Broker's Pick - Resource World MagazineIn our last article we highlighted a
company called A.I.S Resources and
their bid to advance their Guayatoyoc
lithium-brine salar in Argentina. There is
a growing need for lithium in the battery
market, but many don’t realize that there is
roughly 10-to-20 times more graphite in a
lithium-ion battery than lithium!
Global annual consumption of natural
graphite has increased from about 600,000
tonnes in 2000 to roughly 1.2 million tonnes
in 2015. Demand continues to grow at a rate
of about 5% per year as a result of the modernization
of emerging economies like India
and China. Demand for graphite in more
traditional sectors like the steel and automotive
industries continues to be strong
but is now also used increasingly in batteries
and fuel cells, as well as for nuclear and
solar power.
That being said, we have come across an
exciting company called Graphite [NOUTSXV].
There are a lot of graphite deposits
in the market, but in our opinion, only the
best will have any chance at becoming successful.
As with all companies we look at, a
good management team is our number one
consideration. When considering graphite
projects, metallurgy, location, access
and infrastructure are also key factors to
consider.
Montreal-based Nouveau Monde
Graphite is led by Eric Desaulniers, MSc.
P.Geo., a professional geologist with a specialization
in geophysics. Desaulniers has
been at the helm of NOU since he founded
the company in 2012. He has managed to
not only discover the Matawinie graphite
deposit but has been able to raise over
$12 million to advance the project to the
Preliminary Economic Assessment (PEA)
stage.
The PEA economics look promising and
boasts a pre-tax NPV of US $403.7 million
(8% discount rate) and an IRR of 31.2%.
The PEA was based on an old resource containing
46.8 million tonnes in the indicated
category averaging 3.97% Cg (total Carbon
in graphite form). An additional 34.7 million
tonnes averaging 4.08% Cg was classified as
inferred.
With an estimated initial capital cost of
US $144.5 million to build, the operation is
expected to produce 49.9 tonnes of graphite
concentrate/year at an average cost of CDN
$660/tonne. Average sale price of the concentrate
is estimated at US $1,492/tonne.
Recently the company published an
updated resource for the West Zone representing
just one portion of the deposit. This
new resource moved 14.6 million tonnes of
material from inferred into the indicated
category. The West Zone now hosts 32.9 million
tonnes averaging 4.50% Cg (indicated)
and 0.2 million tonnes averaging 4.84% Cg
(inferred). This improved resource now renders
the PEA economics obsolete (according
to NI-43-101 rules); however, the company
is working to complete a Pre-Feasibility
Study by September 2017.
In our opinion, the Matawinie Project is
attractive because it contains a high proportion
of large and jumbo flake graphite from
which a high purity concentrate can be
easily produced. In addition, the project is
only 130 km from Montreal and accessible
year round via public roads. It is connected
to the most affordable electrical grid in
North America with easy access to water.
One other key point is the fact that the
project is located close to the Imerys’ Lacdes-
Iles graphite deposit, the only currently
producing graphite mine in North America.
That mine supplies 25%-to-30% of North
America’s graphite concentrate and it’s
expected to be depleted by 2020.
These facts merge together to form a compelling
story; one that is financially robust,
technically superior and in an ideal mining
jurisdiction. The company also has recently
beefed up its management team, adding six
highly qualified directors, including CFO,
Charles-Olivier Tarte, who has graphite
experience, as it transitions from a graphite
mine developer to an aspiring producer.
We are of the opinion that Nouveau
Monde Graphite is a strong company with
a lot of upside potential. The current market
capitalization is just $29 million with
84.9 million shares outstanding (117 million
fully-diluted).