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

Crossed the key milestone to fast track the Gigafactory: Magnis Resources Limited (ASX: MNS) has announced that Woodstock in Queensland as the site location for the Townsville Lithium-ion Battery Gigafactory and Townsville City Council has approved offering the land in Woodstock, in exchange for equity in the project. Importantly, site selection is a key milestone to fast track the Gigafactory, and the project will now move into a feasibility study to initiate the design and engineering phase. Woodstock is located on the Flinders Highway, approximately 40kms from the Port of Townsville. The parcel of land offered is ~400 hectares and is on flat terrain and high lying with major infrastructure including rail, power and fiber-optic cable. Further, Townsville Lithium-ion Battery Gigafactory is expected to be the biggest impetus for the Townsville economy with the potential of 7,000 jobs created. Moreover, the global graphite market is gradually showing promising prospects and is forecasted to reach $18,769 million by 2022, representing a CAGR of 5.4% during the forecast period 2014 to 2022.


Woodstock site location; (Source: Company reports)
 
Bulk Sample Program:Following the successful testing of its graphite samples sent to Russia’s ROSATOM, a bulk sample program will begin shortly and funded by U1 (Uranium One is a wholly owned subsidiary of ROSATOM) to produce Super Jumbo, Jumbo and battery feedstock. Further, it is expected approximately 18 tons of ore will be required and the same will be extracted from drill sample to give a full representation of the ore body and minimize any risk from localized variability. Most of the drill sample is already available with concentrate to be produced in Australia and sent to U1 for testing.
 
Nachu Graphite Project update:  Magnis has almost completed the land valuations as the 776 parties affected, only three people remain who are not local residents and were unavailable to complete the valuation of claimed properties during the previous valuation exercise. They will now be covered under a supplementary valuation which is expected to be completed by the end of this month. The valuation completed has been done as per the laws of Tanzania with full transparency to the Ministry, and have been verified and signed off by the Chief Government Valuer. The final compensation payments will be made after the supplementary valuation has been accepted by the Chief Government Valuer. The construction of the resettlement village for a total of 59 families living on the project area will commence after the compensation payments have been completed and the final construction tender is now being finalized.


Locality image of Southern Tanzania; (Source: Company reports)

Advancing the production of Lithium-ion batteries at Huron Campus: During May 2017, the company entered into an agreement with Huron Campus and the New York Lithium-ion Battery Consortium (including MNS) for a new 15 Gigawatt hour (GWh) Lithium-ion battery manufacturing plant. Further, their current facility and infrastructure would enable them to expedite production of Lithium-ion batteries. Meanwhile, MNS is negotiating offtake deals for Lithium-ion batteries in advance. Huron Campus is located at Endicott near Binghamton, New York, which was the Birthplace of IBM, and it is a world class high tech facility which was previously used by IBM (NYSE: IBM) for the manufacture of equipment, including, high end circuit boards, semiconductor packaging, and advanced electronics. The facility is ideal for the manufacture of both battery materials and batteries/cells alike, as it has temperature and humidity controlled buildings and warehouse facilities ready to integrate modern technologies. The site has a transmission level substation with 50MW of capacity, and the Campus supplies low-cost power. The Huron Campus contains technology, specialized equipment, an experienced team, and nearly 100 years in logistics business expertise.


section of Huron Campus; (Source: Company reports)
 
The consortium partners (including New York based Charge CCCV (C4V), Primet Precision Materials, C&D Assembly and Australian based Boston Energy and Innovation and Magnis Resources) have already entered an agreement with officials from the Huron Campus. Further, the building earmarked for the manufacture of the consortia’s batteries totals 60 acres. The internal scoping study on LIB manufacture (15GWh) in New York and other jurisdictions was initiated by Magnis and C4V. The study was completed to assess the key project aspects, including battery market forecasting, raw materials supply, material technologies, manufacturing processes, key stakeholders and financial viability. Magnis will be responsible for supplying the anode materials and technologies, while the cathode materials and technologies, manufacturing processes to produce electrodes and the battery cells comprised of those electrodes will be handled by C4V and Primet. C&D Assembly with its state of the art electronics manufacturing facility located in Groton, New York will provide the battery management systems and power harnessing.


Modern Facilities of Huron Campus; (Source: Company reports)
 
Tax exemption for 10 years for the advanced graphite processing plant in Tanzania: MNS has been granted a special economic zone license for the development of an advanced graphite processing plant in Tanzania. This would allow the company to apply the advanced technologies it has been developing to produce value enhanced graphite products. The grant would benefit the company from exemption from payment of corporate tax for 10 years, the exemption of taxes and duties for machinery, equipment and construction materials for the development of SEZ infrastructure. Furthermore, the company would benefit from the exemption from payment of withholding tax on rent, dividends and interest for 10 years.

Noteworthy progress during Q3FY17: During Q3FY17, Magnis has finalized all regulatory and environmental permits, completed a Bankable Feasibility Study (BFS), a power supply agreement and a clearly defined concentrate export route for the Nachu project. As one of the world’s most advanced and shovel-ready graphite projects globally, the Nachu project is on target to meet the forecast increase in graphite demand for lithium ion battery uses as numerous “mega-factories” are commissioning from 2018 onwards. The This MOU with ROSATOM is a significant development for Magnis and positions the Company alongside a highly regarded group that is a world leader in the construction and operating of nuclear reactors with flake graphite being a key material used in nuclear reactors. Further, the Tanzanian Port Authority has notified the Company that progress is being made towards the execution of a lease for land adjacent to Mtwara Port. This is an important development for Magnis given the land is critical for future logistics once the Nachu mine is in production. The company holds A$1.54M of cash at 31 March 2017 and expects cash outflows of A$2.44M for Q4FY17. Further, the Company received more than A$1.85M during the March 2017 quarter from proceeds of share options.

Stock Performance: The stock price has declined over 29% in the last six months, while it lost 42.4% in the last one year owing to decline in graphite prices and termination of offtake agreements with Sinoma and Sinosteel. However, the ongoing project developments at Nachu graphite project, positive developments regarding binding deal with ROSATOM and the prospective growth of the overall industry seems to be catalysts going forward.  Hence, we give a “Buy” recommendation on the stock at the current market price of $ 0.515
 

MNS Daily chart; (Source: Thomson Reuters)
 

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