Battery Minerals Ltd (ASX: BAT)

BAT Details

On track for its first graphite production: Up 14.3% on January 22, 2018, Battery Minerals is gaining investors’ attention. Particularly, BAT came out with a positive update as it is moving rapidly towards the development and production at its Montepuez graphite project in Mozambique and signed its fourth binding offtake agreement. Its latest agreement which is with specialist spherical graphite and anode production company, Qingdao Keshuo New Materials Technology Co. is for 10,000 tonnes a year of graphite concentrate over an initial term of three years. Now it has four binding offtake agreements which cover 80% of its forecasted annual production from Montepuez. It is also at the last stage of finalising its Mining License in this quarter which is a part of its production strategy which will be starting in December 2018. The group is expected to complete its first shipment in the March Quarter of 2019 at export rates of 45,000 to 50,000tpa at an average flake concentration grade of 96.7% TGC (total graphite contained). It expects that the production will grow to over 100kt per annum of graphite flake concentrate from its Montepuez Graphite Project by 2022.
 

Graphite Profile (Source: Company Reports)
 
Its second binding offtake agreement was with Qingdao Guangxing Electronic Materials Co. Ltd (GEM) and it covered 10,000 tonnes a year of graphite concentrate for at least three years and this was followed by another binding agreement which was signed with US-based Urbix Resources for up to 11,000 tpa. It reflects that BAT is rapidly emerging as a significant global graphite producer which enjoys low capital and operating costs and strong cashflows. The group has also signed its third binding agreement offtake agreement with Qingdao Black Dragon Graphite Co for 10,000 tonnes a year of graphite concentrate from its Montepuez project in Mozambique for an initial term of 3 years. Lately, Trek Metals Limited signed to acquire 100% of the Kroussou Zinc-Lead Project in Gabon from Battery Minerals Limited. The consideration for the acquisition includes a cash payment of US$200,000 to BAT and the issue of US$200,000 of TKM shares which are based on a 5-day VWAP prior to the date of issue and are subject to a minimum floor price of $0.025.

BAT’s Return on Equity is yet to show positive levels while the group appears to build on a decent revenue growth potential based on accelerated work. The group appears to have some market and operation risks given the cash generation ability (at the back of equity raised and share placements made) and the volatile environment while BAT’s business forecast is still on a positive side. However, given the risks and reward potential, the stock seems to be a “Speculative Buy” at the current market price of $0.08
 

Comparative Analysis (Source: Company Reports)

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