Magnis Resources Ltd (ASX: MNS)

MNS Details

Growth in Lithium-ion battery market to strengthen group’s position: Magnis’ stock moved up 2.6% on September 13, 2017 at the back of positive sentiments for graphite and lithium sectors. Magnis recently updated that Queensland Premier Annastacia Palaszczuk has publicly expressed its support for MNS’ Townsville Lithium-ion battery Gigafactory project based on the submission of a scoping study that demonstrated the project’s positive economic impact. Magnis is a part of the consortium (led by Boston Energy & Innovation and consists of Magnis, New York based Eastman Kodak Group, Charge CCCV and C&D Assembly) that is responsible to build the project. For the funding discussion process, land valuation work has been completed on the 400-hc site in Woodstock, Qld as the same has been selected as the location for the Townsville Gigafactory. The consortium is engaging major equipment vendors for the project; and pilot testing of manufacturing processes and production of prototype battery products for potential customers has been commenced.

On the other hand, the stock had come under pressure (slipped about 30% in last three months) owing to the uncertainty that emanated with regards to the Tanzanian mining framework for the mining and natural resources sector; while the group later clarified that recent developments have had no net detrimental impact on the Project financial viability as set out in the 2016 bankable feasibility study. MNS had received confirmation from the Export Processing Zone Authority (EPZA) in August 2017 that the new legislation will not impact the subsidiary, Magnis Technologies Tanzania (MTT). MTT is said to utilise Magnis Resources’ developed proprietary technology in the Special Economic Zone for processing of graphite concentrate to final products. As of now, the group continues to assess the impact of changes until complete clarifications are issued by competent legislative authorities.
 

Lithium-ion Battery Plant Offtake (Source: Company Reports)

Meanwhile, Magnis has also signed a Memorandum of Understanding (MOU) with German Lithium-ion battery consortium TerraE-Holding GmbH (TerraE) for the supply of raw materials. As per the agreement, MNS will supply raw materials to the TerraE Gigafactories. TerraE plans to build 34GWh of production capacity across two locations in Germany with first stage production expected to commence in late 2019. Given the latest developments and boost from sector driven sentiments, we put a “Buy” at the current price of $ 0.39

Syrah Resources Ltd (ASX: SYR)

SYR Details

Strong balance sheet position: Syrah Resources’ stock charged up by 2.7% on September 13, 2017 with the release of its interim financial report for half year ended June 2017. The surge seems to be owing to the project updates and cash flow position. Net cash flows used in operating activities were $5.1 million against 2016 figure of $3.2 million and interest received during the interim financial period was $0.5 million (2016: $0.6 million), while net cash flows used in investing activities were $58.2 million (2016: $35.7 million). Overall, strong balance sheet position with $100.8 million of cash has been reported by the group. For the Balama Graphite Project, the group has completed 90% of construction activities and is progressing well with the project development. There has been a delay in construction completion in the Processing Plant that led to a delay in the commencement of production and an increase in the project construction budget from $200 million to $205 million. On the other hand, production ramp-up is expected to be 140,000 to 160,000 tonnes of flake graphite concentrate in the first year of production and 250,000 to 300,000 tonnes in the second year, subject to global market demands. SYR has also made key appointments for the Battery Anode Material (BAM) Project and has indicated to identify opportunity to achieve earlier revenue (H2 2018) and commercial volume (>10,000tpa) through first phase of the BAM Plant in Louisiana. Recently, the group signed a binding sales agreement with Jixi BTR Graphite Industrial, a wholly owned subsidiary of Shenzhen BTR New Energy Materials (BTR), for 30,000t of graphite from the Balama operation in the first year of production. These along with other agreements including sales agreements confirmed with Hiller Carbon, Marubeni and MINERALS GmbH, are expected to provide value.We give a “Hold” recommendation at the current price of $ 3.77


Condensed Consolidated Statement (Source: Company Reports)

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