First Graphene makes prudent call to stay at 30pc holding in Graphene Solutions
Special Report: Advanced materials company First Graphene has told investors that it will stick with a 30 per cent shareholding in the BEST Battery Project, which eliminates the need for shareholders to contribute any more funds.
Perth-based First Graphene (ASX:FGR) produces high-quality graphene from high-grade Sri Lankan vein graphite.
Graphene is a thin and strong layer of carbon that is arranged in a hexagon structure. It is a promising nanomaterial that can up the performance of a wide range of materials used in industry, from something as basic as concrete through to batteries, elastomers, fire retardant paints, polymers and water filtration.
The company entered into an agreement with Graphene Solutions Pty Ltd in May 2017. It achieved the agreed level of equity and was issued shares to 30 per cent in May 2018. This gave First Graphene the right – but not the obligation – to increase its equity level to 70 per cent by spending another $1.3 million.
Graphene Solutions has a reciprocal agreement with Swinburne University, which is funding the Bolt Electricity Storage Technology (BEST) Battery Project, to create a supercapacitor offering high performance and low-cost energy storage.
So what does this mean?
The company explained its approach as responsible financial risk management.
“By retaining 30 per cent, we keep the door open to considerable upside in the event of success, but we limit our exposure to the downside from here,” said Craig McGuckin, First Graphene managing director.
First Graphene reviewed the project in Q4 of 2018 and looked at the progress so far, plus the broader market of supercapacitors and the many competing technologies being developed by competitors.
After weighing up the commercial outcomes that are likely to be delivered at the completion of the BEST Battery Project, it decided that despite the positive progress to date by the University, a commercial outcome was not guaranteed within the set budget.
The Board has proceeded with this prudent fiscal strategy to keep the 30 per cent holding in Graphene Solutions which has already been earned, but not to spend any more shareholder money on what is viewed as a high risk/high reward project.
The decision has been influenced by the progress the company has made with the advancement of its high-quality PureGRAPH range, which interestingly, is not used in the BEST Battery Project.
PureGRAPH progressing nicely
First Graphene said it wants to focus on what it does best – producing the highest quality, fit for purpose graphene for sales into industry. They are one of the lowest cost producers of defect-free graphene products in the world and have a manufacturing capacity of 90 tonnes of graphene per annum.
The company is looking into alternative supercapacitor projects, using PureGRAPH, that offer a lower risk path to commercialisation.
“Judging by our expanding sales book, this is going to deliver tangible earnings and growth for shareholders much sooner than a longer-term research project with no guarantee of success.”