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If you had looked carefully you could have discovered the test series A to D in the pictures of the AGM presentation:Major article appearing today in Australia's premier daily financial newspaper The Australian Financial Review. This is great publicity
Why a Perth resources play has bet on batteries in the Arctic Circle
Hans van Leeuwen Europe correspondent
Dec 5, 2022 – 8.10am
In the back blocks of the remote northern Swedish town of Lulea, in an unremarkable shed, a posse of Australian-backed engineers and scientists is cooking something up.Their modest factory bears no resemblance to the chaotic kitchen of The Muppet Show’s Swedish chef. Except that there’s a gadget that looks like a super-complicated kettle, and one resembles a giant mixer, and something that looks like a row of microwave ovens, feeding into a large kiln. He would probably feel right at home.Talga Resources staff make anode materials for batteries at the demonstration plant in Lulea, northern Sweden.
The demonstration plant, run by Perth-based ASX minnow Talga Group, isn’t producing anything remotely edible, of course. But the product it is dishing up – graphite anode materials for batteries – has European carmakers salivating.Sales of electric vehicles (EVs) rose 65 per cent in Europe last year. The EU has set a 2035 target to phase out the internal combustion engine, so the potential growth trajectory is exponential.Worldwide demand for batteries will surge 30 per cent a year this decade, McKinsey’s reckons, and the battery value chain’s size will increase tenfold by 2030.
That’s already leading to a scramble for all the commodities and components that go into making batteries. But in Europe, where more than a quarter of EVs are made, the problem is particularly acute.European drivers want cars with a supply chain that is as near to net-zero carbon emissions as possible – so for the carmakers, only some batteries will do.And European governments want supply chains that are no longer reliant on China – from where some 85 per cent of the world’s battery anodes and 70 per cent of cathodes now originate.
This is where Talga, headed by affable managing director Mark Thompson, comes in. They want to make anode battery material in Europe, with greenly extracted graphite. And they want to move fast but – unlike the Swedish chef – without breaking things.Talga’s demonstration plant, in the back blocks of Lulea. “A lot of people don’t realise just how much graphite there is in a battery. The graphite in the anode is the largest single mineral in the battery,” he says.“We just thought it was essentially a no-brainer that Europe was going to need its own supply of graphite anode. And that’s what we’ve started doing, and we’re scaling up fast.”
The graphite will come from Talga’s own Swedish mine in the pine forests of Vittangi, right up in the Arctic Circle. This gets Talga’s product over the first European hurdle: the need for a local supply chain.Talga’s test graphite mine in Vittangi, in Sweden’s far north. And it’s also green: rather than relying on carbon-intensive synthetic graphite, the mine yields graphite in its natural form. And because the region has abundant hydropower, the mine can operate on renewable energy.With that confluence of factors, Thompson reckons northern Sweden should be the “breadbasket of the battery industry”.
His initial mine will exploit a 1.2 kilometre-long, 200-metre deep ore body. It will produce 19,500 tonnes of graphite a year, eventually rising over the mine’s 24-year life to 100,000 tonnes a year.Permitting is expected in the first half of next year, but Talga has been operating a test mine.The graphite extracted so far – about one-quarter of a year’s supply – has been sent to Finland for crushing and grinding, then to Belgium for purification. The resulting fine powder then ends up at the demonstration plant in Lulea, which is actually only 280 kilometres south of Vittangi.Eventually the plan is to mill and concentrate the graphite at Vittangi itself, and send two truckloads a day down to Lulea for purification and anode production.
One size doesn’t fit all
At the Lulea demonstration plant, about a dozen people oversee a process in which Talga’s graphite is turned from flakes into rounded and coated particles that battery makers use in their anodes.The process is complex, but the economics are probably the trickiest part. If the company was just offering lithium, nickel or cobalt, that would essentially be one-size-fits-all. With graphite, though, the battery maker has to test and retest the material, to make sure it works with specific products.It has to be “the right shape, the right crystallinity, the right chemistry, the right performance, before it goes into a customer product”, Thompson says. And that takes time.Graphite isn’t like other commodities - buyers have to test the product extensively.
