DYOR. Not advice. Make your own decisions. I attended the...

DYOR. Not advice. Make your own decisions.
​

I attended the Battery Minerals AGM yesterday. It was good to meet the significantly expanded management team. From those I spoke with and saw presenting, they certainly have the right mix of management for maturing BAT from feasibility stage to a producer (first exports) within approx 12 months.

Below, some of the key points from DF as he talked through the presentation.

Slide 1: They have approximately 140 people on site working on construction/exploration.



Slide 3:

• 2.5M tonnes of graphite demand per year ( will grow to over 4 million tonnes by 2023 )
• the majority of the growth is coming from natural graphite
• an extra 1.5 million tonnes of natural graphite needed in market ( that's over 30 x BAT's fully ramped-up stage 1 production )
• Syrah (the big graphite mine) took 7 years to develop. They don't see another big graphite mine on the horizon soon.

Slide 4:

• all the applications for natural graphite are experiencing growth
• estimated that actual growth of Li-on is 50% greater than forecasts

Slide 5:

• in 3 years market share of EVs has grown from almost 1% market share to almost 3% market share ( and the growth is just starting )
• peaks of demand in this chart are the impact of the China winter

Slide 6:

• EV sales in China have exploded in March and April this year ( my annotation added )

Slide 7:

• commodity prices are coming up
• at these prices stage 1 can generate USD $25M
• they have 4 stages of growth ( each stage is commercially / economically better than the previous due to economies of scale )

Slide 8:

• the team
• Ben Van Roon later showed us a drone video he also talked through the activity on site

Slide 9: (DF's key points)

• have achieved a great deal this year
• have completed a DFS and then made it better via a value engineering study
• have 4 offtakes
• have mining license
• have funding from capital markets
• have debt funding term sheet negotiated
• have upgraded resources
• scoping studies have been done against stage 3 and 4
• Balama has excellent economics
  • increased confidence in resource
  • approximately 50% grade increase ( we can expect this to significantly improve OPEX and hence upside from Balama - DFS will reveal numbers - nominally allows for 50% improvement in mine production for same amount of ore hauled )

Slide 10:

• 3 offtakes are fully-integrated graphite suppliers ( 3 of them have their own mines and make anodes in conjunction with BYD or CATL, they are involved in making batteries for cars, they are real production companies )
• Urbix (North America) are a technology company but do graphite trading as well
• $5mill to $6mill of long-lead equipment ordered
• taken delivery of $2.9 mill including camp and crusher

Slide 11:

• have done work on exploration to map out detail for mine planning
• mined a bulk sample pit
• tested the logistics system through to the port

Slide 12:

• they have 300 to 400 mt of exploration targets ( so in the future can turn on additional growth when needed )

Slide 13:

• grade increase from 10.5% to 15.9% ( should yield 40% to 50% more production out the backend - expecting really good economics reported in DFS )

Slide 14:

• first exports on a ship in June next year
• build / grow business through course of this year

Points from video:

• site roads going in ( main site road constructed )
• concrete works starting in 3 weeks for plant area
• 24 pieces of mining equipment on site
• 50% through construction of 100-person camp ( up to 250 people during peak construction
• temporary camp as well ( tents )
• crushers fully-commissioned last week ( running at 300 tph )
  • will run about 6 hours per day
  • approx $850k AUD
• other long lead items ordered ( arriving from september )
• crusher brought in early to produce aggregate for concrete works and producing material for roads
• COO on site about 50% of the time
• lead geologist (Jason) there about 100% of the time
• 60 people from local villages working on site

Q&A:

• locals
  • 9 villages within 12 km ( source of labourers )
  • artisans ( trades people ) from closer to Pemba ( they are impressed by the skills, Mozambique has a good mining history ). Big companies like BHP have been employing for many years
• plant is almost all modular ( expertise needed is mainly assembly )
  • plant is fully-engineered in South Africa
  • only floatation cells and regrind cells made in china (Bigram plants)
  • striker crusher
  • most equipment made in South Africa
• leveraging some of the things Syrah have done (avoiding some of their mistakes)
• production profile
  • grade increase - Balama ( will that reflect a 50% improvement in Opex ), expect OPEX to go down and payback to be significantly shorter
• why did you raise money at time and price ( worked closely with Hartleys and Morgan, they did try to fund earlier with mining license, planning was to achieve this in November ) - my thoughts on this below
• as for the dilution associated with the debt ( debt markets are tough and they want a return for the risk )
• will funding cover Balama?
  • • funding only covers montepuez project
• will have a warehouse just outside of pemba as well as port ( there is expansion capacity at port )
• urbix offtake
  • BAT are selling concentrates at market price ( they are a traditional concentrate buyer)
  • they have in-house boffins ( technical expertise )
  • pending results for downstream test work
  • if there is commercial advantage, will consider doing downstream using Urbix expertise
  • • original plan was own 20ktpa spherical plant, but highest return at right risk is to mine/produce concentrates and then apply IP later
    • urbix are more sophisticated and have better technical expertise
• contained vanadium goes into a tailings dam
  • will keep market informed
  • additional capex ( but sounds like an easy add-on )
  • potential for improved economics

NB - seems their intention was to get Debt funding from November, but the delay in the mining license caused by the change in Mining ministry impacted that plan. My impression is that the key milestone for funding (Mining License) was achieved just as the dow crashed. Timing therefore bad. This ultimately impacted share price and also the funding environment ( debt deal was arranged when our SP was low ). Seems we are victims of circumstances.

I can see this is going to be a successful project, they've got the team in place to do it right. Not the amount of upside long-termers originally wanted. From my perspective 3-4 bags in the next 12-24 months and 15+ over 5 years. That's not taking into account upside from improved economics from Balama as well as potential upside from Spherical Graphite and Vanadium.