Tirupati Graphite plc (LON:TGR), the specialist graphite producer and developer of sustainable new age materials, has announced its Audited Final Results for the year ended 31 March 2023 (FY23). A copy of the Annual Report and Accounts will be available shortly on the Company’s website.
Operational and Development Highlights FY23
● Achieved key milestone at Madagascan graphite projects:
o Completed and commissioned 18,000tpa Sahamamy plant;
o Upgraded Vatomina’s capacity to 12,000tpa.
● Achieved production and first sale of 97% purity flake graphite.
● Took various measures to mitigate the risks of severe weather conditions, stabilise operations and reduce both costs in H2 FY23 and carbon emissions per unit of production:
o Divided processing flow sheet into two parts, shifting the first leg of processing, which removes c.90% of impurities from the ore to the mine pit heads.
● Undertook extensive market development activities resulting in an increase of the number of customers supplied across geographies.
● Improved gross profits and operating margins, setting the base to achieve profitability at corporate level.
Summary of the operating results for the year are as detailed in table below:
|Total Production||Metric Tons (MT)||4,770||2,996||+59%|
|Mining & Processing costs||£||1,512,563||935,604||+62%|
|Human Resources costs||£||326,783||378,671||-14%|
|Logistics utilities & plant admin costs||£||368,061||308,278||+19%|
|(Increase) / Decrease in inventory||£||(676,058)||(485,357)||+39%|
|Total Costs of Production (Excl. Depreciation)||£||1,531,349||1,137,196||+35%|
|Cost per MT of Production||£||321||380||-15%|
|Total Sales Volume||MT||3,982||2,663||+50%|
|Average Selling price per MT of Production||US$ / £ per MT||875 / 726||841 / 618||+4% in US$ / +17% in GBP terms|
|Gross Profit before Depreciation||£||1,358,661||508,112||+167%|
|Gross Margin on Sales||%||47%||31%||+52%|
● Operating margins up due to actions taken to mitigate weather conditions and increasing capacity across Madagascan projects to 30,000tpa.
● Strict cost discipline meant focus was maintained on achieving the higher capacity construction and commissioning alongside production from reorganised operations.
● Management resources and teams on the ground worked efficiently and trained local human resources to improve productivity.
● Grew operating margins – the Company believes it has reached the operational stage where as the production ramp up is progressed it will achieve profitability at corporate level.
● 76% increase in revenues versus 50% increase in quantity sold reflects higher price realisation in US$ terms and impacts of GBP depreciation against US$ during the year.
Outlook of Madagascar Operations
● Post year end, ramping up production and sales with a target to achieve 75 – 80% of rated capacity at the earliest possible.
● Identifying and addressing gaps like adding additional standby power generation and other facilities to minimise plant downtime and with a target to reach 100% capacity utilisation at the earliest.
● Substantially progressed business growth during Q1 FY24 having sold 2,772MT as compared to 3,982MT in whole of FY23,
● Growth at a more gradual pace than targeted impacted by cash limitations due to:
o Considerable capital used to build capacity, undertake weather mitigation work, complete the acquisition of Suni Resources, and build inventory of spares and consumables for the expanded operations, more so as larger corporate buyers need to be provided 60 to 90 days payment period from shipment date.
o Overdue VAT refund of >GBP 1 million as at end of FY23 from the Tax Department in Madagascar (received >GBP 1 million VAT refund for the previous periods April 2022 to December 2022).
● In discussions with possible sources for post-sale credit financing and in negotiations with certain customers for prepayments.
● Remains engaged to ramp up production and optimise capacity utilisation to achieve consistent operating cash generation at corporate level.
Capex Intensity and future capacity growth in Madagascar
Cumulative investments made in CAPEX by Tirupati Graphite across its two projects in Madagascar up to 31 March 2023, depreciation accrued thereon, and net depreciated book value of the CAPEX investments made are as tabulated below:
|Head of CAPEX||Total Investment (£) at CostAs at 31.03.2023||Accrued Depreciation (£)As at 31.03.2023||Net Book Value (£)As at 31.03.2023|
|Property Plant & Equipment||8,536,528||1,874,020||6,662,508|
|Asset under Construction||226,634||–||226,634|
● Applied resources to ensure it continues to increase its output and sales.
● Any further major capacity build is planned to be progressed once c.80% capacity utilisation at the current facilities is achieved.
● Continues to work on the opportunity of increasing the capacity at Madagascar to 36,000 tons per annum as soon as practicable.
