Our new recommendation of December 23, 2021 has already gained some momentum and if everything continues in an orderly manner at graphite producer CEYLON GRAPHITE - as planned according to the company's management - there will still be "a lot of joy" here. This year, sales are expected to more than double from USD 3 million to USD 8 million, and the forecast for 2023 jumps to USD 70 million. Net profit is also expected to "explode" from currently USD 1 million (2022) to about USD 50 million (2023 ). But are such numbers credible? With Don Baxter at the helm as CEO, absolutely, as he is considered one of the most respected mining engineers in the world; he has already built graphite mines in North America and holds numerous patents on graphite processing and graphite extraction. Baxter has also already signed a letter of intent with the multi-billion dollar LOLC holding company for cooperation in graphite mining. Furthermore, the license for another mine has just been granted. So everything is on track as planned. The current market capitalization of around USD 27 million is downright "ridiculous". Some analysts write in this regard of a massive undervaluation, especially in view of the striking profit increase potential.
The following news also makes people sit up and take notice:"Tesla snatches up entire production from graphite mine!" Specifically, Tesla has secured a four-year supply of graphite in the form of an extremely rare deal. This offtake agreement was made with Australian graphite company Syrah Resources. Syrah operates a graphite mine in Balama Mozambique and plans to build a processing plant in Louisiana, USA, with future production almost exclusively committed to Mr. Elon Musk, of Tesla fame. Graphite is high on the industry's wish list. The raw material is not only used in the production of refractory materials or electrodes for steel production, but is also an elementary component of anodes in lithium-ion batteries. At +37% per year, the demand for graphite for e-mobility is growing many times faster than in some other industries. Despite the expansion of mining capacities in regions outside China, there are fears - as with lithium - of a possible bottleneck in the supply of graphite. Tesla has thus cleverly engineered this deal; Elon Musk does not need to be learned in such matters. Tesla will have enough graphite for the next four years, and that at a fixed price. This should save Tesla many millions of US dollars... unless the graphite price would collapse against all expectations. With this purchase agreement, Tesla can also elegantly "circumnavigate" the high import duties for material from China.
A word about the risks: We see these primarily at the political level. Sri Lanka suffers from high levels of over-indebtedness (who doesn't) and inflation for essential products; unrest is possible at any time in such regions. However, economic potential is unlikely to be torpedoed. Our price target is CAD 0.85!
CEYLON GRAPHITE is listed on the TSX in Toronto under the symbol CYL, the security number is 35'217'857, last price approx. CAD 0.200.
