Lomiko Metals: MAJOR Graphite Discovery at Quatre Milles|
Lomiko Metals LMR-V $0.045
Shares Outstanding… 66.4M
Warrants… 10.8M @ $0.148
Fully Diluted… 82.2M
Market Cap… $2.99 million
Discovers large zones of graphite similar to Bisset Creek
The results of Lomiko's phase 1 drill program at Quatre Milles are in. In spite a share price that speaks to the contrary, everything initially believed about The Quatre Milles Graphite Project has been confirmed…AND THEN SOME.
Lomiko confirmed several near surface high grade zones on the property initially discovered by Graphicor in 1990. This is a high value combination of high grade and mineralization starting right at surface, it certainly confirmed everything we thought about Quatre Milles, that it had the potential to host a small to medium sized graphite operation and high grade deposit of around 5Mt-10Mt. Comparable at the upper end of that range would have been a project such as Flinders Resource's Kringel, a 500tpd to 700tpd 8% mine slated for production by 2013/2014 at a rate of about 7,000 tonnes of graphite per year.
What came as a big surprise to most… in addition to the extensive high grade graphite zones found at surface extending over an impressive 1,100 meter strike length… Lomiko discovered that each hole contained broad zones of disseminated (Bisset Creek) style mineralization.
This is something that was completely unexpected and has materially changed the game for Lomiko and The Quatre Milles Graphite Project. QM will now be evaluated as a mining project with 5 to 10 times the scale of the original mine plan. The scope of Quatre Milles has gone from a 5Mt - 10Mt (6% to 8%) project to a 50Mt - 100Mt (2% to 3%) graphite project similar in tonnage and scale to Bisset Creek. What I don't understand is why Lomiko, valued at a $3M market cap can still be trading at $0.045 with better results on the first 23 holes at Quatre Milles than Northern Graphite's 2010 drill program at Bisset Creek. Yes, I said so far, better results than Bisset Creek.
We are not talking about just beating Bisset Creek's results. We are talking about results that compare close to a factor of 2 to the Bisset Creek 2010 drill program. A 20% increase in average grade, zones that are almost double the size at Bisset Creek, and mineralization that starts right at surface.
For all you naysayers out there… Paul Gill stepped up to the plate and delivered when many packed it in and refused to even drill another hole after financing dried up this summer for every exploration company. Lomiko forged on with their program and delivered impressive results. The price Lomiko is trading at after phase 1 results is just downright silly. Lomiko's peers are trading between $30M to $50M market caps while LMR-V trades at $3M.
From 500tpd to 2,500tpd to maybe even 5,000tpd
What was initially envisioned as a high grade 500tpd to 700tpd open pit mine running 6% to 7% head grade through the mill has suddenly expanded in scope and scale to a 2,500tpd project virtually identical to Northern Graphite's Bisset Creek in almost every way. Not only did they confirm Graphicor's discovery, but Lomiko discovered wide zones of mineralization nearly identical to Bisset Creek. So Quatre Milles has a good 'ol Canadian Double Double with tonnage and the high grade component to the story. Everything just got that much bigger and that much better with a world class deposit that has the ability to be scaled up to a 5,000tpd mining operation. Quatre Milles could host an additional 50Mt to 100Mt of this mineralization in addition to the high grade. The mine plan at Quatre Milles went from 500tpd @ 6% for 10 to 20 years to 2,500tpd at 2.5% for 25 to 50 years and still oodles of ore left over for future expansion if needed.
|Typical Graphite Operation
500tpd @ 6%
15 year mine
25 year mine
40 year mine
$40/t op costs
$20/t op costs
$15/t op cost
|Annual Graphite Production
|Annual Cash Flow @
$1,500 / $2,100 / $2,500
|$8M / $14M / $18M
||$20M / $35M / $45M
||$34M / $58M / $74M
|NPV @ $1,500 / 8%
|NPV@ $2,100 / 8%
|NPV @ $2,500 / 8%
From 5Mt-10MT to 50Mt to 100Mt
Quatre Milles does not have enough holes to establish a resource yet because the information from Graphicor's drill program cannot be used. Lomiko cannot locate the old drill cores and must be drilled again. But loaded with this new information about the broad zones of graphite, it is clear that Graphicor only analyzed the high grade zones visually estimated above 4% or 5%. In the map below I have outlined a Central Pit Location which would overlay perfectly onto the proposed Bisset Creek Mine Plan. If you infer Lomiko's early results across the rest of the property, Quatre Milles starts to become a very impressive graphite deposit with tonnage nearly identical to Bisset Creek. Maybe even more.
