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 
Magnis signs MOU with ROSATOM: As its key milestone in the development of the Tanzania project, Magnis Resources Ltd (ASX: MNS) recently signed a memorandum of understanding with ROSATOM for the project financing of its Nachu graphite project and off take of its jumbo flake graphite. A highly-regarded group - ROSATOM - is a world leader in the construction and operating of nuclear reactors for which flake graphite is a key material. As per the MOU, both organizations will work together towards a binding off take agreement once further negotiations take place and certain milestones are met. MNS comments that there is interest in the super jumbo (+500 microns) and jumbo (+300 microns) flake graphite sizes. The larger flake sizes are currently being consumed by several of the business divisions of ROSATOM, including nuclear power generation, aerospace and creating composites. Additionally, with ROSATOM having its presence in Tanzania through its subsidiary Uranium One owning the Mkuju River uranium project, MNS will be significantly benefitted from the deal.
 
Latest financial quarterly report updates: As per the quarterly report to December 31, 2016, Magnis recorded cash position of A$ 2.36 million excluding funding from option conversions which provides Magnis with the financial flexibility to fund operations in the current quarter. Meanwhile, A$9 million is expected over the next four months as listed options expire. Estimated cash outflows for the next quarter is A$2.84 million as per the quarterly report. On the other hand, Magnis delivered a net loss of $5,960,816 in the half-year ended on 31 December 2016 as compared to $7,007,982 in the prior corresponding period. The group witnessed net cash outflows of $4,872,124 during the period as compared to $1,241,594 net outflows in the prior corresponding period. But, MNS has realized significant reductions in the manufacturing cost of graphite silicon blend anode material. It has been able to achieve pricing per unit weight equivalent to that of current coated spherical natural graphite anode products. Meanwhile, considering greater than 65% increase in energy density of the graphite silicon blend indicates that this material would be very cost effective in context of the delivered cell performance level. As per the balance sheet highlights, the group had net assets of $5,899,026 as of December 2016 as compared to $6,865,007 in June 2016. These assets comprise cash reserves of $2,366,751 against the cash reserves of $7,208,404 in June 2016. However, the group sees clearly that their cash reserves balance would not be able to fund their planned expenditure budget including evaluation and development activities for the 12 months to 31 December 2017. Magnis Resources has exploration, evaluation and development expenditure expectation in the coming six months totaling $5,193,304. Accordingly and to fulfil these needs, the group requires additional funds through one or more of equity capital raising, listed options conversion, farm-out of interests in tenements and generating funds from operating activities. 

Financial Performance (Source: Company Reports)
 
Nachu project details: Magnis had earlier finalized all regulatory and environmental permits, completed a Bankable Feasibility Study (BFS), a power supply agreement and a clearly defined concentrate export route. With the high quality and purity of Nachu project, Magnis is focused on the strategy to become a globally significant producer of high value graphite products with a particular focus on supplying the lithium-ion battery market. The Nachu project which is regarded as the world’s most advanced and shovel-ready graphite project globally is on target to meet the estimated rise in graphite demand for lithium-ion battery use as numerous mega-factories are commissioned from 2018 onwards. MNS also completed the land valuation process and is well advanced in the Nachu landowner re-settlement and compensation process, paving the way forward for construction of the mine. An official valuation of the area within the Special Mining License (SML 550/2015) was completed and a total of US$ 3.4 million was calculated for the complete compensation package of crops and trees, land area, structures and other required items such as disturbance allowance. The group reported that around 720 people have been compensated after finishing the most recent payment process, to resettle 58 residents from the Ruangwa District, to their new village area. The Ruangwa District Council is in the process of issuing the documentation for surface rights to the company.
 

Special Mining License Area (Source: Company Reports)
 
Nachu project engineering: For construction at the Nachu Graphite Project, MNS had selected Ausenco to undertake the detailed engineering program of work in preparation. An important aspect of this work has been equipment vendor testing to confirm the selected process flowsheet and associated equipment. Alongside generating samples for vendor testing, there has also been process optimization work to demonstrate flexibility in the range of products that can be produced at the mine site. This work has demonstrated that the addition of cleaner flotation stages to the process can generate up to 99.9% TGC purity product when processing concentrate product from the mine processing plant flowsheet. Also, it continues to demonstrate to potential end users the versatility of the Nachu Graphite Project in being able to produce a range of graphite products in terms of size and purity to suit numerous applications.
 
Lithium-ion battery developments: In recent months, Magnis lithium-ion battery development team made significant progress with Thermo Gravimetric Analysis of graphite flakes produced using only physical steps (milling and flotation processes) with purity >99.95% TGC. This demonstrates the potential to use bulk physical processes to produce anode materials that meet the current <0.05% ash content specification. An external testing facility undertook full cell fabrication in a number of form factors with anode materials containing Nachu graphite and later the full cells were delivered to the Magnis testing facility in New York for an extended cycling. Full cells have also been delivered to end users including major players in the automotive industry. Initial test results were reported to be excellent in terms of first cycle efficiency and charge/discharge capacity.
 
Commercialization of Milling and Spheronisation:  In order to identify exciting opportunities for commercialization, MNS battery development team has been working to improve the energy efficiency and yield of the milling and spheronisation steps in making spherical graphite. For the same, an agreement was reached with a major European equipment vendor to carry out a joint R&D and commercialization program involving the modification of existing commercial equipment to achieve significant cost savings while delivering a high-quality product.
 
Stock Performance:The group’s stock was added in the S&P/ASX 300 index for the first time as part of the rebalance of market indices in December 2016. On the other hand, MNS stock price has declined over 37.9% in the last six months but rose 68.18% in last one year (as of March 21, 2017). Declining Graphite prices have impacted the stock sentiment. The group has terminated the offtake agreements with Sinoma and Sinosteel. On the other hand, factors including the prospective growth of the overall industry, group’s potential in their Nachu graphite project, positive developments regarding binding deal with ROSATOM and so forth, we believe there is value in the stock. MNS has also attracted Dr Ulrich Bez, former CEO and Chairman of Aston Martin from 2000-2014, to join its board. We give a “Buy” recommendation on the stock at the current price of – $ 0.54

 
MNS Daily Chart (Source: Thomson Reuters)

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