Company Overview: Battery Minerals Ltd, formerly Metals of Africa Ltd, is an Australia-based company engaged in the mineral exploration and assessment of mineral projects. It is focused on developing its graphite projects at Montepuez Central and Balama Central, and the Kroussou lead-zinc project. It operates in mineral exploration within East Africa segment. It has completed drilling program at the Montepuez project. It also focuses on undertaking on-ground exploration program at the Kroussou lead-zinc project, including discovery of outcropping. It produces Graphene Oxide and Graphene from raw graphite at its Montepuez project. The Montepuez central project consists of various prospects, such as Buffalo, Lion and Elephant. The Balama Central project is located within Xixano Complex. It has discovered additional outcropping zinc and lead prospects, over a distance of approximately 50 kilometers. Its subsidiaries include Rio Mazowe Limited, Express Resources Pty Ltd and Index Resources Pty Ltd.


BAT Details

2017 was a very progressive year for Battery Minerals Ltd (ASX: BAT) as it signed many agreements for its Montepuez Graphite Project which seem to lay the path for potential growth. It also got approvals under the Environment Impact Assessments (EIA) and completed Balama Central concept study. Moreover, the metallurgical process is still going on, and in fact, the planning stage of the Mine has been already completed. With efforts tracking well, Montepuez might grow to a 1Mtpa operation by 2022. The group has also raised significant funds to support growth at Montepuez.

Montepuez Graphite Project on track for commissioning in December 2018: BAT has made a significant progress in December 2017 Quarter and brought its Montepuez Graphite Project in Mozambique into development. It also released the results of the Value Engineering Study (VES) which was done on Montepuez. With latest developments, Montepuez remains on target for commissioning in December 2018 Quarter and for exporting its first shipment of graphite concentrate in the March 2019 Quarter. The drilling results are expected to come out in the March 2018 Quarter. The main objective of this Project is to significantly improve the financial returns by optimizing the processing plant through modularization and refining the mine plan to produce a higher head grade.
 

Key Aspects of Montepuez Graphite Project (Source: Company Reports)
 
It is worth noting that the Definitive Feasibility Study for the Montepuez Graphite project had demonstrated a decent investment opportunity with life of Mine indicated to be about 20-30 years, annual concentrate production of 100,000 tonnes (which is now 45-50 ktpa post VES), total net revenue of US$ 2,217 million and total EBITDA of US$809 million while project payback period was flagged to be 4.75 years.

On track with regards to Binding Agreements and Licenses: Mining License Application for the Montepuez Graphite Project is also progressing well, and the approval is expected in the March 2018 Quarter. It also completed the Environmental Impact Assessment (EIA) for Montepuez and approvals were received for few submissions which were made in December 2017. BAT signed a fourth binding offtake agreement for 3 years for 10,000tpa of graphite concentrate with specialist spherical graphite and anode production company, Qingdao Keshuo New Minerals Technology Co. Ltd. Its third binding agreement was with Qingdao Black Dragon, a privately-owned company which has expertise in mining, production, downstream processing and in marketing of graphite. Its second binding offtake agreement was with Qingdao Guangxing Electronic Material Co. Ltd (GEM) for graphite production. The first binding sales agreement was with a leading US-based graphite processor Urbix Resources LLC, covering a minimum of 5,000tpa and up to 11,000 tonnes of graphite concentrate per year. BAT has also signed a non-binding Memorandum of Understanding with Meiwa Corporation, a Tokyo Stock Exchange listed Japanese public corporation having expertise in marketing of graphite flake concentrate and of purified spherical graphite across Asia. Both the parties agreed to negotiate in good faith to complete the commercial sales agreement for mutual benefits. Particularly, Meiwa Corporation’s capacity as a trader and producer and BAT’s ability as an emerging supplier are seen to be complimentary.
 

