Broker research reports

[teilenswert]

By all appearances, Talga is making great strides towards the three black knights: off-take agreements, funding and permits. This should, according to many, finally lift the share price to new heights and contribute to Talga attracting much more interest from both analysts and potential investors. Accordingly, it hopefully makes sense to create this thread for future broker research reports.

There is a separate thread where some of us have already made predictions on how production volumes, costs and revenues could develop in the next few years and what impact this would have on the market capitalisation and share price - you can find more information here:

Talga's Current NPV (Updated April 2022)

Talga's Current NPV (Updated April 2022) If you add the NPV's in the Vittangi DSF and the Niska SS they have a combined NPV with an 8% discount rate of between US$3.5B and US$5.7B. DFS_TimingUpdate_v2 (talgagroup.eu-central-1.linodeobjects.com) MicrosoftWord - Final_01_ASX.docx...

thestockexchange.com.au

 

[teilenswert]

Euroz Hartleys rates Talga Group as a speculative buy and a estimates a 12 month price target of 3 AUD. Further details can be found here:

https://talgagroup.eu-central-1.linodeobjects.com/app/uploads/2023/01/14125115/120822EH.pdf

 

[PeeDeePee]

View attachment 27110
Euroz Hartleys rates Talga Group as a speculative buy and a estimates a 12 month price target of 3 AUD. Further details can be found here:

https://talgagroup.eu-central-1.linodeobjects.com/app/uploads/2023/01/14125115/120822EH.pdf

The report does not state that $3 is a 12 month target. It gives us ( in their opinion ) a conservative current valuation of $2.65 with a price target of $3 They also state these numbers, Do Not allow for any potential upside, from our highly anticipated Mercedes deal or Jorc upgrade etc.
Although correctly, their valuation has factored in one major proviso, that "Court approval is a Key and Significant Risk" and that if the Mine is Approved, they are likely to upgrade their recommendation to an outright Buy.
What intrigues me most, is that this Report was written 5 weeks ago. And given between here and HC, a good number of our intrepid colleagues often come up with some very tasty morsels, why has TLG's first ever detailed Independent Report, been suppressed ?

 

[teilenswert]

The report does not state that $3 is a 12 month target. It gives us ( in their opinion ) a conservative current valuation of $2.65 with a price target of $3 They also state these numbers, Do Not allow for any potential upside, from our highly anticipated Mercedes deal or Jorc upgrade etc.
Although correctly, their valuation has factored in one major proviso, that "Court approval is a Key and Significant Risk" and that if the Mine is Approved, they are likely to upgrade their recommendation to an outright Buy.
What intrigues me most, is that this Report was written 5 weeks ago. And given between here and HC, a good number of our intrepid colleagues often come up with some very tasty morsels, why has TLG's first ever detailed Independent Report, been suppressed ?

Well, from my understanding price targets in the stock market are usually forward-looking for 12-18 months. Wouldn't make much sense to value the stock at 2.65 now and at 3.00 in a year?!

 

[PeeDeePee]

Well, from my understanding price targets in the stock market are usually forward-looking for 12-18 months. Wouldn't make much sense to value the stock at 2.65 now and at 3.00 in a year?!

With all respect I don't agree, the Report reads that Hartley's have a clear understanding that the situation is fluid, and that 2.65 to 3 bucks is their 'current' opinion, and that this opinion will no doubt be adjusted, in line with what actually occurs in the coming few months.

 

[teilenswert]

So we agree to disagree, they use the exact term "12 months price target" in figure 34 on page 21, which I had also attached in my post. Also changing a recommendation from 'speculative buy' to 'buy' doesn't mean they have to adapt the price target too. But yeah, I don't get what's the difference between price target and valuation in their point of view...

 

[PeeDeePee]

So we agree to disagree, they use the exact term "12 months price target" in figure 34 on page 21, which I had also attached in my post. Also changing a recommendation from 'speculative buy' to 'buy' doesn't mean they have to adapt the price target too. But yeah, I don't get what's the difference between price target and valuation in their point of view...

I stand corrected. However I suggest you read a portion of the preceding page "Our valuation is $2.65/shr. We see potential to upgrade this if Commodity prices increase, the project is de-risked, or we include some of the Technology/ R&D products."
So the de-risking bit, is exactly what will substantially occur if we receive a position outcome from next month's Court Hearing ?

 

[ACinEur]

Interesting read, thanks for sharing…the key for me is that the analyst has been ‘on-site’ and clearly had the tour from MT… so this is not just a spreadsheet jockey piece…. A tour that many of us would have loved to have done…

 

[PeeDeePee]

I stand corrected. However I suggest you read a portion of the preceding page "Our valuation is $2.65/shr. We see potential to upgrade this if Commodity prices increase, the project is de-risked, or we include some of the Technology/ R&D products."
So the de-risking bit, is exactly what will substantially occur if we receive a position outcome from next month's Court Hearing ?

P.S. another error - I wrote position instead of positive.

