Tirupati Graphite — Integrated graphite play with technology niche

Tirupati Graphite — Integrated graphite play with technology niche

Tirupati Graphite (TGP) is an integrated graphite production, processing and technology company that is set to list on the Main Market of the London Stock Exchange in December 2020. By taking a modular approach, it has already established production and, with relatively modest capital needs, believes it can grow into a major global producer of flake graphite. Unlike most of its TSX- and ASX-listed peers, TGP pursues a vertically integrated model, which should boost margins and provide a degree of cyclical market protection. A separate research and technology business provides further differentiation, giving investors access to growing niche markets including graphene.

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Tirupati Graphite

Integrated graphite play with technology niche

Metals & mining

Spotlight – IPO report

1 December 2020



Market cap


Share details





Shares in issue


Net debt at end March 2020


Business description

Tirupati Graphite is an integrated graphite production, processing and technology company modularly developing to mining and processing capacity of 81,000tpa (currently at 3,000tpa) and value add specialty graphite to 28,800tpa (currently at 1,200tpa) by end 2024. It is also planning to establish graphene production and application development capabilities.


Creating a fully integrated graphite business with relatively low capital intensity and operating costs.

Attractive market opportunity with high-growth industrial applications and favourable pricing.

Modular approach creates potential for early-stage cash generation and funding flexibility.


Ambitious expansion strategy, albeit in a modular form.

More exploration work is required to improve confidence in resource and quality of concentrate.

Downstream capacity can accommodate circa 40% of enlarged mining output, with the balance to be sold on the open market.


Hennie Vermeulen

+44(0)20 3077 5700

Ian McLelland

+44(0)20 3077 5700

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Tirupati Graphite (TGP) is an integrated graphite production, processing and technology company that is set to list on the Main Market of the London Stock Exchange in December 2020. By taking a modular approach, it has already established production and, with relatively modest capital needs, believes it can grow into a major global producer of flake graphite. Unlike most of its TSX- and ASX-listed peers, TGP pursues a vertically integrated model, which should boost margins and provide a degree of cyclical market protection. A separate research and technology business provides further differentiation, giving investors access to growing niche markets including graphene.

Established mining and processing operations

Upstream mining and primary processing operations in Madagascar are already in production and TGP has integrated its downstream processing activities in India to ensure they can accelerate in parallel and at pace. TGP’s plans suggest it could be a top five global producer of flake graphite within five years. However, by taking a modular approach and careful balance sheet management, TGP expects to achieve this with only a modest external capital requirement of £25m (including circa £10m from the IPO).

Modular approach gives funding flexibility

TGP’s expected growth plans are not without challenges, but by taking an integrated approach it can more readily control the pace of development and avoid expensive delays or excessive equity dilution. Furthermore, with downstream integration and early cash flows from both upstream and downstream businesses, the company could leverage the cash flow streams from these operations to aid growth in production capacity across its businesses. However, TGP’s strategic intention is a staged approach, which could assist in de-risking the project and align its growth plans with market developments.

Valuation out of scope

We have not been engaged to derive a valuation range for TGP’s IPO. Ultimately, the company’s valuation will be driven by how effectively it can execute its growth plans and how the market values both current and prospective cash flows, its value-add downstream production capabilities as well as its resource base. Investors should note the wide range of potential basket prices that TGP could enjoy based on its diverse product mix, which could have a significant impact on project economics and profitability.

Historical financials





























Source: TGP Prospectus

Investment summary: Emerging integrated graphite producer with an ESG focus

TGP is a London-registered company that mines and produces natural graphite in Madagascar and has downstream value-added graphite operations in India. The management team has substantial experience and expertise in the flake graphite industry including mining, value-add processing and markets. The company is developing through three verticals that are complementary to each other, but at the same time independent of each other:

Primary/upstream mining and processing of natural flake graphite in Madagascar.

Downstream value-add processing of hi-tech graphite products in India.

Graphene production and application development in India.

TGP is building a fully integrated graphite company and has initiated its development plans by establishing itself as a 3,000tpa producer of primary/upstream flake graphite and a 1,200tpa producer of specialty graphite. It is further expanding into a full-scale independent mining, industrial manufacturing, technology research-driven and eco-friendly graphite producer. With an understanding of this niche material, it is pursuing a staged development approach across its three verticals that reduces execution risks and initial capital outlay, closely aligning its expansion with graphite market development and growth. TGP’s main goal is to grow into a fully integrated flake graphite and graphene producer that captures the entire value chain, with significant exposure to less commoditised and higher value-add applications.

