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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (18737)	6/9/2016 1:16:50 PM
From: Goose94	Respond to of 203353

GLK-V little engine that could showing life.

To: Goose94 who wrote (18737)	6/14/2016 7:34:18 AM
From: Goose94	Respond to of 203353

Lessons From Syrah Resources’ Graphite Off-Take Agreement On Thursday of last week, Syrah Resources (SYR-ASX) announced a 5-year, 50,000 tonne per year (50ktpa) spherical graphite off-take agreement with Japan’s Marubeni Corp. The same day, Credit Suisse raised its target price to $8.02 (AUD) from $6.35 (AUD) and issued a 17-page research update that discussed the Marubeni contract in particular and the lithium-ion battery market in general. I don’t follow Syrah closely, but Marubeni’s long-term commitment is fascinating for several reasons. First, Syrah announced its spherical graphite test results in November 2014, but it took 19 months for independent laboratories and anode, battery and EV manufacturers to test Syrah’s spherical graphite, validate performance and qualify that material for use in lithium-ion batteries. Second, Credit Suisse expects Syrah’s spherical graphite production to begin in 2017 and reach nameplate capacity in 2018. Third, China produced 100% of the world’s natural spherical graphite for lithium-ion battery anodes in 2015 (~43,000 tonnes). The annual deliverables under the Marubeni contract exceed 2015 ex-China demand, which suggests that Marubeni is convinced spherical graphite demand will soar over the next three years. Fourth, the product supplied to Marubeni under the off-take agreement can only be resold to Japanese or Korean customers and certain foreign subsidiaries. Fifth, Credit Suisse believes Marubeni is precluded from selling Syrah’s spherical graphite to Panasonic or Hitachi for subsequent resale to Tesla Motors, which has no visible supply chain for an estimated 30ktpa spherical graphite requirement at its Nevada Gigafactory. Sixth, Credit Suisse is uncharacteristically optimistic that “even the most junior graphite explorer can find a potential off-taker to sign an MOU for future graphite supply. The need for secure feed appears highly likely to increase, particularly as growth continues from consumer electronics demand, modest refractory demand and potential emerging demand for expandable graphite as an emerging fire retardant in new construction.” I’ve understood the complexity of battery industry testing and validation procedures for years, but Syrah’s recent experience is a great case study for investors. Spherical graphite is not a “fungible commodity” like most minerals, but it is far less complex than cathode materials used in lithium-ion batteries. This graphic highlights the differences between flake graphite and finished battery anode material If it takes 19 months to test and qualify spherical graphite from a new source, it could take years to conduct performance testing, complete process due diligence, validate the finished product and qualify a new cathode chemistry or cathode material supplier. Initially, I was surprised if not shocked at the size of the Marubeni off-take agreement. As Credit Suisse explained, official estimates for the global natural spherical graphite market are in the 100ktpa range, with China and the rest of the world each accounting for roughly half of total demand. With 2015 ex-China demand in the 50ktpa range, a 50ktpa contract for Japan and Korea alone seems ambitious. But it may not be. China is taking aggressive steps to reduce pollution from graphite mining and consolidate its graphite industry. If those actions reduce production capacity, graphite exporters will be the first to suffer because China understands the importance of supplying its domestic industries first. It’s also worthwhile to remember that BYD and Foxconn are building huge new lithium-ion battery factories in China that will further reduce the amount of spherical graphite available for export. Finally, Marubeni has worked closely with Syrah to conduct pre-marketing activities in Japan and Korea for nearly 18 months; so I’d give long odds that they have a solid grasp of their customers’ medium- and long-term supply chain requirements. When I consider the risks that Chinese graphite exports may decline sharply at a time when spherical graphite demand from Korean and Japanese battery manufacturers is rising sharply, the 50ktpa number doesn’t seem all that unreasonable. It does, however, leave a huge potential gap between available Chinese exports and spherical graphite demand from lithium-ion cell manufacturers in Europe, North America and elsewhere. Based on the foregoing, I think the spherical graphite market holds great opportunity for junior miners that have advanced to the point where independent laboratories and anode, battery and EV manufacturers have begun the grueling process of validating performance and qualifying their materials for use in lithium-ion batteries. investorintel.com