Company Overview - Magnis Resources Limited is an Australia-based graphite producer company. The Company is engaged in the business of exploring for, developing, and mining natural flake graphite for use in various industries, including batteries for storing electrical energy. Its segments include Australia and East Africa. The Company is focused on the graphite or battery powered industries. The Company is involved in prospecting, exploration and pre-development for graphite on its Nachu Project. Its Nachu Project is located near Ruangwa, in Southern Tanzania and approximately 220 kilometers to the Tanzanian port of Mtwara. Its other projects/tenement names include Ruangwa, Rutamba North, Lihehe East, SML Nachu, Issuna, Mkuju 1, Ilongo North and Manyoni East. Its graphite end uses include battery anodes, expandable graphite, composites, refractory and foundry, steel markets, gaskets, seals, brake linings and lubricants.

MNS Details
Valuation of the land completed for mine construction at Nachu Graphite Project: Magnis Resources Ltd (ASX: MNS) completed the valuations for re-settlement and land compensation activities on the Nachu Graphite Project in Tanzania, which is a major milestone for the group. This update indicated that MNS would be ready to start construction at the end of the wet season. The valuation has come to a total of US$3.4 million of the of the area within the Special Mining License (SML 550/2015) considering the complete compensation package of crops and trees, land area, structures and other required items. Moreover, the valuation documents have been approved for payment by the Chief Government Valuer. The land is acquired for the re-settlement of homeowners and has been cleared for the construction activities beginning early in the New Year. The cost is expected to be US$900,000 for the construction of a new housing village set to be finished in the second quarter of 2017.
 

Plan showing the individual parcels of land in the Special Mining License area (Source: Company Reports)
 
Positive lithium-ion battery results: MNS has got positive initial test results in terms of the first cycle efficiency and charge/discharge capacity. MNS lithium-ion battery development team has made a major progress recently with Thermo Gravimetric Analysis of graphite flakes which was produced by using milling and flotation processes with purity more than 99.95% Total Graphite Content (TGC). This would lead to bulk physical processes to produce anode materials that would meet the current less than 0.05% ash content specification. Moreover, the full cell fabrication with anode materials containing Nachu graphite was undertaken by an external testing facility. This becomes the final part in the commercial development program, and would offer samples to the potential end users for their own evaluation. Additionally, after initial cycling at the external testing facility, the full cells have been sent to the MNS testing facility in New York to undergo extended cycling. The full cells have also been delivered to end users including the major players in the automotive industry.
 
Significant cost reductions for graphite silicon blend anode: MNS made efforts to cut the manufacturing cost of graphite silicon blend anode material. The company got the pricing per unit weight equivalent to that of current coated spherical natural graphite anode products. Moreover, the energy density of the graphite silicon blend enhanced by 65% which makes the material very cost effective at the given level of cell performance it can deliver. Additionally, MNS and its partners got many approaches from parties interested in its graphite silicon blend anode material mainly from the major players in the automotive industry. In addition, MNS got the purchase order to evaluate the product.
 
Detailed engineering work is underway with Ausenco to produce a range of graphite products: MNS has undertaken a detailed engineering program of work in preparation for the construction at the Nachu Graphite Project, which is a part of Front End Engineering and Design (FEED) program. This included equipment vendor testing to confirm the selected process flowsheet and related equipment and would lead to generate up to 99.9% TGC purity product. Overall, the engineering work demonstrates to the potential end users the versatility of the Nachu Graphite Project to able to produce a range of graphite products in terms of size and purity for numerous applications. After the selection and confirmation of the equipment, the optimization work on the processing plant footprint at Nachu is to be undertaken. Moreover, the FEED study is anticipated to be finished by the end of the first quarter of 2017 post the targeted timeline of starting full scale construction at Nachu after the conclusion of the wet season in April 2017.
 
Regulatory permits and power supply agreement for Nachu project: Nachu project has received all the regulatory and environmental permits, while completed a Bankable Feasibility Study (BFS), a power supply agreement and has clearly defined concentrate export route. The Ministry of Energy has granted the Special Mining License (SML) to Nachu and Minerals of Tanzania, as well as Mineral Development Agreement (MDA) has been finalized for Nachu. The Nachu project is on target to meet the forecast increase in graphite demand for lithium-ion battery uses as numerous “mega-factories” are starting from 2018 onwards. Moreover, MNS is continuing the Nachu landowner compensation process, which includes the resettlement of approximately 55 basic dwellings in the Nachu project area. MNS finished with the community consultation and education programs for the project development that includes the land valuation process and verification of asset valuations. The construction of an eco-village resettlement housing development is going to start shortly followed by clearing activities for site access and a construction camp build-up. Several water bores have been identified and successfully drilled to assess and confirm the quantity, suitability and sustainability of the water bores to offer construction water through the development phase of the Nachu project.
 

Target Development Timeline (Source: Company Reports)
 
Flexible Supply Chain Strategy: MNS’s supply chain has major flexibility to meet the customer’s specifications which starts and finishes with the quality of the in-situ graphite at Nachu. The co-location potential of downstream facilities for efficiency has mainly cut the cost and rapid scale up potential to meet end user demand. In addition, MNS has established the higher quality and consistent non-Chinese supply source. Moreover, MNS may supply both coated and uncoated spherical graphite subject to customer requirements.
 
Discussions for the offtake: The group is meeting several potential customers across the world comprising major regions like North America, Europe and North East Asia for the product development and possible offtake opportunities. Therefore, Magnis Resources is focused on getting an agreement which can totally capture the high purity Nachu ore body in the rapidly growing battery anode market.
 
Spherical Graphite Update: The group reported that they produced uncoated spherical graphite from their milling equipment in Europe to perform the spheronisation step having high purity Nachu flake concentrate. Based on the recent quarter update, yields in the region of 75% have been achieved consistently when starting with greater than 99% TGC Nachu graphite concentrate, which is more than the current spherical graphite production. Results indicated flexibility in particle engineering to produce anode powder to suit a wide range of end-user applications with BET ranging between 1.5 to 6m²/g and tap density between 0.9 to 1.2 g/cc. 

Nachu Graphite Crystals (Source: Company Reports)
 
Stock Performance: MNS stock price has risen 46.7% in the last four weeks (as of December 13, 2016) due to positive updates from the group in the recent time. MNS stock got included in the S&P/ASX 300 Index post 16 September 2016. MNS’ high purity play has demonstrated the amenability of the Nachu product without chemical purification processes required for other concentrates. The project also fits along the value chain for a much lower production cost and is expected to capture additional margins for lower cost and broaden MNS’ potential customer base. The group believes that their project timeline for the first production in 2018 would coincide with the beginning of battery “mega-factory” ramp ups. MNS has further finalized all the requisite environmental and mining permits and the Ministry of Energy and Minerals of Tanzania have granted Special Mining License (SML) to Nachu. Moreover, MNS has made considerable progress on the downstream processing of Nachu graphite concentrate to produce lithium-ion battery anode materials. Magnis had a cash position of A$6.1 million as of September 30, 2016. The group was quick in appointing a prominent industry figure, Professor M. Stanley Whittingham to the Board as a Non-Executive Director post the sudden departures of Executive Director, Len Eldridge, and Non-Executive Director, Colin Johnstone. We give a “Buy” recommendation on the stock at the current price of – $ 0.89

 
MNS Daily Chart (Source: Thomson Reuters)

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