Constituting a team with 100+ years of collective experience in graphite, TGP has developed its in-house graphite processing technology and is looking to implement its expertise as it gradually scales to 81,000tpa in upstream, 28,800tpa in downstream and 10kg/day in graphene capacity by end 2024 under its medium-term development plan. In the shorter term, TGP plans to take its graphite concentrate capacity in Madagascar from the current 3,000tpa to 9,000tpa by mid 2021 and to grow its speciality graphite manufacturing capabilities in India from 1,200tpa to 4,800tpa by 2021 to supply high-technology end-markets. TGP’s combined expected output of 81,000tpa will rank it in the top five largest suppliers of conventional use flake graphite for industrial applications. The known quality of TGP’s graphite resource and its slant towards larger/jumbo size flakes should potentially allow for low steady state operating costs (with £257/t on a C2 basis, ie excluding indirect overheads, achieved during the ramp up at one of the operations), high quality of the end product and premium pricing.

In contrast to the majority of peers listed on either the Canadian or Australian stock exchanges, TGP is targeting the UK stock market through an IPO aiming to raise approximately £10m, which will be used to advance its development projects. About 73%, or £7.3m, of the planned proceeds are expected to be used for capital requirements and the balance for general working capital purposes. TGP will be the first UK registered graphite producer listed on the LSE and provide UK investors with a rare exposure to a growing fully vertically integrated graphite company looking to expand both its upstream and downstream operations. Such vertical integration and exposure to high value-add products could mean TGP is less vulnerable to commodity market fluctuations (its market dynamics are different to the majority of bulk commodities) and allow it to generate more stable returns to shareholders. At the same time, the modular approach to growth allows TGP to use cash flow from the early stages of development to fund future expansion. It will also provide investors with exposure to the specialist/niche graphite markets with robust growth fundamentals and an EV/battery upside potential with limited competition and significant downstream expertise.

Since inception in April 2017, TGP has so far raised a total of £5.3m in equity and debt (£4.0m in equity and £1.3m in convertible loan notes). These funds were used to acquire and develop two graphite mining projects in Madagascar: greenfield Vatomina and brownfield Sahamamy. Following the acquisition of Vatomina in May 2017, the company focused on exploration, exploratory mining and metallurgical tests, as well as infrastructure development. At present, the project has 18.4mt in compliant graphite resource at 4.6% total graphite content (TGC). The company is currently working towards commissioning of a 6,000tpa concentrate production facility at Vatomina in Q221. TGP acquired the Sahamamy project in January 2018 and commissioned the 3,000tpa plant in March 2019. The project has 7.1mt in compliant graphite resources at 4.2% TGC. The company was familiar with these mining assets as it sourced graphite from Madagascar before the acquisitions. In addition to the mining operations, in July 2019 TGP commissioned the 1,200tpa Patalganga project in India to produce expandable flake graphite flame retardant. It is envisaged that the IPO proceeds will fund the completion of the 6,000tpa Vatomina plant and the expansion of the Patalganga plant to produce 4,800tpa of high-purity, expandable and micronised graphite, as well as Phase 1 of the graphene production capacity in India. To achieve full mining and processing capacity of 81,000tpa, downstream capacity of 28,800tpa and graphene capacity of 10kg/day by end 2024, TGP estimates that it will need to invest a total of £55m. It expects that circa £25m (including IPO proceeds) will be raised via debt or equity, with the remainder to be generated from internal cash flow.

TGP is approaching its expansion with environmental responsibility in mind as graphite plays an important role in the development of green technologies. It is extensively used in renewable energy generation and storage through fuel cells, supercapacitors and lithium-ion batteries for electric vehicles (EVs). As such, a key aspect of the company’s expansion plan is to reduce its carbon footprint and improve sustainability across industries.

Risks and sensitivities

Although TGP pursues a modular approach to expansion, which should allow it to minimise shareholder dilution and maintain a conservative balance sheet, its ambitious growth plan represents a visible execution risk. That said, each additional production module reduces this risk, starting from the first one commissioned in 2019.

Another risk to consider is graphite market conditions as any visible fluctuations in graphite prices and changes in supply/demand fundamentals could affect project economics and viability as well as the company’s ability to raise the funds required for the expansion. Again, it should be noted that TGP has so far demonstrated relatively low OPEX which gives it a certain protection against the commodity price deterioration. Further, the modular approach suggests TGP could use early-stage cash flow to fund future developments and, thanks to its downstream exposure, could potentially access more conventional debt instruments in addition to more dilutive equity funding.

