Semmel
Regular
With the environmetal permit under the belt, lets talk about the future of Talga. How things will play out the next decades.
I just looked at the numbers again. And it seems, we are far, far away from mining a substatial amount of graphite that is available with the Nunasvaara South surface mine. Its very simple. If we extract 100ktpa ore with an average 25% contained graphite, thats 25ktpa graphite. Very little gets lost in making the anode in the end, so these numbers are simple and check out. Talga estimates a life of mine of 24 years. Talga mines about 25*24=600kt of graphite from Nunasvaara South. Look at the table:
Nunasvaara South has about 2800kt. Of what we know about. Its open at strike and at depth! Meaning, there is about 2000kt where we cant get to with the current mine. Now look at the map from the announcement in here:
Everything is super close by. If that were iron ore bodies like in Kiruna, they would just make a big tunnel and follow the ore underground. Look, there is even stuff between Nunasvaara North and Niska South. Of course, we would need more drilling to specify this, but its obvious it is there. But even if we dont account for more ressources. Even if we dont account for the open strike and depth and use only what we know its there. That is still about 8Mt of graphite after mining Nunasvaara South. I am routing for a life of mine not much beyond 2040. Why?
Because power will become so cheap that competition with synthetic will eat into our profit margins. The sooner we get the stuff out of the ground the better. The more we produce early, the less incentive is there to build the synthetic infrastructure. But why does energy become cheap you might ask? Because of the transition to sustainable energy. The exact thing we are trying to go faster with Talga will ultimately eat our profits. How?
Look at what Tesla recently announced on sustainable energy, link above. Look at what Tony Seba has done for computing the economics of a 100% renewable energy society, image below. Mind you, to build a 100% renewable energy economy is cheaper than continuing to operate existing carbon burning energy economy. Which is INSANE if you ask me. Bulding NEW infrastructure is CHEAPER than maintaining existing stuff? Yes. Thats the core of the argument. There was always a chance that this Tony Seba guy is a whack job. I didnt think so, but I can be wrong too. So factoring that in, I was cautious. But his findings were essentially confirmed by Teslas study. So its not one whack job, its at least two. What is the core of the argument? Look at the image below.
The x on the x-axis is the energy generating capacity requirement (i.e. demand) by the entire economy of some region. The value that is written as the blue curve is Energy generating capacity by wind and solar. The y axis is cost. If you dont want to have power outages, you need to have enough battery capacity to fill in the gaps. The cost of building the batteries required for a given energy generation capacity is the green curve. If you ask any economist, about a 100% renewable energy economy, they say it cant be done because the battery requirements are too high. You dont have batteries that last over winter for instance. These "experts" are stuck at the 1x vertical line in the plot above.
However, the cheepest way of having sustainable energy economy, is not to build a 100% renewable energy capacity. Its to build ~400% renewable energy economy. You basically build the energy generation capacity for about the worst case of winter when you have little sunlight for months. But you build enough solar panels and wind turbines that make STILL enough energy in these situations. Then you need vastly less energy storage, which is much more expensive than power generation. Thats why the most economic sustainable energy economy is to oversupply energy! That means, you have LOTS and LOTS of free energy a lot of the time!
With technological advancements, the sweet spot might not remain at 4x. It might go to 2x with better energy storage. But the fact remains, you need to build more energy generation than you need. Meaning, the cheapest sustainable energy will, as a side effect, have lots of free energy. AND its cheaper than maintain oil and gas power generation, let alone ICE cars. EVs are already cheaper than ICEs if you consider full life cycle.
And to close the loop. Synthetic graphite is expensive because it needs a lot of energy. It also needs Petrolium as feed stock, which goes away, but that can easily be replaced by a different carbon source of which there are plenty. In essence, synthetic will become cheaper over time and eventually become so cheap, that profit margins of Talga will be very low. Thats why I want the graphite out of the ground as fast as possible. I want a sustainable energy economy as soon as possible for environmental reasons and I want Talga to dig it up before they are priced out for selfish stock price reasons. Time is of the essence. We are now at the sweet spot of history for graphite mining. Politically, economically and environmentally.
Time is ticking. We need to be swift and decisive with our expansion plan. We should make plans as soon as possible. Not waiting another year for new drilling results. We need to act now and go as big and fast as possible with the resources we have already drilled. We can fill in the gaps later and extend the mine once we have the permit rolling.
With all this said, we need to make an underground mine, about 400ktpa Talnode-C production capacity, i.e. 1.6Mtpa ore extraction for the entire Niska and Nunasvaara resource body. There are 8Mt in contained graphite. Thats a life of mine of 20 years. By the time its build, its going to be nearly 2030. That is almost too late for us given the discussion above. Maybe I am a bit wrong on the time lines, but I reckon, 2040 is about the time we become energy capacity positive, meaning we cross the 1x line with sustainable energy for good. Thats when the margins start to get hurting. 10 more years of mine after that.. and with even more resources in the ground after THAT. We will see, maybe mining and processing becomes cheaper too and we can keep our profit margins in tact. I dont have a crystal ball that is THAT clear
I just looked at the numbers again. And it seems, we are far, far away from mining a substatial amount of graphite that is available with the Nunasvaara South surface mine. Its very simple. If we extract 100ktpa ore with an average 25% contained graphite, thats 25ktpa graphite. Very little gets lost in making the anode in the end, so these numbers are simple and check out. Talga estimates a life of mine of 24 years. Talga mines about 25*24=600kt of graphite from Nunasvaara South. Look at the table:
Nunasvaara South has about 2800kt. Of what we know about. Its open at strike and at depth! Meaning, there is about 2000kt where we cant get to with the current mine. Now look at the map from the announcement in here:
Everything is super close by. If that were iron ore bodies like in Kiruna, they would just make a big tunnel and follow the ore underground. Look, there is even stuff between Nunasvaara North and Niska South. Of course, we would need more drilling to specify this, but its obvious it is there. But even if we dont account for more ressources. Even if we dont account for the open strike and depth and use only what we know its there. That is still about 8Mt of graphite after mining Nunasvaara South. I am routing for a life of mine not much beyond 2040. Why?
Because power will become so cheap that competition with synthetic will eat into our profit margins. The sooner we get the stuff out of the ground the better. The more we produce early, the less incentive is there to build the synthetic infrastructure. But why does energy become cheap you might ask? Because of the transition to sustainable energy. The exact thing we are trying to go faster with Talga will ultimately eat our profits. How?
Look at what Tesla recently announced on sustainable energy, link above. Look at what Tony Seba has done for computing the economics of a 100% renewable energy society, image below. Mind you, to build a 100% renewable energy economy is cheaper than continuing to operate existing carbon burning energy economy. Which is INSANE if you ask me. Bulding NEW infrastructure is CHEAPER than maintaining existing stuff? Yes. Thats the core of the argument. There was always a chance that this Tony Seba guy is a whack job. I didnt think so, but I can be wrong too. So factoring that in, I was cautious. But his findings were essentially confirmed by Teslas study. So its not one whack job, its at least two. What is the core of the argument? Look at the image below.
The x on the x-axis is the energy generating capacity requirement (i.e. demand) by the entire economy of some region. The value that is written as the blue curve is Energy generating capacity by wind and solar. The y axis is cost. If you dont want to have power outages, you need to have enough battery capacity to fill in the gaps. The cost of building the batteries required for a given energy generation capacity is the green curve. If you ask any economist, about a 100% renewable energy economy, they say it cant be done because the battery requirements are too high. You dont have batteries that last over winter for instance. These "experts" are stuck at the 1x vertical line in the plot above.
However, the cheepest way of having sustainable energy economy, is not to build a 100% renewable energy capacity. Its to build ~400% renewable energy economy. You basically build the energy generation capacity for about the worst case of winter when you have little sunlight for months. But you build enough solar panels and wind turbines that make STILL enough energy in these situations. Then you need vastly less energy storage, which is much more expensive than power generation. Thats why the most economic sustainable energy economy is to oversupply energy! That means, you have LOTS and LOTS of free energy a lot of the time!
With technological advancements, the sweet spot might not remain at 4x. It might go to 2x with better energy storage. But the fact remains, you need to build more energy generation than you need. Meaning, the cheapest sustainable energy will, as a side effect, have lots of free energy. AND its cheaper than maintain oil and gas power generation, let alone ICE cars. EVs are already cheaper than ICEs if you consider full life cycle.
And to close the loop. Synthetic graphite is expensive because it needs a lot of energy. It also needs Petrolium as feed stock, which goes away, but that can easily be replaced by a different carbon source of which there are plenty. In essence, synthetic will become cheaper over time and eventually become so cheap, that profit margins of Talga will be very low. Thats why I want the graphite out of the ground as fast as possible. I want a sustainable energy economy as soon as possible for environmental reasons and I want Talga to dig it up before they are priced out for selfish stock price reasons. Time is of the essence. We are now at the sweet spot of history for graphite mining. Politically, economically and environmentally.
Time is ticking. We need to be swift and decisive with our expansion plan. We should make plans as soon as possible. Not waiting another year for new drilling results. We need to act now and go as big and fast as possible with the resources we have already drilled. We can fill in the gaps later and extend the mine once we have the permit rolling.
With all this said, we need to make an underground mine, about 400ktpa Talnode-C production capacity, i.e. 1.6Mtpa ore extraction for the entire Niska and Nunasvaara resource body. There are 8Mt in contained graphite. Thats a life of mine of 20 years. By the time its build, its going to be nearly 2030. That is almost too late for us given the discussion above. Maybe I am a bit wrong on the time lines, but I reckon, 2040 is about the time we become energy capacity positive, meaning we cross the 1x line with sustainable energy for good. Thats when the margins start to get hurting. 10 more years of mine after that.. and with even more resources in the ground after THAT. We will see, maybe mining and processing becomes cheaper too and we can keep our profit margins in tact. I dont have a crystal ball that is THAT clear
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What I also love with this company is there will be life beyond their current primary focus of batteries/anodes, especially as you mentioned the pressure+possibility of cheap & abundant energy. My mind ticks over a million miles when thinking what’s in store after establishing significant free-flowing cash, customers and then leading onto the eventual/higher demand which comes on board for: coatings, composites, & construction. Right now, the Talphite space it appears (& logically) to play 2nd fiddle. But as MT has mentioned in the past, graphene could be bigger than graphite. A scary concept. That is why our future is blindingly bright, and believe those areas we haven’t even scratched as part of the long-term future.