An anode materials producer like Talga will typically start off by sending a customer just a few kilograms, known as an “A sample”. If those check out, the customers will ask for a “B sample” of at least several hundred kilos, then a “C sample” of, say, a couple of tonnes or even several dozen tonnes.By this point the company and its customer are starting to get pretty committed. At “D sample” level, the customer is going into production with that material.“It’s an almost continuous scale of qualification, until you reach the level where they’re happy to go ahead. That’s why what we’ve done is maybe more of an achievement than gets recognised,” Thompson says.This makes financing difficult, too: you have to be making plenty of samples before you can get committed customers, known as offtakers; but you often need offtakers to get capital.Otherwise, you need lenders who understand the product – which wasn’t easy, until the battery boom got going.“It has been relatively challenging. But it is happening faster and faster now,” Thompson says.
After all, “batteries are the new oil”.Offtakers in the wings?Shareholders seem reasonably au fait with the story. The stock used to trade at about 70¢, but during the first boom in EV sales in 2020, the price went on a month-long tear that ended at $2.Its record high was $2.10 almost exactly a year ago, but it now trades at about $1.40, having shed about 16 per cent this year. That 2022 performance is roughly on a par with the L&G Battery Value Chain ETF.In the past week, there has been mixed news. The mining side of the project has passed preliminary screening for a potential European Investment Bank loan of €300 million ($465 million).But Talga missed a November 30 deadline to nail down its first binding offtake agreement for its flagship anode product, Talnode-C. That would have been a full-fat version of a September non-binding deal with ACC, a battery maker owned by Mercedes-Benz and Stellantis, which makes brands including Fiat, Peugeot and Chrysler.“Talga and ACC expect to finalise negotiations and definitive documentation shortly,” Talga said in an ASX statement last week. But it added a rider: “There can be no guarantee the documentation will be finalised.”
Thompson says Talga has “a bunch of other customers that are interested”, and the ABCD sample production process is “starting to mature now” with some of those. Assuming that the US Inflation Reduction Act and the rising costs of production in Europe don’t change the European battery industry’s dynamics, Talga hopes to have a commercial-scale plant operating in Lulea by late 2024.“We’ve got this really high-grade graphite deposit, we’ve proven that it can work in batteries, we’ve worked out the processing route, we’ve worked out how to make the final product so that you don’t have to send it to China and bring it back in again,” Thompson says.“And we made the real thing entirely within just a couple of days’ drive from Germany and France, where a lot of cars get built, and where batteries are going to get built as well.”Expansion plansTalga began life as a gold explorer, and first picked out the Swedish graphite opportunity in 2012. As this project slowly subsumed the company, is there any sense in which it retains an Aussie twang?“We are swapping over from that Australian equity market scene to a European project financed for European customers, which is the original intent and what it should be,” Thompson says.
But the bigger change to Talga’s identity could come as it expands its range of products and activities over time.The company is exploring partnerships in synthetic graphite, because European customers still want it – they just want it greener. It is also looking at deploying its graphite on the cathode side of the battery.And customers are showing an interest in a silicon anode, which can give the graphite an energy boost. “We are reviewing places where that could take place if that was to commercialise, including in the UK,” Thompson says.“If our assets and technology can work around the world in different ways, we’ll do that,” Thompson says. “But what we’re doing is already extremely ambitious and challenging. And we’re doing it into a world that doesn’t know much about it. So we’ve sort of got to walk before we can run.”
Here I have to ask myself the question of the code that was assigned to the test samples. stand these TTLs for LTT, i.e. Long Time Technology Co Ltd for Foxconn? Using the same coding tactics would then result in codes like BM, VN, WMB. We should keep our eyes open
