London broker SP Angel has tipped Talga Resources (ASX:TLG) to grow from 42c to $1.80 (by 324 per cent).

You may remember Talga as that company with batteries which unlike many competitors can cope with freezing conditions.

But it is the company’s Swedish project that SP Angel tips will take it to new heights. The project is already the world’s highest grade graphite deposit. Its current resource stands at 12.3 million tonnes at 24.4 per cent carbon for 3.1 million tonnes of graphite.

“Mining industry mantra ‘grade is king’ is certainly prevalent for Talga Resources,” said SP Angel.

While this project had been explored before, its true potential had only been uncovered since Talga first began exploring in 2019. “This could offer Talga Resources fundamental raw material supply to support the accelerating European lithium-ion battery market,” it said.

The broker estimates a post-tax net project value of $US767m with 51 per cent IRR (internal rate of return). Barring further dilution though capital raises, this is $1.80 per share.

It’s the batteries

But SP Angel has not forgotten about Talga’s batteries. The broker estimates its anode powder product (Talnode-C) will be commercialised by 2021. Talnode-C will work as an anode electrode for batteries – conducting the electrons and helping with the battery density.

According to Talga, it is superior to other products on the market, having a 20 per cent higher capacity and enhancing performance. It can endure in tough climates, such as freezing weather and will require less thermal management and materials.

This will attract a premium – SP Angel predicts this will cost $US11,250 per tonne and had put this into its forecasts.

Of course full scale production will likely require further capital raises, noting the large investments made by Chinese companies such as Shanshan in building graphite anode megafactories.

Pic: Talga Resources

While this would dilute the share price, the broker said “we fully expect the target price to appreciate with additional technical study”.

The production schedule would achieve payback within 1.75 years once stage two commissioning has begun.