Link:
Listening through the presentation .. and collect my thoughts on them. My opinion only. But If I may say something up front: Please do this more often! I know its kind of repetitive for you but we make the decision to stay invested in Talga each day. We need each other here.
Slide 4: Corporate Overview
Hmm, would love to see the TOP20. "Major Shareholders" does not spell "Top 5". The remaining 15 holders own an average of 0.9% of Talga. It seems very unlikely that none of these would be larger than 1.6%, as it would imply a very very flat tapering of the curve. I bet the Top 5 look different thane the list of "Major Shareholders" shown here. Mark sais there is not much change in the TOP20.. so why not publish it then if he knows what it looks like? Its not much work!
Slide 10: Graphite in Li-ion batteries
That is a nice overview chart and shows you cant escape graphite based anode, no matter what chemistry is used. There is at least 60kg of graphite on average in each car, which is quite in line with what the plot shows.
Slide 11: Battery Megatrend Driven by Electrification
Look, the plot 2018 to 2022 shows a beautiful beginning of an S-curve and then the forecast is predicting some linear growth after than. I call BS on that. The S-curve will continue and if there is not enough EVs to buy, people will still not buy future-death ICE cars, but rather wait and drive the old car for longer. This plot will go to at least 50% by 2026. The ICE car market is dying. Look at the adoption curves of the first gas cars when they replaced horses. The show was over within 10 years. The plot that is shown here is a homage to the ICE car manufacturers that dont want to believe their days are numbered. Also that curve includes hybrids, which will also never get economical and are a complience trick to grab public funding. It will not last.
Mark "We are tracking above some of these forecasts" .. indeed.
Slide 12: Driving immense new graphite anode demand
While I understand that Talga cant grab numbers and plots out of thin air and needs to have a source (better than making shit up for sure), it doesnt eliviate the fact that some other people are also making shit up which then get quoted by Talga. The plot on Slide 12 is grossly wrong in my opinion. First, lets assume that natural graphite market will make 50% of battery anode, and the other 50% are synthetic and silicon. The numbers for cars are quite simple, each car uses about 60kwh (likely more), which conservatively requires 60kg of graphite (again, likely more). That is 30kg of natural grapite according to above assumption. Now, the global car market is going to be 100% transitioned to EVs. That is not in the forecast in any of the analysts because it implies that most of todays gobal leaders in ICE car production will go out of business. That is why this is not forecasted but that is exactly what is going to happen. There will be no ICE market in 2030, hence 100% of the new car market is going to be EVs. Which is about 80 Million cars. Which implies around 2.4Mtpa natural graphite in 2030 (not 1.5Mtpa as the plot suggests). However, thats only cars. There will be a huge demand for stationary storage as well, just as large as the car market. And this also will not include the trucks and smaller boats like ferries which will also transition to batteries sooner or later. You can easily double or tripple the demand for batteries by 2030 based on this. So the plot really should read about 4-5Mtpa demand for natural graphite by 2030. Then, the plot should taper off in an S-curve by 2035, which it doesnt do either. So the second error on that plot is, it suggests an ever growing demand for natural graphite which is also wrong as it suggests all parties have plenty of time to get their shit together. They don't. Swedish government, hurry up with these permits!
Great statement by Mark: "We. among others, are capable of making synthetic quality anode, which hasn't happen before". Indeed. This is great to hear! (start around 12 minute mark)
Slide 14: Talga owns Europe’s largest graphite resources
Love to see these numbers rise over time!
Slide 15: Vittangi Anode Project: Overview
Mark making a good point here that today the mine looks too small but when they scoped it in 2017, it looked like the right size. So do whats necessary and increase future expansions please!
Also, mentions non disclosure agreements with customers. We suspected this., but good to have confirmation!
Slide 17: Project Development updates
Great to hear from Mark (and I am paraphrasing): "We are doing the exploration of new ressources now to pull new mines ahead in time because everything needs to happen in a sequence." Yeah, thats exactly what we need to hear! Lining up offtakes with permitting and financing to start construction next year. Good to hear things are progressing nicely but instant gratification monkey needs to be more patient!
Slide 18: EVA Plant
Mark: "Some small battery users like consumer electronics, drones, etc need only a few 100kg of anode before making a decision but Automotive customers require a lot of regulation and a lot more anode with commercial manufacturing equipment, hence EVA plant". We knew this, but it also needs the QE and other papertrail to show customers that Talga has everything under control. So its not only a plant to produce samples, its also a plant to prove processes and quality as well as paper trail. (Its a difficult trait to learn., so cool that Talga is going through that pain!).
Also "Price and volume negotiations are under way" Fantastic to hear!
Very happy!
Slide 19: Talnode-C performance
Unfortunately, no numbers but statements are very positive on charge speed and cold/hot temperature performance. Great to hear, and probably the best we are going to get ever. Still my science mind wants numbers.
Slide 21: Anode Product Commercial Strategy
Mark: Locking in offtakes is a multi year process due to the complexity of Anodes compared to other battery metals which is much simpler. Deals happening with coalitions of EV manufacturers of Car manufacturer and cell manufacturer, because car manufacturers dont own their own supply chains and its new to them as well with us being the first anode producer in Europe. Gotta be very careful what kind of deals are made as they can last for a long time.
- Interesting take from Mark here. I can totally see that this is a reason for a lot of difficulties. I must say, I didnt fully appreciate the amount of paperwork involved in all this. Its much more than just the product performance.. its all of it and its quite complicated.
