Lots of potential....
Energizer's net present value on a conceptual operation came in at over $420 million, with a 41-percent post-tax internal rate of return, which based on their present 175.6 million shares suggests a possible $2.39 market price. Even considering a 20-percent increase in operating costs — and a 25-percent drop in projected graphite prices — the project’s net present value comes in at $105 million, suggesting a possible a market price of 60 cents.. Both cases are well above Energizers present market cap of of $28 million.
There are potential tax benefits. Madagascar has a Large Mining Investment Act — a legacy of big mines developed there recently by Sherritt and Rio Tinto (LSE:RIO,ASX:RIO,NYSE:RIO). The act allows new mines to have a five-year tax holiday and, in some cases, lower corporate taxes.
Geology could also give Molo a boost. There’s long been speculation — with increasing confirmation from geologists — that Southern Madagascar is part of the same belt of rocks as Sri Lanka. If true, that could suggest potential for Sri Lankan high-purity graphite veins, a type of mineralization that fetches a premium price.
Witt the full feasibility study scheduled for the second quarter of 2013, including construction of two pilot plants. At this time Energizer should have the drill cores at the graphite vein intersections checked for product quality. Scherba said that veins with higher-grade graphite have been found within Energizer’s project area. Although the company has focused on Molo’s bigger, bulk-mineable potential, such enriched zones could be a nitro boost down the road.
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