How quickly will Applied Graphite Technologies Corporation (TSX-V:AGT) be able to get its operations up and running now that it’s listed?
Pretty quickly, according to chief executive Don Baxter.
After all, most of the pieces of the puzzle are already in place.
First off, there’s Baxter himself, a graphite specialist who has previously played key roles with well-known industry players like Focus Graphite and Alabama Graphite (CSE:ALP).
He was also chief executive of Ceylon Graphite, which had operations in Sri Lanka. And it’s not by any means coincidental that this too is Applied Graphite’s geographical area of focus.
That’s two major ticks in boxes already: experience in the commodity and experience in the jurisdiction.
Neither should be underplayed, especially as processing graphite isn’t always straightforward, and knowledge of graphite in Sri Lanka doesn’t necessarily map onto knowledge of graphite anywhere else.
On Applied Graphite’s Sri Lankan ground, the graphite shows up in veins rather than as amorphous, but that’s no problem for Baxter. He’s been over this territory before with Ceylon.
“We discovered that making anode graphite from vein graphite is even better than flake graphite,” he says. Baxter was the first to make natural anode graphite using vein graphite.
But what makes now the right time to set it all in motion?
Two things: first, the graphite market could well start picking up, as China squeezes supply and electric vehicles and other batteries continue to drive demand.
And second, Sri Lanka is just coming out of a major financial crisis that has meant that inward investment is being welcomed with open arms.
Still not easy to invest in Sri Lanka, of course, since like every country it has its own bureaucratic idiosyncrasies. But if you’ve been there before, in the commodity you’re interested in, it is a whole lot easier. AGT has a trusted local partner which is a key advantage to operating in Sri Lanka.
What’s more, Applied Graphite’s projects will be extremely low cost to operate and easy to get started. The vein mining that Applied Graphite proposes to undertake, broadly-speaking, runs vertical from surface. This means that the environmental impact at surface will be relatively small and, given the grade and the relatively small size of the initial undertaking, neither a tailings pond nor a primary processing plant will be required.
“Our mining costs will be extremely low,” says Baxter. “We can either initially sell to processors or go into partnerships with companies that are now focussed on the need for graphite.”
Either way, Applied Graphite’s own ESG footprint will be low, even as its margins ought to be robust.
To be fair, of course, the graphite industry has overpromised and underdelivered in the past: Syrah came out too big too soon, there was a big cyclical upswing followed by a depression, and investor interest passed on to cobalt and lithium.
But graphite has never gone away.
And big vehicle manufacturers like Ford and General Motors are now actively out in the market looking to source and secure graphite supply. In that context, and given the lock China has on the market – 100% of anode supply and 60% of synthetic supply – any graphite that’s available anywhere else is suddenly looming large on everyone’s radars.
Baxter is well plugged in to all of this.
“I am known in the industry,” he says.
“I have had various contacts with original equipment manufacturers in many previous roles. I know how to process natural graphite for anodes, and I was the first to do it from veins in Sri Lanka.”
The opportunity with Applied Graphite, he adds, is very good.
“The only issue is producing enough of it.”
Accordingly, the company is planning to undertake geophysical work imminently to build mine models and attempt to quantify more clearly just exactly how much graphite there is in the ground.
Even allowing that the full extent of mineralization isn’t yet known, the company will be able to start mining pretty quickly. Underground access is already available from former workings, and Baxter anticipates the rapid granting of a mining licence.
He also notes that one of the main Applied Graphite projects lies just south of a project that’s been in operation since 1870.
“Hopefully, we’ll become quite a significant producer,” he concludes.
What does he mean by that?
Something of the order of between 30,000 and 50,000 tonnes per year of anode graphite, perhaps.
It won’t be enough to satisfy the voracious appetites of the automakers, but it ought to bring a nice and chunky amount of cash flowing into Applied Graphite’s coffers.