{kanada_flagge}Emerging graphite producer Gratomic Inc (TSXV: GRAT; OTCQX: CBULF; FSE: CB82) has entered into a preliminary agreement with U.K. investment holding company Technology Metals Market (TM2 Verticals; www.tm2.com) for a future profit-sharing partnership in the sale of its vein graphite from the Aukam processing plant in Namibia. The terms of the agreement include Gratomic bringing its Aukam project into production on an expedited basis and the graphite produced meeting certain technical and mineralogical requirements. Gratomic’s partner, TM2, has established a global supply chain network that extends from mines (upstream) to smelters, processors and converters (midstream) to global distribution networks of global brands. TM2 manages a portfolio of more than a dozen vertically integrated supply chains covering key battery metals such as lithium, graphite, manganese, zinc and nickel. TM2 and Gratomic have worked together for the past two years and agree that this is a mutually beneficial agreement.
{kanada_flagge}Emerging graphite producer Gratomic Inc (TSXV: GRAT; OTCQX: CBULF; FSE: CB82) has entered into a preliminary agreement with U.K. investment holding company Technology Metals Market (TM2 Verticals; www.tm2.com) for a future profit-sharing partnership in the sale of its vein graphite from the Aukam processing plant in Namibia. The terms of the agreement include Gratomic bringing its Aukam project into production on an expedited basis and the graphite produced meeting certain technical and mineralogical requirements. Gratomic’s partner, TM2, has established a global supply chain network that extends from mines (upstream) to smelters, processors and converters (midstream) to global distribution networks of global brands. TM2 manages a portfolio of more than a dozen vertically integrated supply chains covering key battery metals such as lithium, graphite, manganese, zinc and nickel. TM2 and Gratomic have worked together for the past two years and agree that this is a mutually beneficial agreement.
The contract with TM2 provides a 120-day lead time from May 24, 2023, to enter into binding agreements with end users. The contract is for five years and provides for annual supply volumes starting at 4,200 tons per year and increasing to 7,260 tons per year. The graphite concentrate Gratomic sells to its partner will be used for “value-added applications.” The initial focus is on use in alkaline batteries.
Gratomic has already shipped large quantities of high-quality vein graphite to its other collaborative partner, Graphex, for testing to confirm the graphite’s suitability as an anode material. Gratomic is therefore confident that the test results will provide a unique competitive advantage in the desired target markets.
World’s first vein graphite for alkaline batteries
Vein graphite is considered the purest and highest quality naturally occurring graphite. Because the deposits in Sri-Lanka are small and there is insufficient security of supply, commercial use is limited to specialty applications when measured against the overall graphite market. Gratomic aims to be the first company ever to offer an alternative to synthetic and flake graphite for batteries with its vein graphite. As part of the partnership with TM2, Gratomic initially provided one ton of graphite concentrate from its Aukam Vein graphite mine in Namibia to TM2 on June 12, 2023. The concentrate will be sent to South Africa for further refining and then forwarded to mid-sized processors in the United States and Europe, where it will be converted into an equivalent of purified flake graphite (PFG) used in alkaline batteries. The processing of this material in a purpose-built pilot plant is being funded by an end user who wishes to remain anonymous during the testing phase. Once the supply chain and PFG are qualified, the end user intends to enter into a direct purchase agreement with partners Gratomic and TM2.
Successful completion of the pilot tests would mark an innovation in the battery market. To date, vein graphite has not been used commercially for alkaline batteries due to its poor availability. Gratomic would be a pioneer in this regard.
50:50 profit sharing agreed with TM2
The contract with TM2 stipulates that the profit after toll processing of the graphite supplied will be shared between TM2 and Gratomic on a 50:50 basis. In the event that the grade of the concentrate exceeds 95%, which is Benchmark Mineral Intelligence’s index price, the concentrate price will be compensated with a special premium. In such a case, the final price for the concentrate will be adjusted and increased by the special premium to the “final concentrate price”. The target rate is 6.5% for a grade of 96%, 19.5% for a grade of 97% and 32% for a grade of 98%, until a quotable index for a graphite grade above 95% is obtained.
Petur Georgesson, CEO of TM2 commented, “We expect that in the next 36 months every major OEM in the world will integrate their supply chain back to the mine to ensure long-term supply and reliable delivery. TM2 recognized this several years ago and was one of the first players in the battery metals space to begin building globally integrated and connected markets. Gratomic is a key visionary in the graphite space, and this partnership is an important step in building market liquidity, transparent pricing and interconnectivity from source to consumer.”
Arno Brand, President and CEO of Gratomic, stated, “It is gratifying for the company and TM2 Verticals to work in such an innovative partnership. It not only provides mutual benefits, but also opens the door for new applications of graphite from the Aukam vein.”
Bottom line: Gratomic aims to become a leading global graphite supplier. Behind this, however, is the ambition to be more than a mere supplier of raw graphite. Gratomic wants to earn a share of the profits from value creation to refined battery graphite. This is the core of the profit-sharing partnership with TM2 that is now on the table. It is strategically smart for Gratomic not to try to do business directly with the end user. In case of doubt, an established intermediary like TM2 can do that better. On the one hand, OEMs want supply security and transparency all the way back to the mine, but it’s also understandable that they can’t afford umpteen different contacts for each commodity. TM2 CEO Petur Georgesson is betting on the global trend toward vertical integration of supply chains. This is probably inevitable in terms of ESG and supply security. It is understandable, given geopolitical developments, that OEMs want secure sources of raw materials and process chains that are non-Chinese dominated. Gratomic has everything in place, in principle, to become part of this new, secure supply chain. The company has outrun most of its publicly traded competitors in the graphite sector – albeit by unconventional means. CEO Arno Brand has invested more than CAD 40 million in a processing plant in Namibia without the usual prerequisites such as a 43-101 compliant resource or feasibility study. The instinctive entrepreneur has put himself and his shareholders through a lot in the past. Deals like those with TM2 or its other partner Graphex cast the commercial net to reap the rewards for that entrepreneurial courage. Gratomic, if successful, could become the go-to graphite company par excellence.
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