TGR: Finally, some graphite. This may be saving the best for last. It is a graphite play, and probably not a four- or five-hour drive from your office in Toronto. The company is named Northern Graphite. A year ago, virtually no one knew about this company, and now it is about to publish a feasibility study on the Bissett Creek graphite project in central Ontario.
Tell us why you believe the share price will double this year.
PK: The graphite space is something that we are really bullish on. We brought Northern Graphite public in April 2011 through an IPO. The Bissett Creek graphite project is a large-flake, high-quality, carbon graphite deposit where the large flakes within the deposit are abundant—greater than 50%. Large-flake graphite currently sells for around $2,500/ton (t). The upside for Northern Graphite is that its jumbo-flake graphite will be sold on the market for a substantial premium to $2,500/t. It is on the fast track to production and already has a mine permit plan in place with the Ontario government and can begin construction with permit approval. There should be a feasibility study by the end of Q112, and I expect it to have a strategic offtake partner in place that could emerge right around the time of that feasibility study.
TGR: Is that likely to be a Chinese partner?
PK: It is quite possible as China is the world's leading producer and consumer of graphite, and has dwindling resources available to meet its growing demands.
TGR: The project is not far from Algonquin Park. Do you expect any issues with regard to bringing a mine into production in a relatively well-traveled part of the province?
PK: No, I don't. The water drains in the opposite direction of the park from the project site and the tailings are not acid generating so this is a definite positive for Bissett Creek to become a mine.
TGR: As far as an NPV goes, what sort of numbers are we looking at with Northern Graphite?
PK: It depends on which discount rate you use for Bissett Creek; using 10%, I have it at about $125M. The upcoming feasibility study should provide further insight into what to expect from Bissett Creek.
TGR: For how long would that mine be in production?
PK: It could easily expand the existing resources and increase its production scenario, but our model uses a 35-year mine life.
TGR: Any parting thoughts?
PK: I am pretty optimistic that we will see a strong market for 2012 and, particularly, I favor junior advanced exploration and development stories that can either be developed by the existing management groups or ones that would be targeted by a senior midtier company to fit its project portfolio for future production.
Philip Ker is a mining analyst for Union Securities Ltd., a company formed in 1963 that is now one of the largest independent brokerage firms in Canada. The company has offices all across Canada as well as one in London, England. He has field experience as an exploration geologist working across Canada on gold, diamond and base metal projects. He joined Union Securities in June 2011 after completing his Master of Business Administration degree in finance at the University of Alberta. He holds a Bachelor of Science degree in geology.
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DISCLOSURE:
1) Brian Sylvester of
The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of
The Gold Report: Northern Graphite Corp., Geologix Explorations Inc., Timmins Gold Corp., Kiska Metals Corp. Streetwise Reports does not accept stock in exchange for services.
3) Philip Ker: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise for participating in this story.