Thread by @BigBiteNow

(1/7)
It should be of interest to investors that #ACP announced their 3rd MOU, just 10 days after the 15th Oct resource upgrade.

Said off take took total off takes under MOU to 60,000 tpa, which ACP stated at time was "122% of the 49,000 tpa average annual production target."

(2/7)
The key word being 'average.'

The #ACP Scoping Study delivered a 32 year mine life at average grade of 12.5% and it is that which will deliver the ave. 49,000 tpa.

However, the 15th October upgrade delivered 4.3Mt at average grade of 15.9%.

(3/7)
At the same 400,000 tpa plant throughput, that much improved head grade, delivering the same percentage output, is capable of delivering 62,300 tpa for the first 10 years of mine operation.

Said figure sits nicely above the total 60,000 tpa in MOUs signed by #ACP to date.

(4/7)
Hence why #ACP in their 1 and only tweet of 2020 stated that said Oct 2019 resource upgrade ;

"demonstrated the potential to mine higher quantities of #graphite in early years, positively impacting on EBITDA and the DFS being finalised"

(5/7)
Remember latest MOU for 25,000 tpa was signed off 10 days after that resource upgrade.

The resource upgrade by delivering a 'measured' resource, confirmed #ACP ability to produce at over 60,000 tpa in the first c.10 years.

All 3 MOUs are for an initial period of 5 years.

(6/7)
If true then #ACP can operate at over 20% greater output in first c.10 years.

That will deliver lower operating costs, higher EBITDA, and greater cash flows to enable greater expansion earlier, to ensure lower grade later on, does not reduce output.

(7/7)
That says a great deal about the quality of the #ACP DFS, the ability and percentages of turning those MOUs into binding off takes, and the bankability of the project as a whole.

The average 49,000 tpa figure at $408/t operating cost, is not where the real story lies here.

On 8th Aug 2019 #ACP released their "high purity" test work with ave. purity of 97% at this stage in the medium, large and jumbo flake categories, and an overall 96% for the LOM production.

Stating the results "comfortably exceed the 95% average used in the scoping study."

At the time, #ACP said results stated that medium to jumbo flakes accounted for 50.6% of the total flake production.

However, the same 8th Aug update stated that ;

"The average grade of the composite was 8.65% TGC."

and that ;

"Test-work on a higher grade composite of ~15% TGC is currently underway with a focus on maximising the proportion of higher value larger flake sizes while maintaining high purity levels."

Percentages say a 73% hike in TGC, leads to more 'larger' category flakes being present.

Scoping Study basket price of $1,272/t delivers NPV US$349m and IRR 122% at 95% purity, across the 32 year life of the mine.

8th Aug test work delivered min. 96% with 73% better grades currently being tested. Improvement.

#ACP only tweet of 2020 on 15th Oct resource upgrade,

"demonstrated the potential to mine higher quantities of #graphite in early years"

What the above details actually point to is potentially higher quantities & higher flake size content too.

Hence why #ACP "results to date have continually met or exceeded Board expectations."

If DFS demonstrates an ability larger quantities front end, maintaining 97% purity, but increasing larger flakes content, then assuming #ACP secure their binding off takes, the project at current IRR 122% (could improve), is very bankable, even at perceived lower graphite prices.

Well worth returning to this #ACP thread given that today's announcement stated ;

"metallurgical test-work is being completed. . . on high-grade composites of the diamond core with average grades of 14.9% and 15.6% TGC"

#ACP 8th Aug RNS head grades of 8.65% TGC delivered 30% of flakes in Jumbo and large category at 97% purity.

So what can ave. 15.25% TGC content deliver for front end 4 year mine life?

Furthermore, I talked previously about 10th Oct 2019 RNS, which stated 4.3m tons of "near surface" mineralisation at 15.9% TGC.

#ACP now reporting 3-5 years "near surface" high grade production at 400,000 tons throughput.

That effectively confirms up to 62,000tpa production.

This matches up very nicely with the current 60,000tpa of MOUs that #ACP have agreed, with the 3rd signed just 10 days after the higher grade "near surface" material was announced to the market.

All 3 MOUs are for initial 5 year term.

Matching today's announcement again.

To me, #ACP actions demonstrate more knowledge than the market is currently aware of.

5 years of high grade near surface mining at +60k tpa.

5 years of MOU off-takes for 60k tpa signed.

Whether overall DFS beats the SS or not, it doesn't truly matter.

What matters is that we are looking at up to 5 years of lower cost, higher grade, larger production (up to 20% more than 49k tpa in SS), for a project with just c. 1.2 year payback.

I like #ACP chances on finance and can see why they do too.