In the short term, COVID-19 is having a negative impact on the global economy and the industrial commodities, graphite in particular, resulting in lower underlying demand for some of the applications and pricing. This could affect the performance of producing operations and delay development projects.

On the upstream side, we note that TGP has not yet delineated any mineral reserves and that the majority of the resources is still in the inferred category. This could potentially affect project economics. However, the company has adopted a staged exploration programme alongside its production capacity development and has also commissioned SRK with an aim to upgrade its resource base.

While the company is targeting high vertical integration at full capacity, a significant amount of graphite concentrate is expected to be sold on the open market, which suggests TGP may need to secure an offtake and undertake additional product testing to confirm flake distribution to maximise pricing and sales. Here the team’s extensive industry experience could assist the company with the required upstream and downstream market reach.

The company’s strategic development plan assumes significant expansion in production beyond 2022 with the proposed peak output of 81,000tpa of flake graphite. Although some external technical work has already been done such as metallurgical tests (bulk exploratory mining, processing flow sheet, analysis of product basket, tests for high purity and expandable graphite), undertaking additional technical work including completion of multi-disciplinary pre-feasibility studies (PFS) to demonstrate the technical feasibility and economic viability of the expansion programmes in Sahamamy and Vatomina, may be required. The company plans to engage with SRK Consulting for these studies to underpin its future capacity expansion.

Company description: Mapping the expansion plan

TGP is pursuing phased transformation of its two flake graphite deposits in Madagascar to potentially produce 81,000tpa of graphite concentrate by end 2024 from the current 3,000tpa level. The planned proceeds from the IPO (about 30%, or £1.8m, of the total amount allocated for capex is expected to be spent on mining and processing operations) are intended to cover mining and processing capacity expansion of 6,000t at Vatomina, bringing TGP’s overall graphite concentrate production capacity to 9,000tpa by mid-2021. At the follow-on development stages, another three processing plants of 18,000t capacity each are planned to be developed at Vatomina, while Sahamamy will see construction of the second plant potentially producing an additional 18,000t of high-quality graphite concentrate. While planned combined graphite concentrate capacity of 81,000tpa will make TGP one of the largest producers of quality flake graphite, we note that the planned expansion is in modular form and can be adjusted to a slower (or potentially faster) pace, if market conditions change. The planned mining expansion is expected to be closely aligned with development of the downstream operations, allowing TGP to fully benefit from operating synergies and optimise capital allocation.

On the downstream side, TGP currently operates a flake graphite-based, flame-retardant additive manufacturing unit, the Patalganga project in India, with current capacity of 1,200t. It plans to further expand this project and develop a comprehensive downstream flake graphite processing plant for hi-tech speciality graphite products in India. TGP is also looking to develop a research and technology centre, which would consist of a graphene manufacture and application development facility, and would conduct cutting-edge research and industry-focused technology development. The IPO proceeds are expected to fund the expansion of Patalganga to 4,800tpa (40% or £3.0m of capex from IPO) and the first stage of the graphene project (20% or £1.5m).

Exhibit 1: Tirupati projects summary and expansion plans






Current/proposed max capacity (tonnes)

Development plan








High-quality graphite concentrate project with the 3kt plant commissioned in 2019. Expansion is planned in two stages, potentially bringing total capacity to 21kt by end 2024.







High-quality graphite concentrate production with 6kt capacity expected to be commissioned in Q221. Further expansion with three additional plants/modules to bring overall capacity to 60kt of concentrate is planned by end 2024.








Manufacturing flake graphite-based, flame-retardant additive composite. Current capacity was commissioned in 2019. Expansion is planned to quadruple capacity by mid-2021.

Speciality Graphite project






Proposed integrated project for downstream processing of flake graphite. Planned to be developed in two stages with 12kt capacity each.

Graphene research centre






Proposed graphene manufacturing, technology and research centre.

Source: TGP Prospectus

Mining and primary processing operations in Madagascar

Having commissioned the 3,000t Sahamamy project in Q119, TGP is currently developing a 6,000t plant at the Vatomina project, which is expected to be commissioned in Q221. Based on its modular expansion strategy, the company is considering the development of an additional four plants, potentially bringing overall production capacity to 81,000tpa of graphite concentrate by end 2024. At full capacity, about 75% of concentrate from Madagascar may be sold directly to industrial consumers, while the remaining 25% will be sold to TGP’s downstream operations on an arm’s length basis in commercial terms. In fact, upstream operations could sell 100% of its output into the open market if the company chooses and downstream operations could purchase graphite for their inputs from any other supplier. The businesses and operations are totally independent of each other. However, product from upstream is preferred to downstream due to its superior quality. The company’s mining and processing expansion plans are shown in Exhibit 2.

