International Graphite tightens up balance sheet with Comet Resources agreement
International Graphite (ASX: IG6) has moved to protect its growing battery metal supply position by reaching an agreement with its major shareholder Comet Resources.
The deal is aimed at preventing the immediate sale of any of the 40 million International Graphite shares owned by Comet when the stock is released from ASX escrow on 7 April 2024.
In response, International Graphite has agreed to loan Comet $1.5m and in turn it has been granted the right to appoint a majority of directors to the Comet board.
Removal of overhang
International Graphite chair Phil Hearse said the transaction resolves speculation around the short- to medium-term security of International Graphite shares owned by Comet.
He also noted that the directors of both companies were unanimous in their belief that the new arrangements are a win-win for all shareholders.
“International Graphite shares are a major asset for Comet,” Mr Hearse said.
“The imminent expiration of the escrow period, in conjunction with Comet’s recent delisting from the ASX, has fuelled concern that Comet may be compelled to sell down its investment in International Graphite to recapitalise its business.”
“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.”
The Comet loan has a two-year maturity and accrues interest at 10% per annum and includes customary terms for a facility of this kind including change of control protections for International Graphite.
R&D refund boost
The Comet agreement comes two days after International Graphite announced it had received $1.3m from the Australian Research and Development (R&D) Tax Incentive Scheme for the 2023 financial year.
Mr Hearse said receipt of the R&D refund provides International Graphite with additional working capital to support the execution of its strategy to develop an Australian battery anode material.
He added the battery metal market remains positive.
“Globally, the macro foundations for our industry are still very strong. The transition towards renewable energy sources and energy storage continues to gain momentum.”
“Electric vehicle (EV) sales in the United States hit a record last year, topping 1m for the first time.”
“In addition, China recently made significant policy changes restricting the export of graphite products which has resulted in a 75% decrease in its graphite exports in December 2023.”
“As a result, countries outside of China are actively pushing to secure new sources of graphite.”
“International Graphite is extremely well-placed to capitalise on this trend because we are operating in Western Australia, one of the most secure jurisdictions in the world and in a country firmly allied with the expanding markets of North America, Europe, Korea and Japan.”
New plant commissioned
In mid-February, International Graphite successfully wet-commissioned its new graphite micronising plant in Collie, WA.
The 200 tonnes per annum qualification-scale microniser is the largest in Australia and a milestone in the development of a domestic graphite industry.
It will be the first to produce graphite products in Australia for customer acceptance testing.
The new plant is the precursor to a 4,000tpa operation the company is planning at Collie.
Construction of that facility, at an estimated capital cost of $12.5m, could begin as early as mid-2024, subject to funding.
Multiple applications
Micronised graphite is used in many industrial products—from lubricants, polymers, plastics and ceramics to lightweight structural materials and fire-resistant building materials.
As well as being a critical conductive additive in the cathode of lithium-ion batteries, micronised graphite is also the first stage in producing battery anode material for battery-powered technologies, particularly EVs and green energy storage.
“Micronised graphite is the first step in the production of high-value battery materials and its markets are extensive and well established worldwide,” Mr Hearse said.
A busy few years ahead
2024-25 look set to be a busy time for International Graphite.
“This year, we also plan to undertake more drilling at Springdale, complete the Springdale definitive feasibility study and continue developing our battery anode plant feasibility studies,” Mr Hearse said.
“Final investment decisions to start construction at Springdale are targeted for the first half of 2025, subject to funding.”