Mackie Research Capital - Morning Comments
Strategic Metals & Clean Tech
NORTHERN GRAPHITE CORPORATION - (NGC - CAD$0.67)
Target Price: CAD$1.60 Recommendation: SPECULATIVE BUY
NGC Discounted Valuation Unwarranted
Given the emergence of additional junior graphite developers and projects into the category of ‘advanced plays’, we feel it is important to stack the companies up against one another to assess value.
Our analysis indicates that NGC remains the most attractive play in the sector.
Nearly all of NGC’s anticipated product has purities in excess of 94%, which is the bottom end of acceptable grade for many customer end markets. Unlike the other Companies, NGC will be able to sell nearly all of its produced graphite concentrate and refined products.
NGC will be able to realize a sizable price premium and thus superior gross margins. Its Bissett Creek project is the outright ‘large-flake’ play, with 75%+ of its product mix being the most valuable type of graphite, large flake.
While its valuation is modestly below the group average EV/Measured & Indicated, NGC is at the bottom end of the group in terms of EV/Measured & Indicated & Inferred, and 50% below the group average.
The most advanced, closest to production with a clear set of catalysts. With receipt of the final construction permit expected by year end/early 2013, NGC will have one of the world’s only construction ready projects.
Maintain SPEC BUY, and $1.60/sh price target.
By Matt Gowing - 2012/12/04