Exhibit 2: Madagascar mining expansion plans, tonnes

Source: TGP Prospectus

Staged development across all projects allows for a relatively low initial capital outlay, with subsequent investment needs expected to be partially funded from the internal cash flow. Based on the information provided by the company, it expects to achieve capital intensity of around £250–290/t of mining and processing plant capacity at both projects, which puts it in the lowest quartile of all graphite miners. According to the company, the initial 3,000tpa facility at Sahamamy was expected to be built at circa £300/t of capacity. However, we understand the actual capital intensity was closer to circa £350/t including some exploration and infrastructure development costs (circa $451/t at current FX). At the same time, the 6,000tpa facility at Vatomina is expected to achieve capital intensity of about £235/t. The company estimates overall production and processing capacity of 81,000tpa to be about £260/t in current money terms. See Exhibit 3 for a relative comparison of estimated capital intensity and Exhibit 4 for estimated operational costs of various graphite producers. One of the reasons behind the relatively low capital intensity is the projects’ proximity to infrastructure and the favourable geology of the deposits, namely close to surface and free digging. Added to the lower costs are the company’s expertise in processing technologies, equipment design and manufacturing capabilities, all leading to a lean process, high recoveries, flake size retention and high purity of finished products.

According to the technical report compiled by SRK Consulting in 2019/20, TGP’s mining and processing operations are expected to have relatively low operating costs, supported by the favourable geology, access to infrastructure and the relatively coarse size of the graphite resources. During the ramp up phase at the Sahamamy project in April to December 2019, the company achieved C2 operating costs (direct cash production cost plus depreciation and amortisation, excluding indirect G&A and overheads) of £257/t (circa $332/t at current FX). The larger/jumbo flake sizes should also translate into higher per tonne revenue for the end-product. While the processing costs should be taken into account and could vary, these cost estimates could be compared broadly with graphite prices ranging from $1,000/t to $2,000/t for the large (+50 mesh) and jumbo (+32 mesh) flake sizes at fixed carbon (FC) of 95% and above. Further, based on SRK’s technical report, Sahamamy’s production from July to December 2019 was circa 50–60% jumbo/large, circa 25–30% medium and the remainder small/fine flakes, with circa 85–96% FC. At the same time, during the ramp up, the company reported Sahamamy achieved a selling price of US$837/t (circa £665/t).

Exhibit 3: Selected African graphite projects capital intensity (US$/tonne)

Exhibit 4: Selected African graphite projects unit cash cost of production (US$/tonne)

Source: Company data. Note: *TGP Sahamamy capex intensity is based on the project’s ramp up to 3kt capacity.

Source: Company data. Note: *TGP Sahamamy opex is based on the project’s ramp up to 3kt capacity.

Exhibit 3: Selected African graphite projects capital intensity (US$/tonne)

Source: Company data. Note: *TGP Sahamamy capex intensity is based on the project’s ramp up to 3kt capacity.

Exhibit 4: Selected African graphite projects unit cash cost of production (US$/tonne)

Source: Company data. Note: *TGP Sahamamy opex is based on the project’s ramp up to 3kt capacity.

Sahamamy project

Sahamamy consists of a mining permit covering 8km2 and is located about 8km aerially from Vatomina. The project was acquired by Tirupati with existing infrastructure and had been producing small quantities of graphite in the past. It has an environment permit for 3,000tpa capacity, a production team and internal infrastructure.

The mining operation is presently a free-digging, open-pit operation. The 3,000tpa processing capacity implies run-of-mine (ROM) ore consumption of circa 80,000tpa and moving 240,000tpa of waste and ore. The project consists of two adjacent mining blocks: Sahamamy and Sahasoa. The mining permit for the Sahamamy block is valid to July 2039, while Sahasoa has a mining permit up to April 2056.

Following the acquisition, TPG constructed and commissioned a new 3,000tpa process plant in February 2019 while simultaneously working on internal infrastructure, mine development and marketing strategy and development. According to the company, it has also established a new technology which reduces waste by 50% and produces construction sand. Commercial production at the plant started in January 2020 and reached full capacity in March 2020.

