Triton Minerals (ASX:TON) is moving up the graphite value chain with its entry into two binding joint venture agreements with China's Yichang Xincheng Graphite Co., Ltd (YXGC) to develop and produce graphite enhanced products.
This expands on the 20-year offtake agreement worth at least US$2 billion it reached with the graphite products specialist in April.
The two JV companies, will source Triton Mozambique Graphite (TMG) graphite concentrate exclusively, to develop a wide range of high-value graphite enhanced products.
Mozambique JV (Triton 70%) will produce high value expandable graphite, flexible graphite sheet, refined battery grade graphite and other enhanced graphite products while China JV (Triton 49%) will focus initially on producing high strength graphite composite sheets.
YXGC is a major producer of graphite products and operates some of the most advanced graphite processing equipment in the world.
"The execution of these joint venture arrangements with Yichang Xincheng Graphite Co., Ltd places Triton in a truly remarkable and unique market position," managing director Brad Boyle said.
"Not only is Triton positioning itself to become a producer of high quality graphite concentrate, through its TMG product, it is now planning to be directly involved in the production of very high value enhanced graphite products that will supply the electronics, technology and energy storage sectors, to name but a few, for future generations.
"We are excited to be able to enter into these joint venture arrangements with YXGC and leverage off their significant experience in producing the highest quality enhanced graphite products used in components that are distributed worldwide to some of the world's premier technology companies, such as Apple and Samsung."
YXGC chairman Yue Bin added that the long term supply of high quality TMG afforded to the new joint venture companies will allow both Triton and YXGC to develop and prosper from competitively priced enhanced graphite products destined for the global markets.
The China JV will be sited in Xingshan Region near a hydro power substation, port loading facilities and accommodation facilities.
Triton, which will be one of the first foreign companies to invest in the region, is already working with YXGC and the Xingshan Regional Government to progress the production plant as soon as possible.
Xingshan will also provide generous financial concessions in order to facilitate development.
The plant will have space for up to 10 n graphite production lines to produce up to 100,000 tonnes per annum of high strength graphite composite sheets and other graphite products.
It could generate up to US$200 million in revenue at full production.
Both companies will deposit between US$1 million to US$2 million into a JV bank account and establish a management team.
Conditions include Triton commissioning a processing plant or plants capable of satisfying the graphite concentrate demand; receiving all relevant Mozambique and Chinese government approvals; and completion of due diligence by Triton.
The Mozambique plant will have space for two graphite production lines to produce up to 10,000 tonnes per annum of enhanced graphite products.
This can be increased if Triton elects to add a third production line to refine TMG graphite concentrate to a purity of not less than 99%.
Revenue generated is estimated at US$30 million per annum.
Integrated Business Development Plan
Triton is fast-tracking the development of its graphite mines in Mozambique with support from strategic partnerships, offtake agreements and potential funding partners.
These potential developments are now fully integrated with a value adding production supply chain that compliments the raw materials supply chain.
With the new JVs, Triton will be one of the few graphite-focused companies in the world that will be actively involved in all aspects of graphite supply chain - from exploration, mining and potentially production of graphite concentrates through to indirectly supplying major technology companies with a product range that can demand prices of up to US$500,000 per tonne.
China is the world's largest user of flake graphite and is also the largest producer of high value graphite products.
YXGC's increasing market share, affords Triton with the opportunity to align with one of China's largest manufacturer of high value graphite products, in an exceptionally lucrative and unique long term high-value-add business arrangement.
The off take agreement that is currently in place with YXGC comprising 100,000t per annum is sufficient to meet their current production and sales requirements.
With the commissioning of the new China JV plant, YXGC estimates that they will require an additional 160,000t per annum to meet their projected production and sales commitments.
Graphite Enhanced Product Uses and Demand
Expandable graphite has the ability to increase hundreds of times in volume after treatment with dilute acid and heating.
After treatment, expandable graphite is pressed into sheets to form foil which is then cut into various shapes as required by the customer.
Currently, China produces approximately 16,000 different types of expandable graphite products.
The main markets for expandable graphite include graphite foils, sheets, flame retardants, thermal conductivity additives, electrical conductivity additives, sealing materials in critical applications of high pressure environments and, by far, the most significant - the fuel cell market.
Fuel cell powered vehicles are expected by some observers to literally overtake electric vehicles in popularity.
In addition, the Chinese Government is reportedly planning to mandate that all building insulation use expanded polystyrene in construction of new buildings that must contain 10-15% of expanded graphite.
If this occurs, then the potential market size is significant as it would likely be implemented across the entire population base of the country.
High strength graphite composite sheets are formed by mechanically or sticking flexible graphite sheets together with metal plate.
It has excellent compressibility and resilience, excellent sealing property for microscopic surface irregularities and a long working life. It is mainly used for making cylinder gaskets of engines and punching into all kinds of sealing also used for many high-pressure industrial applications.
Flexible graphite sheet & roll, namely expanded graphite sheet & roll, is made from flake graphite with high carbon content which is gone through chemical treatment, expanding under high temperature and then rolling.
It has the characteristics of high temperature resistance, corrosion resistance and good elasticity, and is the basic material for making all kinds of reinforced graphite sheets, graphite tapes, packing and sealing gaskets, which are used in a multitude of applications including becoming heat sinks for laptop computers and mobile phones and other electronic devices.
The existing offtake agreement with YXGC has the following terms:
- Term: 20 years;
- Amount: 100,000 tonnes of graphite concentrate per year, annualised over term, scaling up from initial production;
- Sale Price: Graphite Market Price;
- Minimum Sale Price: US$1,000 per tonne of graphite concentrate;
- Minimum Contract Revenue: US$2,000,000,000 (2 Billion Dollars);
- Minimum Flake Size: 150μm;
- Graphite Purity: 90% Total Graphitic Carbon;
- Moisture Content: Less than 1%;
- No Restriction: Triton is not restricted in selling TMG to other parties; and
- Exclusivity of Supply: YXGC will only source graphite concentrate from Mozambique, Madagascar, Malawi and Tanzania exclusively from Triton.
The further joint venture agreements with Yichang Xincheng Graphite for the production of very high value enhanced graphite products is clearly value accretive for Triton Minerals.
Notably, it now ensures the company is involved in all aspects of the graphite value chain rather than just supplying raw graphite concentrate to producers.
There is also potential to significantly expand the existing binding offtake agreement with YXGC in order to meet the requirements of the JVs, which will source graphite exclusively from TMG.
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