Grigor Says Talga and MRL are ‘Catalysts for Disruption in the Graphene Sector’

He says MRL is a new player in the graphene space with the ability to use the same single step, low cost graphene recovery technology

First he singled out Talga, now Warwick Grigor says he has found the other key player in the low cost graphene space.

The Sydney-based resources analyst who runs Far East Capital made headlines in Australian newspapers earlier this year when he proclaimed that he was putting his money where his mouth was and investing a large chunk of his own cash into Talga Resources (ASX:TLG) because of its single-step graphene process.

Now he has picked out another Australian company, MRL Corporation (ASX:MRF) and – again – invested his own money. He says there is room for both in an investor’s portfolio as they are operating in different fields. Talga is looking at a European hub (it is building a pilot plant in Germany and plans to supply European companies from its Swedish project) while MRL (whose deposit is in Sri Lanka) is looking to Asia and Australia as its markets.

As I have said before, Grigor is one of the most experienced Australian analysts of mining companies and, also this year, issued a detailed paper on graphene.

He says MRL is a new player in the graphene space with the ability to use the same single step, low cost graphene recovery technology that Talga “has been holding close to its chest”. His client note is advising taking up shares in MRL because of the differences in valuation: Talga’s market capitalization is A$54 million while that of MRL is A$12.2 million.

There are other differences: Talga’s orebody is much larger and wider, offering long life and technically simple mining conditions. MRL’s orebodies are narrow vein and underground with less amenability to drilling out to prove the size of the resource, but this is offset by the lower costs of working in Sri Lanka.

Another difference is the grade, says Grigor. Talga’s is around 25% whereas MRL’s is over 90%. According to his figure, Talga will need about A$30 million to get into production, MRL less than A$10 million.

He says at this junction Talga is knocking on the door of becoming an institutional-grade stock but has to kick a few more goals to get there, the obvious one being the successful commissioning of the pilot plant. “I don’t think there is much risk here, but the box still needs to be ticked,” write Grigor. By contrast, at A$10 million, MRL is still a private client stock at present; it is difficult to deploy sizeable sums of money into a company with such small capitalization.

Grigor’s second point, arguing that Talga needs to beef up its management team with respect to commercial operations, seems to have been satisfied. Last week Talga signed a non-binding term sheet with Haydale Graphite Industries, based in Britain, which would see the two companies collaborate on the development of finished graphene composite and ink products. [As Roger Bade, at London brokers Whitman Howard noted, “although there is no certainty that this collaboration will come to anything, it could give credibility that both companies – although going along separate routes – are amongst the best graphene plays out there”.]

Grigor draws comfort from the fact that his two picks are essentially non-competitive because of their separate regional focus.

“As each of these companies make progress, sentiment will rub off on other players in the sector as the graphene story becomes more credible,” he says. “Both companies will offer the lowest cost, purest forms of graphene available, so they will both be catalysts for disruption in the graphene sector.”

Pacfico Minerals Surges on Copper Hits

Core from Coppermine Creek

Three holes drilled at the Coppermine Creek prospect intersected significant intervals of disseminated chalcopyrite and bands of semi-massive chalcopyrite.

One of the holes returned veins and disseminated chalcopyrite from 38-67m, with the interval from 67-73m corresponding to the Gordons Fault and containing bands of semi-massive chalcopyrite, as well as chalcopyrite fracture fill and disseminations.

The company said the chalcopyrite was associated with only minor pyrite and returned values of more than 25% using a hand-held XRF over widths of up to 30cm.

Assays are expected within a fortnight.

Airborne electromagnetics indicate a 3km by 1km alteration and mineralisation system extending away from the Gordons Fault to the southwest, with further drilling planned to test it.

Pacifico has also started drilling the Bing Bong prospect with the assistance of a NT government grant.

Borroloola West was one of the projects Sandfire floated on in 2004 but the company farmed it out to Pacifico in 2013.

Pacifico expects to earn 51% of the project by the end of the year by spending $A1.5 million under the first phase of the agreement.

The company can earn an additional 19% by spending a further $2.5 million and can get to 80% by sole-funding a bankable feasibility study or spending another $3 million.

Shares in Pacifico jumped 130% to 3.2c, while Sandfire shares gained 1.4% to $5.71

China's Revenge Serves Body Blows to BHP and Rio

China's revenge serves body blows to BHP and Rio

It's taken six years, but China is slowly turning the tables on the heavyweight iron ore miners.

In 2009, iron ore giants BHP Billiton and Rio Tinto decided they wanted to take advantage of China's soaring demand for iron ore, which was pushing prices ever higher. So they ditched the 40-year old system of setting annual contract prices in favour of using spot pricing for the majority of their iron ore shipped to China from 2010.

Needless to say, China's steel mills weren't very happy about that. BHP's previous CEO Marius Kloppers is widely acknowledged as the man most responsible for bringing about the change. With BHP and Rio filling a huge amount of China's demand, the steelmakers had little choice but to acquiesce. 