Snapshot of Consolidated Income Statement
Summary of the Group’s consolidated income statement for the year ended 31 March 2023 is as follows:
|Particulars||FY23 (£)||FY22 (£)||YOY Change (%)||Commentary|
|Revenues||2,890,010||1,645,308||76%||Revenues grew due to increased production and sales|
|Cost of Sales||(1,531,349)||(1,137,196)||35%||Cost of Sales grew at much lesser rate than revenue due to operational efficiencies|
|Gross Profit (Excl. Dep)||1,358,661||508,112||167%||Resulted in Gross Profit increase by 167%|
|Less Administrative Expenses||(2,197,703)||(1,774,581)||24%||Admin expenses increased for corporate costs, fund raise costs and increased management team size on the ground|
|EBITDA||(839,042)||(1,266,469)||(34%)||Resulted in improved EBITDA loss decrease|
|Less Depreciation||(1,267,227)||(565,079)||124%||Increased due to additional Capex subjected to depreciation|
|EBIT||(2,106,269)||(1,831,548)||15%||Negative EBIT increased by 15% due to increased depreciation|
|Less Finance Cost||(251,641)||(140,209)||79%||Finance Costs increased due to new CLN issue|
|EBT||(2,357,910)||(1,971,757)||20%||Resulted in increase in negative EBT by 20 %|
|Less Taxes||(9,775)||48,271||Impact of Deferred tax and current tax provisions in Madagascar Subsidiaries|
|EAT||(2,367,685)||(1,923,486)||23%||EAT loss increased by 23 %, due to increased depreciation|
|Loss per share (Basic)||2.59 pence||2.24 pence||16%||Basic Loss per share increased by 16%|
|Loss per share (Diluted)||2.59 pence||2.24 pence||16%||Diluted Loss per share increased by 16%|
Highly favourable long term demand matrix
● The global push for climate action and energy transition is resulting in increased consumption of flake graphite in energy storage lithium-ion batteries used in EVs and other applications.
● Increasing consumption of flake graphite is reported in applications like fire safety, thermal management and advanced materials and composites, while consumption in conventional applications continues.
● Substantial global dependence for flake graphite on Chinese sources has created greater interest in the consumer industry for non-Chinese sources.
● The Company is not aware of any other new material production having commenced during the year outside China.
● The Company continues to increase its markets across geographies as is evident from its growing sales although remains a buyers’ market at this time.
● Non-Chinese battery capacities remain substantially in development stage and expected to add new demand over the coming years.
● Completed the acquisition of Suni Resources SA (“Suni Resources”) as announced on 3 April 2023 from ASX listed Battery Minerals Limited as part strategy to supply c.8% of global 2030 flake graphite demand, estimated to be no less than 5 million tons by that time.
● Acquisition brings two advanced stage flake graphite projects in Mozambique, which host c.150 million tons of JORC Compliant reserves and resources containing c.12 million tons of flake graphite.
● Commenced work on further optimising the studies conducted by the previous owners to advance the projects and incorporate the in-house advantages and processing technologies used by the Company.
● The Montepuez project is also being evaluated for its Vanadium resource which has the potential to present as an economic by-product and further strengthen the project’s economics.
● To further strengthen its presence in Madagascar, the Company entered into a conditional agreement in September 2022 to acquire three mining permits in Madagascar covering a total area of 31.25km2 and located in the vicinity of its existing projects.
Downstream and Advanced Materials
● The sub-committee of the Board comprising the Independent NEDs is continuing to look at the alternative options to meet the objective of developing a downstream and advanced materials business within the Company The Company plans to provide a more detailed update to the market once these options have been fully evaluated.
● In Madagascar, continue to progress second phase of exploration activities with an enhanced target of c.10,000 diamond core drilling to be executed and acquired a second drilling rig for the purpose.
● Completed the construction of the maiden 100 kilo watt hydro power plant in Sahamamy and generated its first power during the year, though commercial use of power commenced only in June 2023.
● Continued restoration of mining areas where appropriate and plans further developed for the larger mining areas for catering to current operations.
● Continued to integrate environmentally friendly flake graphite processing technologies for projects in Madagascar, generating sand as a by-product, which remains in extensive use for its internal developments.
● Continued sustainability initiatives – further details to be included in an updated Sustainability Report.
I am pleased to present the sixth Annual Report of Tirupati Graphite to our shareholders. Tirupati Graphite (‘TG”) has continued to evolve and expand, helping to address the increasing demand for graphite, one of the key critical minerals in the energy transition, especially for emerging supply chains non-dependent on single nations. Amidst this wider market demand, value creation remains core to our culture, and we continue to leverage our extensive graphite expertise and key principles to drive sustainable value across our stakeholder base.
We have now completed two full financial years since our ordinary shares were admitted to trading on the standard segment of the main markets of The London Stock Exchange (“LSE”). While we continued to evolve the development of our projects in Madagascar, we have also sharpened our long term aims, targeting circa 8% of the global flake graphite market by 2030, estimated to be circa 400,000 tpa, in the long-term as EV adaptation gains ground. The Company set the base for this by completing the acquisition of two world class graphite projects in Mozambique. Flake Graphite and its derivatives are essential materials in technologies for achieving improved energy efficiency, e-mobility, fire hazard safety, thermal management, and evolution of new age materials. We recognise its importance as a material, its market demand expectations, the economics that create a sound business model, and the opportunities it presents us with.
We are pleased to report that our first stage of development to a capacity that enables us to become a profitable Company at the Corporate level was completed during the year under reporting and incorporated successful operational innovations at our producing projects. The Company also successfully completed the acquisition of Suni Resources S.A., incorporated in Mozambique, post year end. Across its two projects, Suni holds a globally significant resource base that sets an expanded foundation for our significant ambitions as part of the global energy transition, with particular focus on the electric vehicle segment.
It has been tireless efforts from the Board and management of the Company that has led us to reach this stage and we will continue to build from here with our step-by-step approach. Achieving the capacities, we have to date significantly strengthened our standing as a company and our prospects for growing further business moving forward. We will refine our capacity development for a short period and assess the location options for our near-term future capacity additions that will best fit the needs of our growing business, whether in Madagascar or in Mozambique. In this period, it is our target to fully optimise the outcomes of the capacities already created and continue to develop deep relationships with markets of this critical mineral.
Tirupati Graphite Chair