Talga signs first-stage graphite supply deal with EU battery maker

Talga Group (ASX:TLG) and French EV battery maker Verkor on Wednesday signed a legally non-binding letter of intent (read: agreement) for Talga to supply the latter with graphite battery anode material. 

Verkor and Renault have an established manufacturing relationship. 

Under the deal, Talga will potentially supply Verkor with graphite materials from its 100% owned Vittangi Project, which is located in Sweden. 

The project was given interim approval by Swedish regulators in April last year. 

Legally binding agreement en route 

Currently, Talga and Verkor are eyeing either a 4-year or 8-year long formal contract for supply. 

The parties are working towards the publication of a legally binding term sheet in the first quarter of this year. 

The benefit of a binding term sheet for investors and shareholders is that the agreement becomes more thoroughly protected by law, appealing to risk-off sentiment and allowing both parties to seek legal means to amend breaches or terminations (outside the terms of the binding agreement.) 

A binding agreement would also enhance the bankability of the Vittangi project. 

Who is Verkor? 

Verkor, a battery maker, is already backed by European carmaker Renault Group. 

The company intends to open a lithium-ion battery “gigafactory” in Dunkirk, France, before 2025. 

That factory is expected to have a 16 gigawatt hour (GWh) per annum capacity, referring to the number of batteries it can produce (enough lithium ion batteries to provide power equivalent to 16GWh, an impressive feat). 

By 2030, Verkor wants its gigafactory to produce the equivalent of 50GW/h. 

Talga stands to benefit from the move by being a direct supplier of the graphite needed in EV batteries from its Swedish project to the Dunkirk factory. 

Shareholders should note graphite is difficult to process downstream into ready made battery products, however, Talga reports success in its own commissioned testwork on the company’s flagship anode product, called ‘Talnode-C’. 

A battery anode ultimately allows for the generation of electricity in a battery. 

Considerations on performance 

Talga Group has a market cap of $531.5m. 

It is ranked 81 of 942 companies in the ASX Materials sector. 

One year returns are down -2.75%.

Year to date performance is up 13.57%. 

At the end of the September quarter, it held $4.72m in cash. 

It spent $6.9m in opex over the same period. 

The company conducted a $22m capital raise in October last year. 

An environmental permit hearing in Sweden for the Vittangi project takes place on 30 January later this month and is expected to run until 20 February.

The shape of Talga Groups' three month charts