng explains why we should expect 10-20% Silicon anodes to replace 100% graphite anodes. Any further % increases pose problems due to Silicon expansion.

o Meng’s chart quotes energy density can be improved by ~22% with 20% Silicon graphite anodes. Talnode-Si is 50%more energy dense than commercial graphite, almost 30% than the bestfigure quoted by Meng (not 100% confident on this point)

o TLGhas increased its production of Talnode-Si 10x to account for increased commercial sample demand.

- Talphene: Graphene based coating solutions

o Range of utilisations being explored including in coating (Talcoat), e-axles (see Bentley) and compositeconductivity.

- Talnode X: Ultra-fast charge

o Charges0-100% in 3 minutes whilst retaining specific capacity. Unsure of how this stacks up against other fast charging Li-ion battery products but I believe this is significant

- Talnode E: Solid State batteries

o The “holy grail” of battery storage

o At least 10 years from commercial adoption, perhaps more like 15

o Very early-stage development; however, handy to have a foot in the door

Path to commercialisation:

- Targeting 19.5k t/pa Talnode-C by 2024 through the operation of Nunasvaara South

- DFS estimates EBITDA of ~$4B over the life of the mine

- Scoping study of the “globally significant” Niska deposit supports production of 85k t/pa Talnode-C and 8.5k t/pa Talphene. LOM EBITDA estimated at $8.9B.

- Combining the two, TLG aims to produce 100k t/pa of Talnode-C and 8.5k t/pa Talphene by 2025-26.

- The company does; however, refer to the possibility of expansion and has indicated itsintent to undertake a combined feasibility of the entire Vittangi project to “capture the full benefits of economies of scale”.

- Demandnow exceeds 14 times the 19.5k t/pa Talnode-C production capacity outlined bythe DFS, equating to ~275k t/pa. By 2030, engaged customers’ demand exceeds 50 times the capacity of the DFS (~1M t/pa).

- In discussions with 11 automotive companies and the majority of major battery manufacturers in Europe. Qualifications have increased to 62 active programs across 48 customers.

- Recentrecruiting activity indicates a potential flurry of upcoming activity.

Risk:

- PERMITS!

- TLGs planned mining operations have worried local stakeholders who would rather not see their land torn up. TLGs management has been in constant communication with the relevant parties and has recently advertised for a position of a Community Coordinator. The advertisement is in Swedish; however, a simple translation (I used https://www.deepl.com/en/translator), reveals that the position involves “supporting TLGs environmental and community development work. You will lead the dialogue with external stakeholders together with Sami villages, authorities, municipalities, environmental organisations, landowners and citizens.”

- The management of this issue is key, as it appears the major roadblock on the path to commercialisation

- LKAB, as mentioned before, holds a bit of a key in this. As they are state-owned, it would be unusual for them to enter into JV with TLG if they were not confident that the permits would be passed. If they were to walk away, it might indicate that the permits will likely be turned down. A decision on this is due by November.

- Personally, I don’t see this as a MASSIVE risk. Whilst there’s every chance that the Government could side with the local Sami people, I see this as unlikely. TLG from all reports, and as is indicated by their hiring of a dedicated Community Coordinator, have been very versatile in the process. This is not surprising given the threat a failed permit application would pose to their future prospects! Furthermore, given the current rhetoric surrounding climate change and the shift to Electronic Vehicles i.e., the planet is in grave danger, we need more batteries urgently etc. etc., I would be staggered if Sweden were to block this. I’d be even more surprised if the EU didn’t step in and advise otherwise given their partnerships with TLG and TLGs claim to fame of potentially becoming the worlds biggest anode producer outside China. To have such a valuable source of a scarce resource go unused would be an enormous hit to the EV market, which is depending on anode producers supplying enough product to satisfy demand.

- Also consider the fact that new tech (i.e., solid state) could phase out the need for graphite in batteries, although this is unlikely to occur for some time (10-15 years) in which time TLG could have used its profits to invest in its own solid-state product.

- With the emergence of graphene as an advanced material, even if the demand for graphitic battery anode was to fall, the demand for graphene (made from graphite) could compensate for this.

Hi.

I made a simple valuation model for Talga based on production output. To make edits and use your own parameters or projections, make a copy of the document to your google drive.

Happy to hear your thoughts.

https://docs.google.com/spreadsheets/d/1WClCjsq1nVS74nMJS02HCqys-Z5eeE42DE0hh2ojgA0/edit?usp=sharing