According to SRK, between July and December 2019, the total ROM ore feed to the plant was 22,903t, while graphite concentrate production was 895t at 85–96% FC.

As TGP plans to minimise upfront capex and equity dilution, it is pursuing a phased expansion approach at Sahamamy, with an overall capacity target of 21,000tpa by end 2024, a project for which the environmental clearance has already been granted.

Vatomina project

Vatomina is a greenfield project located on the east coast of Madagascar and situated about 70km south of Toamasina, the port city of Madagascar. The company has a 98% interest in the project.

The mining permit covers a 25km2 area and is valid to December 2055. TGP currently has an environmental permit to produce 12,000tpa of graphite concentrate from Vatomina.

The style of mineralisation is similar to that at Sahamamy and suggests shallow free-digging surface mining.

The first 6,000tpa plant was designed in-house by TGP (as are all the other modules for expansion) and is under construction, with the aim of commissioning it by mid 2021. This operation is planned to be followed by three more 18,000tpa modular plants, bringing total production capacity at the project to 60,000tpa by end 2024.

TGP’s Madagascar projects are high-purity flake graphite deposits within a graphite-bearing rock that has been weathered leading to the formation of saprolite horizons (ore is shallow and free digging) with thickness varying between 15m and 20m. SRK Consulting provided a total JORC compliant mineral resource estimate of 25.5mt at 4.5% grade implying contained graphite of 1.1mt and an estimated life of mine of circa 14 years at full production capacity. According to TGP, it has explored 25–30% of its mineralised zone up to a 50m depth, from which it appears that the currently established compliant resource in terms of size and grade is somewhat towards the lower end compared to similar graphite projects in Africa (see Exhibit 6). However, in general this is not indicative of inferior project economics or lower project profitability as there are a number of other factors that play a significant role in determining profit margins in graphite mining and processing. Further, we note that there is some evidence in graphite mining of inverse relationship between the head grade and the flake size distribution (ie lower grade corresponds to larger flakes), with the coarser flake size leading to the premium pricing and higher profit margins.

At present the majority of TGP’s mineral resources are in the inferred category (see Exhibit 5). The company is yet to define mineral reserves and plan to conduct additional exploration work. As one of the potential next steps, SRK suggested to undertake a pre-feasibility study on the projects. To this end, TGP has allocated an initial budget of about £0.3m (we understand the company owns a drill rig, which lowers exploration cost) to be spent on expanding and upgrading its resource base and has engaged SRK to assist with developing a targeted exploration programme that is expected to be initiated shortly after the listing. Both projects have additional exploration targets, which coupled with the fact that the company has only explored about 25% of the deposits’ footprint so far, suggests potential upside to the resource base.

Exhibit 5: SRK resource estimates for Vatomina and Sahamamy projects


Resource category


(TGC %)

Contained graphite (Mt)

Life of mine

















Total mineral resource





















Total mineral resource





Group total

Mineral resource





Source: TGP Prospectus. Note: TGC stands for total graphite carbon.

Exhibit 6: Selected African mining projects resource (LHS, mt) and head grade (% TGC)

Source: Companies’ data

Downstream processing operations

The flake graphite concentrate used for industrial applications, which typically has up to 96% FC, forms the input raw material for further processing. Additional processing includes refining up to 99.99% FC (which removes the remaining impurities from primary processed flake graphite), intercalation (the infusion of flake graphite molecular layers with other molecules, imparting the property of expansion at a trigger temperature), micronisation (size reduction with controlled particle sizing) and shaping (modification of shape from sheets to spherical or potato type). TGP’s downstream processing capabilities are being developed under two projects, namely the Patalganga and the Speciality Graphite Projects (SGP), both based in India. The company envisages the following development timeline for Patalganga and SGP:

Exhibit 7: Downstream capability development plans and planned commissioning timeline

Source: TGP Prospectus

The Patalganga project is currently a small-scale manufacturing and production plant for expandable flake graphite composites used as flame retardants in various products for construction, metallurgy and other applications. The Patalganga project also houses facilities for flake graphite concentrate finishing, which provides the company with a launch pad for its Madagascan flake graphite into the Indian markets. The project also provides the company with early-stage earnings and secures a solid foundation for planned future developments, giving it early access to large and important Indian domestic and global customers.

The project is in the well-developed industrial area of Maharashtra 40km from Nhava Sheva Port, on the west coast of India. It has well-developed infrastructure, is close to input materials and has a skilled and technically qualified workforce with low-cost structures. India has various policies promoting manufacturing and business, including the ‘Make in India’ programme.

