RE: Catalyst Northern Graphite Corporation, (TSXV:NGC)
Target Price: $3.50 Rating: BUY
ANALYST Marc Pais | 416. 864. 2609 | mpais@mgisecurities.com
INVESTMENT THESIS
Northern Graphite owns 100% of the Bissett Creek graphite deposit located 300km north of Toronto, Canada. Close to Infrastructure: 17km from the Trans-Canada highway, electricity and natural gas; Access to major North American steel and automotive markets in Ontario and Michigan
Metallurgical Testing and Pilot Plant production have demonstrated the potential to produce high-value large flake graphite. We believe there is also the potential for the deposit to produce a very high-value spherical graphite product
Large flake graphite is a premium product in high demand for the production of lithium-ion batteries, fuel cells, vanadium redox batteries and pebble bed nuclear reactors
Strategic Value – Potential to provide security of supply to a growing North American lithium-ion manufacturing market
POTENTIAL CATALYSTS
2Q’2012: Bankable Feasibility Study; Test production of spherical graphite
3Q’2012: Receipt of major mine permits
1Q’2013: Initiation of mine construction at Bissett Creek
VALUATION
We have valued Northern Graphite using a DCF analysis that incorporates a concentrate graphite price US$2,500/t, spherical graphite price of $7,000/t, a discount rate of 12%, mine life of 20 years, and production start date of 1Q’14. We calculate a net asset value of $3.50 per share.
RECOMMENDATION
We are initiating coverage of Northern Graphite Mines Ltd. with a BUY rating and 12- month target price of $3.50 per share.