Ann: Increase in Montepuez Graphite Reserve, page-16

A keeper for me but I'm prepared for and expecting further dilution. For those on the sidelines and concerned about the risk, perhaps wait until the finance solution is determined. The waiting hasn't stoppped me from increasing my holding of options.

With the delays in a number of ASX-listed Graphite projects achieving approvals and finance I think the outlook is strong for the graphite sector, due to the delays in a significant number of projects coming on line to meet demand. I’m also aware of a Canadian-listed project having trouble getting through the financing hurdle. Presumably, there are others. Demand-outlook is strong over the next 5-10 years according to benchmark minerals. The more mature graphite plays are the ones best positioned to fill the anticipated shortfall in supply.

BAT are generally in a good position because the infrastructure is now all in place. The camp is constructed, footings are in place for the process plant and all the roads and tailings facilities have been built. From memory that should mean about 6 months to finish construction once they achieve finance. I’d assume a 3 month lead time for long-lead process-plant mechanical items but they can proceed with other parts of the construction whilst they wait. Sovereign risk is a consideration in Africa but there are plenty of mines already operating there ( but it does need to be adequately

At current levels I think somewhere in the 5-10 bags range in terms of upside over 12 to 18 months (from current SP). This of course all depends on the finance solution they ultimately come up with and the amount of dilution that results. Will do more analysis of that once we know more.

Of course it does require BAT management to get an acceptable finance solution over the line that creates positive sentiment for the share price. They made a big mistake last time in leaving a shortfall from funds that would come in from RCF plus a cap raise and SPP. It provided plenty of ammunition for people to throw stones.

I’m personally now only holding BATOA options. Exchanged my holding of heads for options as I think there is more upside there. The main risk for options is takeover and of course not getting finance over the line. A heavily-dilutive finance solution could punish the existing options until there is sufficient traction in the share price.

For further upside we have:

• Montepuez Stage 2 ( another 50 ktpa )
• Balama Stage 1 and 2 ( DFS due this quarter ). Nominally another 100ktpa.
• Spherical Graphite - should add significant margin through production of add-value battery-grade Spherical Graphite. We don’t have a clear timeframe for this however logically it might come into play with Montepuez Stage 2. Offtakes for Stage 2 have not yet been signed so may provide a window for incorporating spherical graphite sales.
• Vanadium – vanadium goes into tailings. They can add a process plant for extracting saleable concentrates. They’ve done preliminary testwork for this and a scoping study is planned. I’m still not sure about the fundamentals for Vanadium given EV car batteries can apparently be repurposed for storage applictaions.

Management focus is achieving finance to get us on the path to commercial operation so cash flow from Spherical Graphite and/or Vanadium is only potential upside at this point.

I do think there may be some background work going on in the offtake space. Surely that will be the case with the Balama DFS scheduled for release this quarter. We also have a portion of Montepuez production unallocated to offtakes so a possibility of news on that front around the time of finance.