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Kibaran Resources Limited (“Kibaran” or “the Company”) is well down the path to implementation of a vertically integrated graphite business supplying a number of markets outside of China. This includes traditional uses and the developing lithium-ion battery (“LiB”) anode market, the latter of which some forecast will result in a eight fold increase in demand for natural flake graphite for batteries by 2025. The Company’s key asset is the 100% owned (through wholly owned Tanzanian subsidiary TanzGraphite) Epanko Graphite Project (“Epanko”) in Tanzania, which is fully permitted and has binding offtake agreements thus far with German and Japanese customers for ~44,000tpa of the planned 60,000tpa of proposed high-quality graphite concentrate production. Kibaran is now working towards finalising financing following a hiatus (now ended) in the development of Epanko, with the potential for first production by 2021. Delays were initially due to conforming with the rigorous bankable feasibility study (“BFS”) and other requirements associated with sourcing funding out of Europe and complying with the IFC Equator Principles, however satisfaction of these requirements has resulted in a rigorous study and robust, financable project. Delays were also caused due to the well publicised changes in the Tanzanian Mining Law - this affected Kibaran (and a number of other companies) in that the issuing of Mining Leases (ML) was held up for over twelve months; Kibaran has now been issued with a Letter of Guarantee effectively extending the life of the Epanko Mining Lease from 2025 to 2035, which is a requirement of the senior debt financiers in that it matches the term of the ML with that of the debt financing, and which now allows for the recommencement of financing negotiations. The second key part of the strategy is downstream processing of graphite to purified spherical graphite (“SpG”), a key component of LiB anodes. This has involved the setting up of the EcoGraf business, which has also included the development of an environmentally friendly proprietary SpG purification process, that has been successfully tested on graphite from Epanko and a number of 3rd parties globally. Purified SpG has been used to produce “in-spec” battery anode material that has been successfully tested by a number of anode manufacturers. The development of EcoGraf has continued in parallel with Epanko, with a pilot plant now operating in Germany. Plans are for a staged expansion up to a production of 20,000tpa purified SpG by 2021, with further expansions possible thereafter. The nature of the business is that plants will have the flexibility to be able to be set up in locations to suit the markets, and with the potential to be able to be developed in association with strategic partners. KEY POINTS Ready to go: With the recent Letter of Guarantee on the Mining Lease, Kibaran is now in a position to finalise funding and progress Epanko to development and production; EcoGraf is currently underway, with the Company now considering attracting a strategic partner to help fund the commercial development of the SpG process. Offtake in place: Binding offtake agreements are in place with quality partners; this includes an 20,000tpa agreement with Thyssen-Krupp that could supply ~30% of the German refractory market, 10,000tpa with a German trader and 14,000tpa with Sojitz, a major supplier to the non- Chinese battery markets in Japan and South Korea. Forecast strong market growth: Graphite markets are forecast to grow very strongly over the foreseeable future, largely driven by the growth in electric vehicles; one outcome of this is that end users will be looking to supply outside of China, which currently controls the market. Quality resources with upside: Mineralisation at Epanko is of high quality, and suitable to supply most markets; in addition, there is considerable upside potential for future operational expansions. The Company also has a strategic holding and Resource at Merelani-Arusha in the north of Tanzania, which has the possibility to be a future producer. Success with EcoGraf: Results to date suggest that EcoGraf will be able to be successfully developed commercially, and being an ethical and green non-HF purification technology, products should have broad market appeal. Experienced personnel: Company personnel have extensive and successful experience in the resource sector (including graphite), and have a significant stake in the Company. Active work programme: We expect to see milestones being met over the near to mid term, thus leading to material news flow. Valuation: We have a base case valuation/six month price target of A$0.64/share for Kibaran, calculated on a share structure diluted for funding of Epanko and EcoGraf and graphite pricing adjusted slightly upwards to reflect changes in pricing since release of the BFS. This is predicated on menaingful progress at both the Epanko and EcoGraf projects.
Kibaran Resources
