REG - Tirupati Graphite - Unaudited Full Year 2024 Trading Results

Tirupati GraphiteAnnouncement

10/05/2024 07:15

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RNS Number : 9501N  Tirupati Graphite PLC  10 May 2024

The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014 which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this information is
considered to be in the public domain.

 

10 May 2024

Tirupati Graphite plc

('Tirupati', 'TG' or the 'Company')

 

Unaudited trading results for the year ended 31 March 2024

 

Tirupati Graphite plc (TGR.L), the specialist flake graphite company and
supplier of the critical mineral for the global energy transition, is pleased
to announce its unaudited trading results for the financial year ended 31
March 2024 ("FY24") and a corporate update.

 

Commenting on the results and recent progress Shishir Poddar, Executive
Chairman, said:

 

"The period has seen a lot of important change. The Company has evolved from a
graphite project developer into an established global graphite producer with a
growing international roster of blue-chip customers and organisations in the
sampling and qualification stages. It is ideally placed to take advantage of
its position as a leading supplier of the critical mineral graphite outside
China.

 

The Company has delivered its highest production in the year to date and has
achieved this under immensely challenging circumstances. Critically the
Company has built world-class plants and facilities using ex-China
technologies from its founders and a 30,000tpa final production capacity using
its own in-house team and without the need for ( )more costly third party
outsourced contractors. It has achieved this in the face of challenging COVID
restrictions and the adverse Madagascan cyclone season of 2022.

 

Tirupati has significantly expanded its resource base, becoming a multi-asset
operator that will benefit from the synergies of scale. In doing so we believe
we have increased our appeal to our growing global customer base, which is
looking to de-risk graphite purchasing and avoid a market dominated by China,
whose export restrictions have heightened geopolitical concern and tightened
supply.

 

During the year we successfully managed to grow our commercial production year
on year, with 70% growth in sales revenue and 49% year-on-year production
growth despite the Company's working capital limitations. We believe we are
strongly positioned to capitalise on the growing tailwinds supporting global
graphite demand.

 

The Company is actively seeking new independent appointments to the Board to
address shareholder concerns over corporate governance.  We are making good
progress on this front with announcements expected in the near future
regarding board composition changes. As part of this process, we are seeking
to split the role of CEO and Executive Chair, with the appointment of a new
Non-Executive Chairman.

 

I take this opportunity to thank all of our investors for their support and
reiterate our aligned commitment to drive value from our operations over the
near and long term for all stakeholders."

 

 

 

 

Highlights for the year ended 31 March 2024

 

Financial (Unaudited for year ending 31 March 2024)

 

·    Total sales increased by 70% YoY to £4,903,856 (FY23:
£2,890,010).

·    Gross profit decreased 62% to £514,846 (FY23 £1,372,048), largely
driven by increased operating costs as a result of the two final concentrate
units entering production simultaneously and the inefficiencies caused by the
lack of working capital leading to lower than anticipated production and sales
and increased cost per ton.

·    Initiated engagement with a Development Finance Institution ("DFI")
for debt financing for the proposed expansion of the Madagascar operations
from the current effective capacity of 20,000 metric tonnes to 54,000 metric
tonnes. Discussions have advanced with documentation and a detailed financial
model prepared by the Company currently under review by the DFI.

·    Additionally, the DFI has expressed to our appointed intermediary its
interest in potentially providing debt funding for the first 50,000tpa flake
graphite project development at the Montepuez project in Mozambique.

·    As at 31 March 2024, the company had cash and cash equivalents of
£189,144.

·    The comprehensive unaudited position of current assets and current
liabilities as at 31 March 2024 was as tabulated below:

 

 Summary as on 31st March 2024
 1   Trade Receivables                                     £     692,929
 2   VAT Refundable Madagascar & Mozambique                £   3,237,805
 3   Fixed Deposit in Mozambique towards Bank Guarentees   £   1,809,278
 4   Cash & Cash Equivalents                               £     189,144
 5   Inventory                                             £   1,209,925
 A   Total Current Assets                                  £   7,139,080
 6   Advance for sales                                    -£     504,913
 7   Trade Payables of the group                          -£   1,756,569
 8   Director remuneration Payable                        -£     241,679
 10  Management remunerations payable                     -£     151,756
 11  Taxes payable                                        -£        15,537
 12  Other Payables                                       -£        34,262
 13  Borrowing payable within 12 months                   -£   1,133,093
 B   Total Current Liabilities                            -£  3,837,809

 

·    A significant amount is owed to the Company in respect of the VAT
refundable in Madagascar and Mozambique, which the Company is continuing to
push to recover.

