Join our daily newsletter At The Bell to receive exclusive market insights
- Magnis Energy Technologies (ASX:MNS) has paid commodities broker Traxys Europe SA to enter into a binding offtake agreement for the supply of natural graphite product from its Nachu Graphite Project in Tanzania
- Magnis will issue Traxys 700,000 fully paid ordinary shares and 1.3m options, exercisable on or before the 24-month anniversary of the date of their issue for $0.60 each
- This is not the first time Magnis has announced a binding offtake agreement over its Tanzanian graphite assets, which were subsequently unwound
- The upfront payment to Traxys, described as a marketing fee by Magnis, appears different from other recently announced ASX graphite company offtake agreements that have not made payments to their counterparty
- Magnis claims the arrangement is significant because it will enhance the chances of successfully funding the Tanzanian project
- Shares closed on Monday, December 20 up 2.3 per cent at $0.44
Magnis Energy Technologies (ASX:MNS) announced today it has paid Traxys Europe SA, a commodities broker, to enter into a binding offtake agreement for the supply of natural graphite product from its Nachu Graphite Project in Tanzania. The project is not yet funded or built, and the agreement will take effect from 2024.
Magnis will issue Traxys 700,000 fully paid ordinary shares and 1.3m options, each exercisable into Magnis shares on or before the 24-month anniversary of the date of their issue for $0.60 each, subject to shareholder approval at the next general meeting of Magnis.
Magnis claims this agreement is significant because it will help the case for project finance for the Tanzanian project that Magnis has held since at least 2013.
However the agreement with Traxys comes with an upfront cost to Magnis shareholders, but with no risk to Traxys.
Less than binding offtake agreements
Magnis subsidiary Uranex has held a Special Mining Licence issued by the Government of Tanzania since September 2015, and has been associated with the Nachu prospect since at least 2013. The Tanzanian Government insists on holding a 16 per cent non-dilutable interest in the capital of all mining firms.
This is not the first time Magnis has announced a binding offtake agreement over its Tanzanian graphite assets.
In December 2014, the company signed two binding offtake agreements with China-based SINOMA and Sinosteel for 80,000tpa and 100,000tpa, respectively.
Magnis would then go on to announce on January 30, 2017 it had signed a deal with Russian-based Rosatom for project financing and offtake of flake graphite from Nachu.
However, just a day later, Magnis announced in an operational update that it had terminated the offtake agreements with SINOMA and Sinosteel.
Other ASX graphite offtake agreements
The upfront payment to Traxys, described as a marketing fee by Magnis detailed in the announcement, appears different from other recently announced ASX graphite company offtake agreements.
In June last year, emerging graphite producer EcoGraf (ASX:EGR) announced it had a non-binding agreement with German commodity dealer Thyssenkrupp Materials Trading for the sale of battery graphite products from its planned Kwinana facility in Western Australia. There was no mention of any payment to the prospective partner in the announcement.
In April 2019, Walkabout Resources (ASX:WKT) announced a binding offtake term sheet agreement with Chinese customers for graphite from its Lindi Jumbo project in Tanzania. Once more, no mention of any upfront marketing payment.
In August 2018, Volt Resources signed a five-year agreement with no upfront marketing fee with Qingdao Tianshengda Graphite Co. Ltd (“Tianshengda”) for 9,000 tonnes per annum of Bunyu Graphite Product over five years.
Past controversies
Traxys is a physical commodity trader with a record of several controversial dealings. It has previously been linked to investigations into forced labour by African mining interests and buying conflict minerals in South America. The company has denied any involvement by it or its partners.
In 2017, the company was named in reports from an agency funded by The European Union (International Alert) about concerns over child labour being used in African cobalt mining linked to trading on the London Metals Exchange.
Over the past twelve months Magnis has seen its shares rise by more than 135%. In 2021 alone, the company’s share price is up almost 120%, reflecting positive investor sentiment.
However recent news coverage has been less-than-positive.
Notably Magnis was reported to have engaged alleged drug-smuggling kingpin Hakan Arif to act as an agent for the company in Turkey. In responding to the report Magnis said it had never had any engagement with Mr. Arif and has never made any payments to him, though former Magnis director Peter Tsegas is reported to have met with Mr. Arif.
In an announcement, the company said it had retained Queen’s Counsel and senior lawyers to represent it in proceedings arising from the “assertions and imputations” from recent “defamatory articles”.
In addition questions have been raised around a proposed buyer of products from the companies US operations. New York based Imperium3, a related business of Magnis, claims to have contracts worth $885 million for the supply of electric vehicle batteries.
However in September it was revealed one of the customers named in the contracts, New Delhi-based battery storage firm Sukh Energy, had assets of less than $2000, according to the company’s own filings with the Indian corporate regulator, and it was unclear how the potential buyer could fund its proposed orders.
Separately, Magnis has lost a number of high-profile business and political figures from its board, including former NSW deputy premier Troy Grant and one-time Macquarie executive Warwick Smith.
Both Mr Grant and Mr Smith left the company after less than 12 months on the board.
Shares closed on Monday, December 20 up 2.3 per cent at $0.44.
