RE:RE:RE:RE:RE:RE:RE:RE:Graphite Investing News Interviews SJL CEO Mr Paul OgilvieBogala is definitely a huge operation but they ran into problems in 2009. Graphit Krophmuhl AG of Germany injected some cash to help turn things around.
Losses in the financial year ending December 31, 2009 rose to 127.7 million rupees from a loss of 100 million in 2008. The loss per share was 2.70 rupees in 2009.
They have made headway though and started banking some profits again. The market meltdown in 2008 - 2009 hit these companies hard. As Good Speculatior mentioned - Keep costs low and you preserve profits. The Bogala mine is a kilometer deep at it's lowest point. There are around 2000 employess so it's a huge operation. So it has to be costly bringing it up from such a depth. Where do they send it to upgrade it? Again...what is the cost per ton?
SJL's CEO laid things out nice and clear in his interview!
"So whenever we assess a project, we come at it trying to make sure the project works on all levels – and that includes being able to effectively satisfy the varied requirements of graphite customers. That was a principle factor in pursuing the Sri Lankan project. There you can get graphite out of the ground and on a truck for roughly $100 a ton. There’s a profound difference between that and, let’s say, Ontario projects with a cost base upwards of $1,300 to $1,400 a ton. Quebec projects with their higher grades are looking at $800 to $1,000 a ton. So a cost difference such as that between Torch and these projects will represent a distinct competitive advantage for us. Keep in mind, I’m not including our Quebec projects in that statement as our projects are lump.
The other significant thing is that a lot of our material comes out of the ground at extremely high purity, in the 95-percent-plus Cg range. That means you actually have material that you can sell at between $2,000 and $3,000 a ton without extensive upgrading. Even the high-quality material of Ontario-type projects still has to be upgraded to get into those numbers because the grade is so low. That can be another $1,000 in upgrading costs over and above the $1,400. So from a profitability standpoint, you can’t compete with our material. Synthetic can’t compete with it and no other graphite miner can compete with it.
Those grades also dramatically reduce our anticipated capital expenditures to build the facilities necessary to mine and process our material. Our current budget planning is projecting costs of $10 to $12 million to become fully operational. Compare that to a typical Ontario or Quebec large-flake project, which is looking at $140 to $150 million, and you can quickly begin to see the impact on overall profitability and return on investment. Ultimately, when we look forward six or seven months from now, we see ourselves as the largest holder of lump graphite in the world and plan to be in production before anybody else.
Massive difference between 12 million and 140 million to get into production! Which scenario is gonna dilute the value of your shares to high heaven?
The fact is, from Sri Lanka, if SJL can produce lets say for $150 per tonne and the selling price is between $2000 to $3000 per ton....this is "Pure Profit" At $2500 per ton the cost to produce is 6%. I may not be a physics major but I certainly understand general math very well. I give you $150 and you give me $2500. I'll play that game all day as many days as possible.
I'll use a scenario for illustration purposes. This is only theoritical to focus on percentages. So lets say SJL produced 20,000 tons the first year. At $2500/ton The sales would be $50,000,000. Costs would be $3,000,000. Total Profit Of: $47,000,000. That's phenomenal!
Now take a competitor who has to spend $1900 per ton to mine it and upgrade it.
Their costs are $38,000,000. Profit of: $12,000,000. It's still profit. That's good. But which company would you rather have your investment in????
Which company are you gonna want your investment in if the sell price for graphite drops to $1800 per ton? The competitor is now losing money! Oh Oh!
And SJL is still pulling $36,000,000 in profit. Wow! I think that sends the message home a little clearer!
SJL only has a market cap of 3,818,000. Think about it!
So why would anybody in their right mind exit their position in SJL at these prices??
And this leads me to my next post regarding Pinetree Capital!