·    With the injection of £2 million to current liquidity the directors
believe the Company would be able to operate its projects at a capacity of
20,000 tons per annum, with potential to increase to the rated capacity with
the addition of two pre concentrate units to overcome the deficiencies caused
by lower ore feed grade of c.3% that the Company is achieving.

 

Operational

·    Total production increased by 49% YoY to 7,096 tons (FY23: 4,770
tons), driven by a debottlenecking programme. This was still beneath
achievable capacity due to working capital constraints.

·    Added significant JORC 2012 reserves and resources of c. 152 million
tons in Mozambique (see Mozambique Group Mineral Reserves & Ore Reserves
Statement in 17 August 2021 RNS) by acquiring Suni Resources.

·    Completed full commissioning and establishing regular power
generation from the Sahamamy 100-kilowatt Hydro Power plant from Q1, paving
the way for future additional hydropower capacities, that will significantly
reduce costs and accelerate the Company's ability to produce 'green graphite'
through sustainable production techniques.

·    Successfully grown global customer base. Sample testing and
qualification processes are underway with global leaders in Electric Vehicles
and associated operators in the supply chain.

 

Board Composition, Governance & General Meeting

·    The Board's immediate priority is to add suitable independent
non-executive directors to the Board, including a Non-executive Chairman, on
the appointment of which Mr Shishir Poddar would step back as Executive
Chairman retaining only the sole position of CEO.

·    A simultaneous immediate priority is to appoint a CFO, preferably
London-based.

·    Concurrently with its own search efforts, the Company is considering
the appointment of independent executive search agents for identifying
potential suitable, independent, non-executive candidates.

·    As announced, the Company has received a valid letter on behalf of a
group of underlying shareholders holding, in aggregate, 6,847,813 ordinary
shares representing c. 5.8% of the issued ordinary share capital of the
Company requesting the Company convene a general meeting. The Company  will
announce its response to this shortly.

 

Change of Auditors

·    PFK Littlejohn LLP ('PFK') has resigned as company auditor due to
amounts owed to them. This is in relation to the prior year's audit, creating
a perceived conflict of interest in their audit of the accounts for the year
ended 31 March 2024.

·    As required by Section 519 of the Companies Act 2006, PFK has
confirmed that there are no other circumstances connected with the resignation
that it considers should be brought to the attention of the members or
creditors of the Company.

·    Johnson Chartered Accountants ('Johnsons') was appointed company
auditor on 22 April 2024, and Johnsons will therefore undertake the Group's
audit for the financial year ending 31 March 2024, and audit work has
commenced.

 

Trading Performance

 

·    Total sales increased by 70% YoY to £4,903,856 (FY23:
£2,890,010), with sales increasing across all geographies.

·    Total production increased by 49% YoY to 7,096 tons (FY23: 4,770
tons).

·    The basket price of graphite sold declined slightly, by 5%, to $828
(FY23: $874), in spite of subdued market conditions.

·    Gross profit for FY24 remained positive, the fourth year in
succession, albeit lower than anticipated and the previous year due to
commissioning debottlenecking and ramp-up costs, lower head grade and the
impact of working capital constraint which has limited production with higher
costs per ton as a result.

·    Head grade of ore provided from mining activities for its processing
plants is c.3% (see 19 October 2023 RNS), resulting in an effective production
capacity of 20,000tpa, and requiring the set up of two additional
pre-concentrate units further to the existing four in operation, to fully
utilise the final 30,000tpa capacity developed.