India has strong domestic demand for products with technologically advanced processes in place, something that TGP has developed with its own unique processes, proven at trials, with samples for multiple applications.

The Patalganga 1,200tpa plant is producing fire-retardant grade graphite suitable for multiple applications like roofing, various foams, walls and coatings, to improve the ability to contain and control fire and material burn.

The expansion of this facility to 4,800tpa is in progress to increase production capacity and expand product capabilities by adding other value-add products (high-purity graphite and micronised graphite). Test samples were approved and pilot-scale tests were completed.

The Patalganga project assists the company with establishing its presence in niche products prior to developing larger projects, reduces gestation periods and provides early cash flows.

Graphene research centre

The company is also looking to develop a centre for graphene manufacturing and application, which should provide it with a technological backbone and help develop advanced materials.

TGP developed a zero hydrogen fluoride high-purity graphite purification process, producing the input material for graphene. It has also developed state-of-the-art technology for manufacturing graphene and plans to install capacity and manufacture graphene at a scale of 10kg/day by 2022. It is working with multiple universities and industries and the centre is planned to also manufacture ultra-high purity graphite (>99.99% FC) that will be sold as a graphene precursor, samples of which have been approved by users, as well as industrial scale graphene and graphene oxides. This unique zero hydrogen technology has the following benefits:

high-quality two to four layers of graphene and graphene oxide;

low cost, commercially feasible;

scalable process;

zero-chemical, environment friendly; and

the process has been standardised at 1kg/day scale.

Additionally, the company plans to use its expertise in mineral processing to provide consultancy services to industries, providing an additional source of revenue to the centre.

Graphite fundamentals

Supply of graphite dominated by China

Graphite is mined by both open-pit and underground methods and has to undergo beneficiation. This is carried out in stages by crushing, screening and floatation to produce high-grade concentrate for sale to end users. Graphite concentrate is differentiated by the grade and the flake sizes. The higher-grade and large flake sizes command premium pricing. The flake size and grade to a significant extent also determine the end use of the concentrate. This concentrate of 80–96% FC is used directly in various applications like crucibles, refractories etc and is further used as a raw material in downstream processing of graphite to produce high-purity (up to 99.99% FC), expandable, micronised and spherical graphite. These value-added downstream products are consumed in multiple hi-tech applications. Battery application requires the primary processed graphite flakes to be micronised, shaped and then purified to 99.95% FC. The new hi-tech and green industrial applications require additional downstream processing such as chemical purification. China serves 90% of the downstream markets. In general, for primary mined and processed graphite concentrate production is dominated by China, which contributed almost 70% or 700kt of world output in 2019, followed by Mozambique (9%), Brazil (9%), India and Madagascar, as shown in Exhibit 8 below.

Exhibit 8: Global natural graphite production (kt)

Source: USGS

Demand for graphite underpinned by steel and battery needs

Graphite is used in a number of conventional industrial applications such as refractories, crucibles, foundry, recarburisers, casting etc. It is also an essential component in multiple advance and hi-tech applications like lithium-ion batteries for EVs and energy storage, halogen-free flame retardants, thermal management in electronic devices, gaskets & sheets, conductive polymers, friction materials, lubrication and insulation. Historically, demand for natural graphite has been driven mainly by the steel sector. The need for graphite in the refractory, foundry and crucible sector (and the necessity for recarburisers in the steel-making process) takes total steel-related demand to more than two-thirds of total natural graphite consumption. Refractory applications (and crucibles) are those that involve extreme heat and therefore require materials that will not melt or disintegrate under such extreme conditions. Although graphite electrodes consume synthetic graphite, synthetic graphite’s market share is around 40% or 1.3mtpa of the total graphite market (2.5mtpa), pushing the importance of steel in the life of total graphite up to more than 55% or around 1.4mtpa. The World Steel Association forecasts that steel demand will contract by 6.4% in 2020, dropping to 1,654mt due to the COVID-19 crisis. In 2021, steel demand is expected to recover to 1,717mt, an increase of 3.8% over 2020.

Flake graphite has over 150 applications diversified across various industries. Of these, the lithium-ion battery market is growing at a 25–30% CAGR, while the expandable graphite markets are growing at a CAGR of 6–7%. Growth is also visible in composites, friction materials, fuel cells and insulation. Flake graphite is classified as a critical resource by both the US and the EU.

