[Nick Hargrave]

TGR has raised capital in the form of a convertible loan note, with the initial conversion price of almost double the current price at 60p. This is to part fund the Mozambique acquisition, where the majority of funding is through the issuance of shares at £1.03. Hopefully this will allay market concerns of a dilutive fund raising and allow the share price to begin to reflect the value of the business, but we note that a further £1.5m of loan notes still need to be placed and the market can mis-interpret convertibles as always being issued at a discount to the current price rather than at the premium disclosed here

https://www.londonstockexchange.com/news-article/TGR/convertible-loan-note/15574463

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[Nick Hargrave]

I had a call with the CEO this morning with a view to participating in the CLN fund raise. Shishir is a really good operator and with the added colour he provided, my conviction on TGR is enhanced. With the current price of 43p, therefore, the equity is just a more compelling investment to me than the CLN at this point

Some key clarifications from the call:

The business will be at EBITDA breakeven with the current 12ktpa capacity, before the next profitable 18ktpa comes online in September

The remaining 54ktpa capacity planned in Madagascar is still expected to come onstream by end 2024, with the timing of future modules benefiting from the investments made in the sites already

With EV buying now a commercial decision rather than an ESG one, TGR feels that the 2030 graphite demand forecasts are probably low given that currently only 15% of graphite demand is from EVs vs. other applications, With incremental demand struggling to find supply, there is no sign of pricing softening

Expecting future sales to remain in line with the current split of 70% to end users and 30% to intermediaries for smaller customers – preference for having direct, operating relationships with end users rather than signing offtake agreements

The Mozambique DFS is complete and everything is fully permitted with some equipment already on site. TGR plans to ‘just’ optimise the processing plan to remain the lowest cape operator in graphite globally before prudently building out capacity. Both parties are keen to get the regulatory approvals finalised

The TSG acquisition remains in the works, but the need for a UK downstream presence in the near term means they are likely to pursue a direct UK investment in facilities (utilising the increased Madagascar and Mozambique capacity) with a commercial licence agreement for the technology

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