·    A summary of the operating results for the year are as detailed in
table below:

 

 Particulars                                  Unit   FY 2024    FY 2023    % Change YoY
 Revenue and Sales
 Quantity Sold & Shipped                      MT     7,434      3,982      87%
 Revenue from Sales                           £      4,903,856  2,890,010  70%
 Price Realised                               $/T    828        874        (5%)
 Price realised                               £/MT   660        726        (9%)
 Production and Cost of Production
 Quantity Produced                            MT     7,096      4,770      49%
 Mining & Processing Costs                    £      2,680,678  1,512,563  77%
 Human Resources                              £      646,067    326,783    98%
 Logistics Utilities & Plant Admin Costs      £      923,790    368,061    151%
 (Increase) / Decrease in Inventory           £      138,475    -689,445   (120%)
 Total Cost of Production                     £      4,389,010  1,517,962  189%
 Cost of Production per ton                   £/MT   619        318        95%
 Operating Profits & Margins
 Gross Profit                                 £      514,846    1,372,048  (62%)
 Gross Margin % of sales                      %      10         47         (79%)
 Cost of Production % of Price realised       %      94         44         114%

 

 

Working capital and financial position

·    At the start of the year when the Company entered the debottlenecking
phase it had £289,338 in cash.

·    The Company continued to focus on operating its projects within
limitations, engaging with its suppliers of goods and services and buyers to
manage cash constraints whilst simultaneously evaluating different
alternatives to bridge its requirements; concurrently, it faced the following
challenges:

o  Owing to the restriction of 12 month 20% rolling share issue authority
under the listing rules, the Company could not issue new ordinary shares
without issuing a prospectus; the authority being exhausted by meeting
obligations for the acquisition of Suni Resources SA;

o  Engagement with the Company's bankers to provide working capital remained
non-productive, with a positive EBITDA report necessary for access to a
lending facility.

·    During the period, the Company constantly engaged with its broker,
Optiva Securities Limited, and sought to address the working capital gap by
exploring multiple avenues to raise capital. Despite this, no fundraise could
be achieved by its brokers until December 2023. In January 2024 the Company
undertook an equity placing, using up the authority reinstated in December
2023.

·    The Company has now engaged independent financial advisors to raise
funds and is also engaging with professional investors and high-net-worth
individuals interested in the Company to resolve the working capital gap.

·    In light of the limited working capital availability, the Company's
operations remain impacted. Operations are currently being run intermittently,
resulting in lower production and sales, as depicted in the result for the
year ended 31 March 2024.

·    The Company, however, confirms that its projects are well placed to
produce as per the current effective capacity of 20,000 tons per annum,
considering a 3% head grade, upon a successful financing solution to the
working capital while also engaging for VAT refunds as detailed below.

·    The Company remains strongly engaged with its creditors across the
group, which includes suppliers of goods and services.

 

Further Details

 

VAT Refunds

·    Following the Madagascar electoral period and assurances the Company
received in March 2024, the Company expected the imminent return of VAT funds.
As at 31 March 2024 the value of outstanding VAT due to be returned to the
Company in Madagascar stood at above $2 million (£1.65m).

·    The Company is yet to see the initiation of refunds and continues to
pursue them, but understands the delays of returns are the result of national
budgetary constraints.

·    The Company is also pursuing the repayment of VAT from Mozambique
following the acquisition of Suni Resources (see 3 April 2023 RNS). The VAT
outstanding in Mozambique exceeds $1.2 million (£0.96m).

 

Development Finance support

·    The Company has engaged an advisor to obtain term lending with
certain Development Finance Institutions ("DFIs") for further expansion of its
Madagascar projects from 20,000 tpa at 3% head grade to 54,000 tons per annum.
This involves the investment of circa £30m including the working capital
requirements.

·    Interactions with large-scale potential customers have driven these
engagements along with the tailwinds currently driving global demand for
natural graphite.

·    Work with DFIs is advancing with extensive document review, and the
financial models prepared by the Company have been shared with the DFI and are
currently under their review.

 

Madagascar Mining Resource Drilling and Exploration Update

·    As announced on 11 March 2024, the Company completed the second phase
of exploration and resource drilling programme at its two Madagascan flake
graphite projects, using in-house drill rigs and machinery, involving c.5,000
metres of diamond core drilling, 26,000 metres of auger drilling and 360
metres of trenching.

·    An updated Competent Persons Report ("CPR") is being prepared by SRK
Consulting.

 

Mozambique Overview

·    The acquisition of Suni Resources SA in April 2023 added two
world-class, globally significant natural graphite projects to the Company's
asset portfolio: the Montepuez project and Balama Central project.

·    The projects acquired contain JORC 2012 reserves and resources of
c.152 million tons meaning more than 12 million tons of contained graphite,
which adds by a factor of 12 to the Company's global resource base. Together,
Montepuez and Balama Central are fully permitted to produce c.158,000 tons per
annum of flake graphite.

