Why is this ASX 300 stock crashing 13% today?

Investors aren't happy with an announcement on Friday.

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The Talga Group Ltd (ASX: TLG) share price is having a tough finish to the week.

At the time of writing, the ASX 300 stock is down 13% to 56.5 cents.

This leaves the battery materials developer's shares trading within touching distance of a multi-year low.

Why is this ASX 300 stock crashing?

Investors have been heading to the exits today after the company announced the completion of a mining study into the expansion options for its Vittangi Graphite Project in Sweden.

The release notes that the mining study forms part of a wider integrated scoping study aimed at expanding the ASX 300 stock's existing initial 19,500 tonnes anode per annum (tpa) production of low-emission graphite anode products for lithium-ion battery markets.

According to the release, the study found mine plans supporting 0.6Mtpa, 1.0Mtpa, and 2.0Mtpa Run of Mine (RoM) ore production from existing indicated and inferred JORC resources of 35.0Mt at 23.8%Cg.

However, it also warns that "there is a low level of geological confidence associated with Inferred mineral resources and there is no certainty that further exploration work will result in the determination of Indicated mineral resources or that the production target itself will be realised."

The study also found that a transition to underground mining and optimised development plan negates the need for multiple open pits, with the potential to increase life of mine beyond 40 years at a lower 0.6Mtpa mining rate.

Big investment required

But to get to the above, it will take a significant investment and there is no certainty that it will be able to raise the required funds. The release states:

To achieve the range of outcomes indicated in the Interim Report, capital funding in the order of €520 – €1,100 million [A$848 million to A$1.8 billion] plus contingencies may be required. Investors should note that there is no certainty that the Company will be able to raise that amount of funding when needed.

This compares to the current Talga market capitalisation of approximately A$210 million.

Nevertheless, the ASX 300 stock's CEO, Martin Phillips, is positive on the company's prospects and appears optimistic that today's study is a big step forward for it. He commented:

Our large-scale Swedish graphite project is a key alternative source of strategic raw materials to support the EU's ambitions and the demand from key export markets. The completed mining study underpins the Scoping Study underway to outline expansion options to supply the global battery anode market beyond our initial 19,500tpa project.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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