*EDIT: The OCT ticker is NSRCF btw for those that don’t live in Canada. - thanks to u/Essos101
This is my analysis of Nextsource Materials ($NEXT.tse).
DISCLOSURE:
I have been following Nextsource Materials for almost 7 years and have been steadily picking up shares averaging at approx 6.8 cents. The following analysis is based on NEXT's 2019 Feasibility Study for the Molo Mine and assessment of their Green Giant Vanadium Mine.
INTRODUCTION:
NEXT is a Canadian mining company that fully owns 3 mines, 2 of which are quite valuable, especially so with the current global trend of car manufacturer shifting to EVs. The first and most discussed is the "feasibility stage" and fully permitted Molo Mine, one of the largest-known and highest quality deposits of graphite in the world - located in Madagascar. For reference, graphite, especially high-quality graphite, has several "top demand applications", such as refractory (steel), lithium-ion battery applications, and expanded graphite (foil) applications.
The second mine is the Green Giant Vanadium Mine, which is another huge and valuable mine that is fully owned. For reference, vanadium is used in the manufacturing industry due to its malleable, ductile and corrosion resistant qualities. Just 2 pounds of vanadium added to a tonne of steel will double its strength. Furthermore, when vanadium is found in sediment-based deposits (<5% of vanadium deposits world-wide are sediment-based), it becomes ideally suited to produce a key material in making super batteries, more on this below. For reference, the Green Giant Vanadium Mine is entirely sediment-based.
RATIONALE:
The multi-phased Molo Mine Project, according to their feasibility study, completed in September 2019, is confirmed to have one of the lowest operational costs due to how they plan to mine the materials (a "full-modular mine build"). They compare their planned capital expenditures ($21M for phase 1, $46.4M for phase 2, total $67.4M) to competitors. The closest competitor had a capital expenditure of $90M, 33% more than NEXT.
Phase 1 consists of a processing plant that will produce 17,000 tonnes per year of high quality graphite concentrate for the first 2 years of operation. After this, they will expand to phase 2, which will result in producing 45,000 tonnes per year in the 3rd year. The mine life is expected to be 30 years at this rate.
The graphite, which the price per tonne varies depending on the concentration (range: 96.9%C to 98.1%C), is between $770-2100 USD per tonne. The average "basket price" of Molo graphite is estimated to be $1207.55 USD per tonne, as of March 2019. Their financial analysis reveals an estimated cash flow of $643.4M after all expenditures and taxes, or an average of $21.4M/year. With 534M outstanding shares, and unless my math is wrong, we're looking at $643.4M/534M shares = $1.2 USD/share.
As for the Green Giant Vanadium Mine, this one is particularly unique among the majority of vanadium deposits in the world due to the fact that it is a sediment-hosted deposit. Only about five percent of vanadium occurrences occur in sediments. Being sediment-hosted, no magnetic metals are associated with Green Giant’s vanadium and this makes it ideally suited to produce high-purity vanadium pentoxide (V2O5), which is a key precursor material required to produce the liquid electrolyte that powers a vanadium redox battery (VRB). The VRB is currently recognized as a leading, large-scale energy storage system technology for the harnessing of coal-powered and renewable energy and as such, is forecasted by industry analysts to have high future demand growth.
NEXT also has deals/contracts in place with Ford, Honda, and several other companies/countries, including speculation around a Tesla partnership. The only thing is, they have not started mining as they are still working on gathering funds ($21M) to start phase 1 production of the Molo Mine. And for reference, a few years ago, when we thought phase 1 was starting, NEXT hit 22 cents. This is why I believe at least 20 cents is possible upon the actual start of phase 1.
CONCLUSION/TLDR:
High-quality graphite and vanadium will be in demand considering the current global trend of shifting to EVs. NEXT owns 2 of the largest mines for these 2 materials and is only 8 cents today. It is likely to hit >20 cents upon phase 1, >$1 upon phase 2, >$3 upon production on the vanadium mine, and maybe >$5 with hype and demand in the space of EVs. With several partnerships already confirmed, and a speculative Tesla partnership in the works, this stock is likely to do very well - both short and long term.