Slide 22: Financing Strategy
I like that the wind is turning towards more a dept financing model rather than an equity financing model. BurnVoir seems to have good experience in the Battery Sector. Talga plans to provide project equity rather than company equity, we knew this before.
I didnt know that this wasnt available before. So this makes sense, but the question remains how Talga wants to find cash to simply live, not only build the project, but survive the next quarters. Maybe something comes up later in the presentation.
Slide 23: Mine Permitting
We researched that topic to death and I can proudly say, that all that Mark said, we knew already. We have the process nailed down and we are NOT subject to any of the misconceptions that he mentioned here, unlike a certain sand-ocean interface wants us to believe in the other forum. Actually, we did a fucking good job on being on top of things. Thank you all that provided input and understanding here!
Slides 29+30: Vittangi Graphite Grows / Exploration
We know that Talga has a lot of demand from customers and that the Niska expansion is never ever going to cover it. So they go for exploring the remaining ore in order to extend the life of the Niska Expansion by defining more ore in the ground and also use the exploration to find opportunities to produce more. I would say, dont be so coy about it. The market is gigantic, and the time you need to go through all the paperwork and permitting processes.. Mark seemed too cautious about it. If they start now, it takes at least 5 years to the mine.. so better start drumming the drums for 1Mtpa production. If all the conversations that Mark mentioned with customers are true, there is no need to be cautious. Go full steam for large! I know financing is difficult at moment, but you will not get financing if you sell it as a 'maybe'. Need more faster! The EV Adoption S-curve is gonna be brutal, and so will be stationary storage!
Slide 31: Catalysts
It appears that off takes are closest, followed by financing and then permits, which are sort of vague obviously. We kind of assumed that from the quarterly report already, but nice to hear it from Mark expressed in a way that leaves just enough room for interpretation that he doesnt jeopardize any deals.
Questions:
Question: How will Talga meet its financial requirements over the next few quarters?
Mark: We can do things with equity if the price is high, but its quite rubbish the last months so we will not do anything radically and we are limited. Nothing in details I can say, we have plans (shrugs).
My take: Body language tells me, its uncomfortable topic for him, I would feel the same in his position. My suspicion is, that is exactly why we have a down ramping beach. These people want to prevent Talga from getting money through equity. They are not interested in accumulating as many suggest. They just want to hurt Talga, the business. Might be oil, might be chinese, might be other shady players, doesnt matter. Its something Talga needs to fight with more of these public presentations. We, as shareholders, matter!
Question: Are chinese anode suppliers subject to the same rigorous processes by customers as Talga?
Mark: You should ask customers that. But technically yes, they are more attractive on the cost basis, not so much on the quality or time basis..
My take: Established players ... and you know you get shit natural anode from china because of its diversity that needs to be blended with sythetic to make it work in the first place. Talgas natural anode is (see above) of similar quality as synthetic, hence similar priced. The argument that Talgas product must be cheap because its natural and all natural is cheap doesnt hold water. I guess the qualification process is so demanding because Talgas product is the outlier in the natural anode market and therefore needs to be tested to make sure its actually what it promises to be. Makes sense.
Question: Talnode-Si commercialization and Solid State
Mark: We dont talk about it much because we have tech in there. We can be low cost provider for silicon anodes that is very scalable. Its beeing tested extensively by Tear 1 automotive (hint hint, rubs nose, points at the graphite Tesla in the background).. Confirms that the silicon product uses the graphene waste products from the anode production process (gosh that sounds like technobabel but would it be great if it works!) On the solid state front: It still got fundamental problems and might never work, not big focus (i.e. its on the shelf).
My take: His hints at Tesla make sense to me. I am deep in Tesla, I know basically everything there is to know as aretail investor and the battery day silicon product they have shown for the 4680 looks eerily similar to what Talga shows on their product. Also the way he describes the interaction just shouts Tesla to me. I can be wrong and might be whishful thinking, but I am 90% sure he talks about Tesla here. Tesla is very technically minded and able to find solutions on a technical level together with their suppliers. They are not the company that drives negotiations at gunpoint like others use to do. Makes them tough negotiators though, you cant bullshit them with management talk and power point karaoke.
Question: Is there a PFS for the Niska expansion?
Mark: We probably will do a PFS but unsure if its in the scale of the scoping study or at a different scale. Given what we see in terms of demand from our customers and the demand curves.. we might need to revisit what scale we have and what Niska IS. There might be another scoping study.
My take: Uuuhhhhh, interesting! I like THAT! FINALLY a concession to the demand! I have mentioned that about 10 times in my takes here already. Niska expansion needs to grow! Great to hear that, please do!! Please dont be so unsure about these things either. Just say: "look, Niska is gonna be too small in its current form. We are looking at another scoping study first. Cant promise its going to go down this way for uncertainties in the permitting process, but we intend to have it larger." We all know its true!
Question: What are your top priorities for success over the next 12 months?
Mark: Killing the three horsemen of the apocalypse (permitting, off takes, financing). Maybe getting some part of the financing early for long lead items. Also hints at offtakes for the products from the expansions as well.
My take: Uuhhh, interesting!
Fantastic quarterly call! Thank you for doing it and please please please, do another next quarter! Also, why the time limit? Just take as much time as you need, no reason to jump through the presentation. Its your show. No one is putting a clock on you!
You really know what to say! I only have to wait for your analysis. I would like to mention or highlight two things:
