Shares in International Graphite surged more than 27 per cent today after it agreed to loan major shareholder Comet Resources $1.5 million to resolve market speculation on the short-to-medium-term security of its stock owned by the latter.
Management says the strategic funding transaction will prevent the potential sell down of any of the 40 million International Graphite shares owned by Comet – which delisted from the ASX in January – when they are released from escrow next month.
The company was concerned that the looming end to the escrow period coupled with Comet’s recent delisting had fuelled speculation that its major shareholder would sell down its investment in a bid to recapitalise its business.
But International Graphite says the deal, which includes giving it a majority of directors on the Comet board, would prove the “catalyst for a rebound” from a recent share price slump. And that sentiment proved immediately prophetic, with the company recording its biggest one-day trading volume since September as its stock rose from a previous close of 11c up to 14c, with almost 880,000 shares changing hands.
Management says the directors of both companies were unanimous in their belief that the new arrangements are a win-win for all shareholders. It believes the deal will help protect its growing battery metal supply position at a time when many countries around the world are looking for new and reliable graphite sources on the back of China’s shock decision to ban exports.
The Comet loan has a two-year maturity and accrues interest at 10 per cent per annum.
Stabilising Comet’s financial position and appointing a majority to the Comet board removes the ‘overhang’ that we believe has contributed to the recent decline in the International Graphite share price and provides the catalyst for a rebound.
International Graphite chairman Phil Hearse
Just last month, the company successfully commissioned its new graphite micronising plant in the Western Australian town of Collie in what it says is a first for the Australian battery minerals industry.
Its qualification-scale microniser, with a capacity of 200 tonnes per annum, will be the first to produce graphite products in Australia for customer acceptance testing.
Management says the plant commissioning represents a major milestone in the development of a domestic graphite industry as part of its mine-to-market strategy.
The company plans to process ore from its Springdale graphite project near Hopetoun on WA’s south coast at the Collie processing facility that sits about 450km from the deposit. The procedure will allow it to transform the raw graphite material into a substance appropriate for use in the construction of lithium-ion batteries.
Just last year, International Graphite more than tripled the size of its mineral resource at Springdale to a whopping 49.3 million tonnes at 6.5 per cent total graphitic carbon (TGC). The impressive resource includes a grade increase from the previous figure of 15.3 million tonnes at 6 per cent TGC, with 11.5 million tonnes at 7.5 per cent in the indicated category.
In December last year, China made significant policy changes to restrict its export of graphite products, resulting in a 75 per cent decrease. International Graphite believes it is extremely well-placed to capitalise on the significant change to the global supply chain as micronised graphite is the first step in the production of high-value battery materials and its markets are extensive and well-established worldwide.
The company already has plans in place for further drilling at Springdale, with a definitive feasibility study (DFS) set to be released this year. Final investment decisions to start construction at Springdale are targeted for the first half of next year, subject to funding.
And if today’s positive share price movement is any indication, it shows that the best way to deal with speculation is to squash it.
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