Graphite and graphene largely contribute to a greener and sustainable global economy by reducing energy requirements, increasing energy efficiency, renewable energy generation and storage, reduce consumption of materials and fossil fuels, and provide green flame-retardant solutions.

While natural graphite demand is still dominated by the traditional industries, which on average grow at low to medium single-digit rates with growth linked to GDP, the battery-related sector is emerging as a fast-growth area for graphite application. It is believed that rising demand from energy storage solutions and EVs will represent a significant driver behind future demand for graphite. In this regard, the World Bank estimates graphite supply needs for this sector will increase more than fivefold over the next 10 years. For more details and insights on the battery markets, sector fundamentals and growth prospects please see Battery charge, published by Edison Investment Research in 2019. Exhibit 9 below demonstrates the demand for graphite by application.

Exhibit 9: Demand by application for natural graphite (2019)

Source: Various industry sources

Graphite pricing: Flake size and purity are key

Size fractions and purities of graphite have a substantial influence on realised graphite prices and the former can change the values by up to £2,000/t (from £200/t for small/fine flakes, from circa £500/t for medium/large flakes and from £1,000/t for jumbo flakes). The downstream processing adds value to these primary grades allowing for extra value creation in hi-tech applications (see Exhibit 10). According to TGP, it has an in-situ flake size distribution of circa 50% jumbo, circa 35% large and circa 15% fine, potentially indicating premium pricing. Similarly, purity plays an important role in graphite pricing and as a rule of thumb one can add or subtract about £30/t for each percentage point change in carbon grade (CG) above 94% for graphite concentrate post processing. Looking at TGP’s results for the nine months to end December 2019 (9M FY20), the company achieved a selling price of circa £665/t (US$837/t) during the ramp up phase at the Sahamamy project. According to the company, it is moving towards its target basket price of circa US$950/t. Although this appears to be lower than the current market values for the high-quality/ premium graphite concentrate, the prices of flake graphite vary with the markets. Also, according to the company, market prices were negatively affected over the reporting period due to the improved availability of the saleable product from new suppliers. In particular, we note that Syrah Resources (ASX: SYR), which operates the large-scale Balama graphite project in Mozambique that was commissioned in 2018, reported the weighted average CIF price of US$478/t of flake graphite concentrate in H120 (US$443/t in 2019). However, we understand that Balama’s product mix is dominated by the finer material (87% of sales in 2019), which is more geared towards the EV battery market and commands lower pricing. Against this backdrop, according to TGP, Sahamamy was still able to show direct operating margins in excess of 50% at prevailing market prices. Exhibit 10 below shows theoretical prices for both saleable graphite and speciality products in 2020.

Exhibit 10: Average graphite and speciality product prices based on different mesh sizes and applications (2020)

Source: TGP

The cost of producing speciality graphite (ie product with purity in excess of 96% CG) is crucial in defining project economics and hence pricing. Although mining and primary processing is a significant part of the overall cash structure, for the high-value end products processing dominates the overall cost.

Management and key shareholders

The directors and management of the company have substantial experience in the graphite industry with exposure to all key areas such as mining and primary processing, downstream processing and marketing. We believe the significant experience and skills are crucial for the future success of the company in such a niche area. The main members of the management team are:

Shishir Kumar Poddar, executive chairman and managing director, is a world-renowned expert in the flake graphite industry and has considerable experience spanning more than 27 years working with natural flake graphite in various areas such as the mining, processing and marketing of this commodity.

Hemant Kumar Poddar, non-executive director, has 27 years of experience in the flake graphite industry. His contribution to building TGP has resulted in its diversified global market reach.

Puruvi Poddar, head of corporate and business development, is a material science engineer with deep understanding of and expertise in the graphite industry, processing technologies and its markets.

Kien Huynh, CFO, is a mining industry professional with more than 20 years’ experience in global capital markets and mining finance.

Vijay Bhagat, CEO of downstream operations, has 38 years of techno-commercial experience and expertise in processing flake graphite into speciality products like expandable graphite for hi-tech applications.

Uday Pratap Singh, project director of mining, is an experienced geologist with 35 years of diversified experience in the resource industry and project management. He has provided leadership in developing the projects in Madagascar and has extensive recognition in the Malagasy government.

At end December 2019, the top six shareholders owned 76% of the issued share capital of the company, with the main owners holding circa 50% and the directors controlling 5%. Two other large shareholders are Nicolas Petitjean with a pre-IPO holding of almost 8% (obtained as a result of the sale of mining assets to TGP) and Optiva Securities (5%).