 

[DAH]

Interesting read, thanks for sharing…the key for me is that the analyst has been ‘on-site’ and clearly had the tour from MT… so this is not just a spreadsheet jockey piece…. A tour that many of us would have loved to have done…

Very true!

As a LTH it's refreshing to finally see an analyst or commentator who appears to "get it", not only TLG but their unique position in this massive transition (and opportunity).

@Semmel I'd like to think that the hypothetical 800k TPA of Anode just might be an off-record answer from MT with regard to his hopes and plans for the future that he understandably avoided during the last webinar Q&A.

Bring on 2023!

 

[Semmel]

Finally had time to read the actual report. Sorry, was short on time due to family constraints (mini-me is finally sleeping and I am not).. Anyhow, I agree that the 800ktpa long term potential is an interesting number. But I dont see Marks signature in it. Given how conservative the report is, this type of speculation is probably an upper ceiling on what Talga could do with the resource. Lets face it, members of this forum came to similar conclusions. And its not rocket science either. Take the 200mt graphite ore in the ground. Say you can extract 80% of that, so 160mt. Then apply a 4mtpa extraction rate to get to a 40 year life of mine. With 20% graphite concentrate from graphite ore, thats 800ktpa. If we can do that without Marks help, they can do it too.

Except I think that calculation is wrong. The 200mt does not refer to a graphite ore with 20% graphite concentrate, but it already applies the 20%. Otherwise, you could simply increase your resource number by adding useless rock. So.. if their line of reasoning is to be followed, they would actually look at a 16mtpa graphite ore extraction and a production rate of 4mtpa graphite concentrate / 3.5 mtpa anode. Which .. would be a much more ridiculous number! I also think they underestimate the size of the market by 2040. As everyone does at the moment. But projected demand is corrected upwards every year, only helping the Talga story. My estimate, the world needs around in produced 30TWh battery capacity in 2040. With around 1kg / kWh of anode in battery, that means we need around 30mtpa anode production per year in 2040. Say advances with silicon drops the contained graphite mass to 0.5kg / kWh, that is still 15mtpa graphite anode. Talga could easily capture 20% of that market with its resource.

Anyhow, another thing.. Euroz Hartleys wants to be conservative which is understandable. They want to err on the side of caution. But Talga should try to be much, much faster with that! We need Niska to be 200-300ktpa, not 85ktpa. We need this by 2028 fully ramped up, not 2030. And we need another expansion to its final size after that. Though, MT seems to be way too conservative to drive the process this fast unfortunately. I have come to terms with the fact that the timeline Euroz Hartleys presents is more likely than the dream value I want Talga to achieve.

 

[anbuck]

Finally had time to read the actual report. Sorry, was short on time due to family constraints (mini-me is finally sleeping and I am not).. Anyhow, I agree that the 800ktpa long term potential is an interesting number. But I dont see Marks signature in it. Given how conservative the report is, this type of speculation is probably an upper ceiling on what Talga could do with the resource. Lets face it, members of this forum came to similar conclusions. And its not rocket science either. Take the 200mt graphite ore in the ground. Say you can extract 80% of that, so 160mt. Then apply a 4mtpa extraction rate to get to a 40 year life of mine. With 20% graphite concentrate from graphite ore, thats 800ktpa. If we can do that without Marks help, they can do it too.

Except I think that calculation is wrong. The 200mt does not refer to a graphite ore with 20% graphite concentrate, but it already applies the 20%. Otherwise, you could simply increase your resource number by adding useless rock. So.. if their line of reasoning is to be followed, they would actually look at a 16mtpa graphite ore extraction and a production rate of 4mtpa graphite concentrate / 3.5 mtpa anode. Which .. would be a much more ridiculous number! I also think they underestimate the size of the market by 2040. As everyone does at the moment. But projected demand is corrected upwards every year, only helping the Talga story. My estimate, the world needs around in produced 30TWh battery capacity in 2040. With around 1kg / kWh of anode in battery, that means we need around 30mtpa anode production per year in 2040. Say advances with silicon drops the contained graphite mass to 0.5kg / kWh, that is still 15mtpa graphite anode. Talga could easily capture 20% of that market with its resource.

Anyhow, another thing.. Euroz Hartleys wants to be conservative which is understandable. They want to err on the side of caution. But Talga should try to be much, much faster with that! We need Niska to be 200-300ktpa, not 85ktpa. We need this by 2028 fully ramped up, not 2030. And we need another expansion to its final size after that. Though, MT seems to be way too conservative to drive the process this fast unfortunately. I have come to terms with the fact that the timeline Euroz Hartleys presents is more likely than the dream value I want Talga to achieve.

I'm curious what makes you say that MT is too conservative. I get the sense that he wants to be more aggressive, but the board is more conservative.