The changes, and China's thirst for iron ore, saw the iron ore price soar as high as US$191 per tonne in February 2011, from around US$60 per tonne in 2008. Rio Tinto produced record underlying earnings of US$15.5 billion in the 2011 financial year, with iron ore contributing US$12.9 billion. BHP, for its part, saw net profit rise 74 per cent to US$21.7 billion as revenues rose 36 per cent.

China may also still be sore over aluminium giant Chinalco's aborted US$19.5 billion investment in Rio Tinto back in 2010, which was aimed at gaining resource security. At the time, reports suggest Chinese officials feared that China was too vulnerable to both Rio and BHP, even separately. Rio's board canned the deal, and announced that it was instead forming an iron ore joint venture with BHP. That deal never went ahead – much to the relief of China.

The giant (re)awakens

But China has never forgotten, and appears unlikely to forgive. Now the sleeping giant has awakened, and looks set to turn the tables on Rio and BHP.

Firstly, China needed to loosen its dependence on the two Australian iron ore miners, so it has turned to Brazil's Vale. For many years Vale was snubbed by the Chinese. The iron ore giant had built a number of very large ore carriers to ship ore to China, but they have been banned from docking at Chinese ports since 2012.

Now, China hasn't just removed the restrictions but Vale has also sold 4 of the ore carriers to two of China's biggest shipping companies. Each carrier can transport up to 400,000 tonnes of iron ore, and could reduce Vale's production costs by as much as 25 per cent, according to some estimates. That would bring Vale's landed costs around the same as BHP and Rio's.

Vale also has a 25-year shipping agreement with China Cosco to transport iron ore from Brazil to China. China has gone another step further too, loaning Vale US$4 billion to help fund a US$16.5 billion project, known as S11D.

S11D is expected to produce 90 million tonnes of very high quality iron ore each year, taking Vale's production to 450 million tonnes of iron ore within the next few years.

In two moves, China has decreased its dependence on BHP and Rio, loosening their control over the iron ore market, and thanks to the increase supply of iron ore, achieved lower prices.

One last dance? 

Fairfax Media reports today that Chinese-linked companies have applied to the Foreign Investment Review Board seeking permission for an investment with Australia's self-styled 'new force in iron ore' Fortescue Metals Group.

Fortescue, with its US$7.7 billion in net debt, could strengthen its balance sheet with a capital injection, either to pay down debt in return for an equity stake, or refinance existing debt at lower rates. The miner recently issued US$2.3 billion in senior secured notes, but is paying a whopping 9.75 pe cent interest rate, at a time when interest rates around the world are at record low levels.

Fortescue could struggle to repay its debt load if iron ore prices continue to trade at or under US$60 per tonne, with some estimates putting the miner's breakeven price around US$70 per tonne. The company may well be amenable to a deal with the Chinese, particularly after the recent kerfuffle over the iron ore inquiry that was going ahead, but was cancelled.

Australian Households Chase Sun to Lead World on Solar Adoption

Australian Households Chase Sun to Lead World on Solar Adoption

Australian households are world leaders in solar power installation, according to new figures from Australia's peak industry body representing the fossil fuel and renewable energy sector.

The Energy Supply Association of Australia, representing the fossil fuel and renewable energy sector, has sourced data from around the world revealing household solar photovoltaic (PV) penetration in Australia is way out in front of any other nation.

The report shows almost 15 per cent of Australian households have adopted the technology to power their homes.

This is more than triple that of Germans, who are second on the world stage and typically thought of as the most prolific solar adopters.

The report breaks the data down to countries and jurisdictions illustrating where the world's most enthusiastic installers of small-scale solar energy are located.

"Germany, the US, Spain and others are held up as being at the forefront of solar power, but it is Australia, where households have taken it upon themselves to install solar PV, that easily lead the world when it comes to solar penetration," the ESAA report states.

The ACT had 15,637 household installations as of September last year, according to ActewAGL figures. Based on 2011 census data this put the ACT at about 10 per cent of households connected to solar – South Australia leads the way with almost 25 per cent of households connected to solar PV.

Although Australia leads the charge on small-scale installations, Germany is out front with utility-scale solar installations.

In terms of total solar energy produced per million people, Germany's capacity is about triple that of Australia's.

Australian Solar Council chief executive John Grimes said that was due to policies that had focused on domestic solar systems.

"The economics are compelling," Mr Grimes said. "The cost of the technology continues to fall at such a rate that it is already much cheaper to install solar than it is to buy electricity from the grid. And with the advent of cheap energy storage technology – battery technology – that really closes the loop.

"People like the Energy Supply Association and others should rightly be thinking about this. If they don't start to embrace the technology as opposed to resist it, their members companies – the big utilities – are set to become the Kodaks of the future." 



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