The company currently has four million warrants issued to the members of the management team and the board, which are exercised at £0.3–0.4/share. We understand that TGP plans to issue additional warrants to Optiva Securities, but the actual amount and exercise price are not known.

Financials: First revenues from concentrate sales

Currently, the main source of revenues for the company is the Sahamamy project, which was commissioned in April 2019. The project was in a ramp-up phase until the end of last year, with commercial production commencing in January 2020. For the 12 months to March 2020 (FY20), TGP reported a loss of £913k on revenues of £794k from graphite concentrate. This compares to a loss of £1,114k and revenues of £145k in FY19 (12 months to March 2019). In FY20, TGP achieved gross profit of £382k and generated an EBITDA loss of £685k. We note that the company managed to keep admin costs broadly flat in FY20.

At end FY20, the company had gross cash of £47k and gross debt of £810k, with the latter represented by the convertible loan note with a 12% interest rate. As such, despite the fact that TGP has already entered the production stage, its balance sheet has been conservatively managed with net debt of only £0.76m. Overall, since its inception in April 2017, Tirupati has raised a total of £5.3m in equity and debt (£4.0m in equity and £1.3m in debt in the form of convertible loan notes).

Exhibit 11: Tirupati financial results

£000s, March year end






Cost of sales



Gross profit



Cash admin cost









Operating profit



Finance cost









Profit after tax






Net debt/(cash)



Source: TGP data

Future funding requirements

In order to execute on its ambitious expansion plans, TGP estimates that it will only need to spend a total of £55m in capex. Thanks to its modular development approach, the company is expected to generate early cash flow from the already commissioned Sahamamy plant, followed by the Vatomina project in mid-2021. This cash flow can potentially be used to part-fund future expansion at the next development phase. As a result, TGP estimates that it will only need to raise circa £25m in equity and debt (including circa £10m to be raised at the IPO) to be able to achieve the proposed capacity by 2024.

Exhibit 12: Capital required for total vertical integration strategy

Area of activity

Total capital required,

Proposed IPO fund allocation, £m

Expansion timeline

Phase 1



Mining and processing












Phase 2



Mining and processing












Phase 3




Total strategy



Mining and processing









Source: TGP Prospectus. Note: *Although the IPO value is estimated at around £10.0m, the total IPO portion allocated to Phase 1 of the strategy is only £7.3m as the balance of the proceeds will be allocated to working capital requirements.

Risks and sensitivities

Execution is key to TGP’s expansion and vertical integration plan. While the expansion strategy appears to be ambitious, it could be executed if the company delivers on its staged development approach and achieves sufficient early cash flow generation to part-fund subsequent expansion and therefore limit any future equity dilution. The execution risk could be materially reduced with the successful development of the production modules across all business verticals. TGP has delivered on the first phase of its development achieving various set parameters on technological, processing, mining, markets, product basket and financial sides.

Supply/demand fundamentals and graphite pricing will also play an important role in TGP executing on its development plans, as commodity price fluctuations could have a significant adverse effect on project economics, the company’s ability to achieve and maintain profitability, and to access capital markets for future funding. In this regard we note TGP’s relatively low production costs as demonstrated by Sahamamy during its ramp up in 2019. In addition, the modular approach to development provides flexibility should the market conditions deteriorate. While the company is rapidly emerging as a graphite producer and has so far maintained a conservative approach to its balance sheet, it has to date undertaken a limited amount of external technical work, in particular on its resource base in Madagascar. It is yet to establish its mineral reserves and the majority of resources are in the inferred category. Among other things, this could affect production costs, product qualities, production scheduling and output volumes. As such, additional studies may be required to upgrade the resource and improve confidence. We understand that the company has allocated a certain budget to expand and improve the resource base. Additional technical work may also be required to secure offtake in the future as the company grows and sells more volumes on the open market as well as to secure additional financing. We understand that the company has so far completed an internal feasibility study.

We also note the company has developed its proprietary downstream processes but none of these have so far been patented, thereby removing an opportunity to benefit from any licence agreements.

Finally, while we believe that Madagascar is a relatively mining-friendly jurisdiction, there is a risk that any changes in the political situation and relevant legislation, fiscal in particular, could potentially affect project economics and viability. We also understand that capacity expansion to achieve 81kt of mining and processing capacity will require additional permitting. In particular, the existing environmental permits only allow the company to produce 3,000tpa at Sahamamy and 12,000tpa at Vatomina.

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