Montepuez Graphite Project (Source: Company Reports)
 
Majority of Montepuez product (stage 1) under binding agreements: By entering into four binding offtake agreements with Urbix, GEM, Black Dragon and Keshuo, BAT has up to binding offtake for about 82% of Montepuez product which represents up to 41,000tpa of graphite concentrate. The group is thus into advanced discussions and technical due diligence with potential customers and is continuing negotiations with other parties. In addition, the group’s CAPEX is down to US$42.3M from US$126 million and its OPEX per tonne is of concentrate of US$337/t based on processing ~500,000t of ore at a grade of 12% Total Graphite Content (TGC). This will help Montepuez to initially produce 45,000 - 50,000t pa of graphite flake concentrate at up to 97% TGC. The Company has anticipated approvals and grants for the mining tenure to underpin the construction which will commence at Montepuez in the March Quarter 2018. BAT will also focus on its key targets in order to achieve wet commissioning and ramp up of the Montepuez Graphite Project from November 2018. Further, BAT will continue to focus on its research and development on spheronisation for anode production.
 

Exceptional Project Details under VES (Source: Company Reports)
 
Balama Central Graphite Project: BAT recently started a Concept Study, which included metallurgical test work and it highlighted the outstanding potential for its Balama Central Graphite project in Mozambique. The preliminary test work indicated the very coarse flake sizes of graphite which were on an average of 54% of higher value large and jumbo graphite flakes. Accordingly, Battery Minerals started a feasibility study and is targeting to complete the same by mid-2018. Environmental approval process has also started, and an additional 1600 m of diamond drilling was completed in December 2017. The basket price for Balama Central product at the end of December 2017 was US$1,216 per tonne.
 

Balama Central Project (Source: Company Reports)
 
Financial Position: The Company has completed a placement and raised funds of about $19.5 million recently. It issued approximately 325 million shares at 6c per share in two tranches in November 2017 and got an approval of the shareholders on 5 January 2018. Thus, in January 2018, the group raised $20m via the $19.5m placement and $0.5m via a drilling for-equity arrangement. At the end of December 2017, Trek Metals and Battery Minerals had signed a binding term sheet for Trek Metals to acquire 100% of the Kroussou Project from BAT for a consideration of US$400,000. BAT will also retain a 2.5% NSR which is subject to a 1% buyback option by Trek Metals. Considering the overall scenario, the Company reported to have cash and liquid assets of $18.78M. While the business rating needs to pick up, the revenue stream is expected to be relevant in the future. The group’s ROE has also improved over last two years while it reported losses before extraordinary items, and the financial position is expected to improve over time given the efforts on production, sales, strategic moves, and marketing.
 

Battery Anode Feedstock Demand (Source: Company Reports)
 
Stock Performance: Current emphasis on lithium ion battery technology has resulted in recent high interest in three commodities, flake graphite, lithium and cobalt. These commodities are of interest because they are highly priced and are currently in short supply, so the rapid expansion of investments in lithium battery promises an increase in the demand for these commodities. Catering in many directions, the group has also completed its Board restructuring as on 25 January 2018 with David Flanagan moving to the Managing Director position while Jeff Dowling became an independent Non-Executive Chairman. The group is putting efforts to have cost reductions from improved mined grade from 8.8% TGC to 12% TGC over the first 10 years of mine life at Montepuez, smaller infrastructure footprint, lower water consumption and increased recoveries supported by additional metallurgical and processing test work. Thus, the Montepuez Graphite Project is said to maintain 20-year mine life with significant extension potential (10+ years @ 12% TGC and 10+ years @ 8% TGC). Given the significant developments, Battery Minerals’ stock price has increased by 41.98% in the past six months and by 54.4% in the past one month followed by a 7.6% drop on February 02, 2018, and we believe there is more room for growth. Looking at the risk and reward potential, the stock is a “Speculative Buy” at the current market price of $0.098
 

BAT Daily Chart (Source: Thomson Reuters)

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