·    As announced, the International PranaGraf Mintech Research Centre
(IGMRC) conducted studies to optimise the proposed processing facilities,
targeting reduced required processing stages and incorporating sand separation
technology to improve efficiencies.

·    Reports of tests on the 600 kgs sample have been received. Further
tests for the sand separation technology shall require large pilot-scale
testing with 10 tons bulk scale testing.

·    Product from the tests are being used for providing samples to
propective large customers for qualification.

·    It should be noted that IGMRC has provided these technology services
to the Company on a complementary basis to date.

 

Corporate Developments

 

Downstream business potential and Pranagraf relationship

·    The Company has considered options to progress downstream natural
graphite processing to capitalise on the current and significant future market
opportunities in light of the global energy transition and growing demand for
flake graphite.

·    Following conversations with various national governments and
international funding groups, it is the Board's opinion that the Company
should progress its downstream strategy.

·    Having pursued a previous agreement with PranaGraf Materials &
Technologies Private Limited (or "Pranagraf", the same company formerly known
as 'TSG'), and completing the necessary whitewash process as required in 2021
as previously announced, the Company experienced an impasse in the
transaction.

·    This impasse was primarily caused by: a) Indian regulatory approvals
for the transaction requiring an updated valuation in accordance with FEMA
requirements (which must be not more than 90 days old, invalidating the
original valuation according to the regulation); and  b) the valuation
variation that the passage of time and evolution of the internal Pranagraf
businesses since the original transaction agreement in 2018 has had
implications for any proposed transaction value.

·    The Company has considered the following options for furthering the
relationship with Pranagraf:

o  continued pursuit of regulatory approval for the original proposed
acquisition;

o  exploring possible commercial arrangements with Pranagraf; or

o  exploring possible participation in alternative investment vehicles for
investment in Pranagraf.

·    A prospective option for a commercial arrangement with Pranagraf was
offered for discussion by Pranagraf in May 2022 and August 2023 but was not
furthered by the Company's previous independent directors who were authorised
to progress the matters.

·    The Company intends to appoint independent advisors to work alongside
future new independent directors, to oversee renewed discussions with
Pranagraf regarding any potential commercial arrangements.

·    The Company shall provide an update on this as the matters progress,
noting that the progress will rest on independent directors on the Board.

 

 

ENDS

For further information, please visit https://www.tirupatigraphite.co.uk/
(https://www.tirupatigraphite.co.uk/)  or contact:

 

 Tirupati Graphite Plc                          

 Puruvi Poddar - Joint Managing Director       admin@tirupatigraphite.co.uk

                                               +44 (0) 20 39849894
 CMC Markets UK Plc (Joint Broker)

 Douglas Crippen

                                               +44 (0)20 3003 8632
 Optiva Securities Limited (Joint Broker)

 Ben Maitland - Corporate Finance

                                               +44 (0) 20 3034 2707

 FTI Consulting (Financial PR)

 Ben Brewerton / Nick Hennis / Lucy Wigney     +44 (0) 20 3727 1000

                                               tirupati@fticonsulting.com

 

About Tirupati Graphite

 

Tirupati Graphite Plc is a specialist Graphite producer and a supplier of the
critical mineral for a decarbonised economy and the energy transition. The
Company places a special emphasis on green applications including renewable
energy, e-mobility, energy storage and thermal management, and is committed to
ensuring its operations are sustainable.

 

The Company's operations include primary mining and processing in Madagascar
where the Company operates two key projects, Sahamamy and Vatomina with a
combined 30,000 tpa of currently installed capacity, producing high-quality
flake graphite concentrate with up to 97% purity and selling to customers
globally.

 

The Company also holds two advanced stage, world class, natural graphite
projects in Mozambique. Work has already commenced to optimise the economics
for development of the Montepuez graphite project, which is permitted for
100,000tpa production and where substantial construction work has already been
undertaken by the predecessor. A table of the Company's projects is provided
below:

 

 Country       Project           Stage
 Madagascar    Sahamamy          In production: 18,000tpa capacity
 Madagascar    Vatomina          In production: 12,000tpa capacity
 Mozambique    Montepuez         100,000tpa permitted, development-initiated
 Mozambique    Balama Central    58,000tpa permitted, development-ready

 

 

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