 

[Semmel]

The initial scale of 19.5 ktpa was small enough to the market then. He had the foresight that the battery space will explode but didn't scale the project properly. Same story with Niska. Way too small, even at the time of conception. And even though he knows it's too small, we see nothing that indicates the situation to change. Maybe he is holding his feet still to not steer the pot before the permits are granted. I don't know. But the pattern of under planning is there until I see proof to the contrary.

 

[JNRB]

Two thoughts:

1. I don't think MT wants out announce too much expansion-wise until the company is actually up and running selling anode.

2. If a 300-800ktpa scenario were under serious consideration, what action do you think the company would be talking different to what they have been?

At this stage I think the companies course of action would be much the same. Still need to get into initial production, still need to provide ramp-up volumes in line with customer scale-up, we're still expanding the resource, still need to acquire realistic amounts of capital for the stage we're at.

All of that is to say, if 800ktpa was Mat's goal, i think we're still taking the right actions to get there, even if it hasn't been states explicitly.
In actual fact, the company has gone out of their way not not state ANYTHING about targets post 100ktpa. To me suggests either the targets aren't there, or that there too big to talk about just yet

 

[Semmel]

Two thoughts:

1. I don't think MT wants out announce too much expansion-wise until the company is actually up and running selling anode.

2. If a 300-800ktpa scenario were under serious consideration, what action do you think the company would be talking different to what they have been?

At this stage I think the companies course of action would be much the same. Still need to get into initial production, still need to provide ramp-up volumes in line with customer scale-up, we're still expanding the resource, still need to acquire realistic amounts of capital for the stage we're at.

All of that is to say, if 800ktpa was Mat's goal, i think we're still taking the right actions to get there, even if it hasn't been states explicitly.
In actual fact, the company has gone out of their way not not state ANYTHING about targets post 100ktpa. To me suggests either the targets aren't there, or that there too big to talk about just yet

I absolutely agree. For 1. Yes, that's what I was speculating as well. For 2. They could have issued a new scoping study for Niska.

But let's not get ahead of our selfs. We don't know anything for future expansions and even Niska is jet to be filed for environmental assessment. I guess waiting for the new law to pass in March (was it?) For the new legislation on permits is the faster way to do it. So i do don't expect any documentation would be filed beforehand.

 

[cosors]

I absolutely agree. For 1. Yes, that's what I was speculating as well. For 2. They could have issued a new scoping study for Niska.

But let's not get ahead of our selfs. We don't know anything for future expansions and even Niska is jet to be filed for environmental assessment. I guess waiting for the new law to pass in March (was it?) For the new legislation on permits is the faster way to do it. So i do don't expect any documentation would be filed beforehand.

If I remember correctly the results of the analysis and a catalogue of measures with suggestions on what to do will be published this spring, i.e. no law yet. I'd have to search here, but I don't have the time at the moment. I think the SGU was commissioned to do this. Interesting conversation here!

 

[Coolbeans]

Talga has already mentioned about the expressed demand for just under 1mtpa by 2030, The potential is there and I think most of you guys are underestimating Talga. After the permits my guess is we will see some very confident language from MT and Talga, along side some very nice announcements with a completely different MC.

 

[TentCity]

Talga has already mentioned about the expressed demand for just under 1mtpa by 2030, The potential is there and I think most of you guys are underestimating Talga. After the permits my guess is we will see some very confident language from MT and Talga, along side some very nice announcements with a completely different MC.

I tend to agree. We just need Talga to get past this first hurdle and secure the environmental and natura permits in the first instance.

Mark telegraphed some time back that the Niska scoping study was already outdated and they were looking at larger expansion options. As I’ve mentioned previously, it would be counterproductive to vocally promote this ambition too widely as it will just antagonise and potentially heighten local opposition to the mine at this critical point of the process.

What i am particularly interested in is the renewed sense of urgency from the EU to try and level the playing field after the US introduced the IRA. I’ve noted the increased media coverage regarding how Europe needs to massively step up its level of support for local projects to be competitive with N.America.

We know the EU Commision are planning to report on the Critical Raw Materials Act this quarter, with a target of 10-30% of domestic sourcing of CRM. Furthermore, key projects will be selected for additional support, termed ‘European Projects of Common Interest’ (PCIs) aligned to energy policy and climate objectives. We know that the EIB has already shortlisted Talga for up to 300million Euro low cost loan, but could there potentially be more support on the way subject to the implementation of the CRM?

The biggest question is timing - if there is more near term support (financial or otherwise), how much would this reduce the equity stake Talga is currently proposing to raise via Mitsui or another strategic partner? Or, if it comes post the FID for Stage 1, could the additional financial or permit streamlining fast track Talga going from 19,800tpa to 200ktpa/300ktpa and above? Either which way, Talga is positioned to be major beneficiary of any new policies and we know they are very well policitcally connected in Sweden & the broader EU with the recent EU Commission visit to Kiruna.

 

[WheresTheMonkey]

OK here is the Bell Potter recommendation Guys & Gals

 

[Amur27]

WTM - thanks for posting the report - 24 pages of good reading (excluding Disclaimers).