Nettes Summary über NGC! The Graphite Investment Boom Is Just Starting April 10, 2012 | 2 comments | includes: NGPHF.PK, ZENYF.PK
Introduction
Graphite is quietly emerging as a strategic industrial material in short supply, similar to the rare earth commodities. Years of underinvestment in new supplies, and growing demand sources, have caused prices to rise sharply in the past few years. China, as the world's dominant supplier, has significantly curtailed exports in an attempt to exert greater control in the market. As a result, it's not entirely surprising that the EU named graphite as one of 14 critical materials along with the rare earth elements.
EU Names Graphite a "Critical Material"
A new global rush to find quality graphite supplies has just begun. However, not all graphite is created equally, and there is significant quality variation that determines its price and value, which can range up to a few thousand dollars per ton. When investing in graphite companies, it's essential to find the emerging producers with the right quality graphite to supply the fast growing end markets, assets with proximity to infrastructure, and a management team with skin in the game that can advance the mining project.. .. Northern Graphite (NGPHF.PK)
Northern Graphite is by far the blue chip graphite investment in Canada. The company has a large, well-known deposit called the Bissett Creek project. Below I summarize the key highlights of the company and its asset.
Key Highlights - Right Quality Graphite: The graphite at Bissett Creek has proven to be large-flake graphite capable of producing graphene and spherical graphite. This is the rarest and highest priced product that is necessary to meet stringent manufacturing requirements in the fast growing segments of the market.
- Strong Partnerships: Leading developers have been signing up to secure partnerships with NGC. This includes a recently announced deal with Panacis, a global leader in high performance Lithium Polymer battery-based energy storage systems and supplier to the military, telecom, medical and renewable energy markets. NGC has also formed a partnership with Grafen Chemicals for graphene research and will retain a 50% interest in the North American patent rights to any products or processes developed by Grafen
- Low Project Risk: The project is low risk because it is in Canada, the graphite is close to a major highway, above ground, conventional mining, and has all the necessary infrastructure available.
- Advanced Timetable: NGC is the most advanced junior mining company in the graphite market having started the project well ahead of others. They are already at the stage of receiving a Bankable Feasibility Study. Once received, they will be in a strong position to attract an off-take agreement with a strategic partner and receive bank debt financing.
- Attractive Economics: The capital costs necessary to bring the mine into production are low by mining standards at around $85m. With a 40 year mine life, 20,000 tons per year of production and current graphite prices, it's entirely possible for NGC to generate $30m per year of cash flow.
- Tight Capital Structure: The company has only 52m fully diluted shares outstanding and has a judiciously raised capital to advance its project. The company recently raised $10.5m at $1.70/share with billionaire Eric Sprott participating. Instead of the stock price going down on announcement, the stock has risen sharply. Depending on the exact outcome of the BFS, there are scenarios where the company may never have to issue another single share.
- Proven Management Team: The company is run by experienced operators in the mining business and has executives with actual experience in the graphite market, and mine development.
It's easy to see why NGC has garnered so much attention from the business and investment community recently. Given the mine current economics, it's entirely possible the NGC's shares can easily double from here to over $6/share. To arrive at this figure, I conduct an NPV analysis with $30m/yr of cash flow, 40 year mine life, and a 10% discount rate. Analysts estimates have been rising recently as the company has delivered successively positive news results that confirm the quality of its graphite. For example, Mackie Research recently upped their price target to $4.40 per share. As the project gets further de-risked with the release of the BFS, and announcement of an off-take agreement, the price targets will continue to rise toward my full valuation.
There are other useful things potential shareholders might want to review as part of their due diligence. For example, the video entitled "The Miracle Material: Graphene" highlights NGC as the one company sitting on billions of dollars of graphite capable of supplying the high growth market for graphene. At the end of the video, there is a partial interview with NGC's CEO.
BNN, the premier business new network in Canada, also recently hosted NGC's CEO last month in an interview. This was a pleasant surprise to see a company with under a $100m market cap to appear on their national TV. .. Quelle: http://seekingalpha.com/article/...e-investment-boom-is-just-starting |
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