Quatre Milles… A Bisset Creek Clone, but better
As much as Quatre Milles grew in significance with the scope and scale of the operation, no matter how you cut up LMR's 2012 results… when you compare them to NGC's 50 hole drill program at Bisset Creek, the Quatre Milles results compare better on every level. The zones are wider, the overall grade is higher and it is a lot closer to surface than Bisset Creek. In mining… those are the three biggest factors that affect a project's mining costs. In comparison to Bisset Creek, Quatre Milles wins out on every level. The one thing that still is a mystery is metallurgy, but with pretty much everything else being identical, I doubt metallurgy results will be much different. How is that for an unexpected turn of events? Tiny little Lomiko's project has the potential to make a lot more money than Bisset Creek.
It's got the big 3 mining variables on its side…
QM is higher grade
QM is closer to surface
QM mineralized zones are wider
QUATRE MILLES IS HIGHER GRADE.
Lomiko has confirmed several at surface high grade zones of graphite which will translate into higher than average returns for a disseminated graphite deposit like Kearney, Eagle or Bisset Creek. Quatre Milles is indicating the highest grades of any of this style of deposit in Canada. Northern Graphite's Bisset Creak lacks any high grade mineralization over 3%, let alone that grade over 10% C that start at surface. Lack of high grade will translate into lack of a flexible mine plan being able to blend grades when prices are high or source from high grade zones when prices are low. When you blend Lomiko's high grade with the low grade you end up with a project that still has the scope of a large 2,500tpd operation like Bisset Creek, but also the potential to mine grades averaging over 3%. In the early years when it really counts, the difference between 2% and 3% in a cash flow statement is enormous. Cash flows are not discounted as much, the project gets paid back faster which makes financing the project that much more flexible and the project has the ability to survive sudden prices fluctuations such as the recent drop in graphite prices.
QM is CLOSER TO SURFACE. NO OVERBURDEN. NO STRIP.
Of all the graphite discoveries, Quatre Milles is the closest to surface. The central part of the deposit is nearly identical to the Bisset Creek mine plan overly in the feasibility study. When you take into account Bisset Creek is one of the lowest cost producers on a cost per tonne of ore mined with an extremely low strip ratio, Quatre Milles has Bisset Creek beaten in those factors and promises to be just as low cost. If not even lower. If you exclude 4 holes to the north where the ore body dips which is outside the scope of a pit design, the project averages less than 4 meters to surface. Bisset Creek's average depth is more than 17 meters from an analysis of the 2010 drill program.
THE MINERALIZED ZONES ARE WIDER.
As much as Bisset Creek promises to be a low cost mining operation with $18.34/t all in, Quatre Milles should easily beat this number considering the strip ratio on an open pit mine at Quatre Milles would be near zero. It will also have a lower strip throughout the life of the project because the zones are also almost twice the size. Not only is there less rock to move above the deposit at QM… THERE IS MORE MATERIAL per area when they are mining. Throughout the life of a mine at Quatre Milles… the strip will be close to zero and most stripping will be to stockpile lower grade ore in favor of high grade material. Mining costs at Bisset Creek are a third the overall $18 cost per tonne. Considering a third of the Northern Graphite's open pit mine is waste, Quatre Milles promises to beat even this extremely low strip ratio.
|Mining Analysis (BC2010 vs QM 2012)
||Bisset Creek - Pit Shell
||Quatre Milles - Central Pit location
||750m * 500m
||500m * 500m
|Average mining width (individual horizons)
|Average aggregate width (stacked zones)
|Average Rating Per Zone
|Average Rating Per Hole
|Average Grade of Drill Programs
|Probable Mine Reserves
||18.8Mt @ 1.89%
|In Pit Shell Measured and Indicated - No cut-off
||22.1Mt @ 1.78%
|My rough estimate based on drill programs
||24.5Mt @ 2.00%
||30.7Mt @ 2.42%
Quatre Milles: EVERYTHING Bisset Creek HAS… AND THEN SOME
Obviously Bisset Creek is a lot further advanced than Lomiko's Quatre Milles having a feasibility study released this summer. No one is debating that. Lomiko is still waiting for initial met results for Quatre Milles. But when you look at what is shaping up under the drill bit at Quatre Milles, it is easy to see EXTREME VALUE in a company that is trading at a tenth the price of Northern Graphite. Given the discovery at Quatre Milles and the proximity of the mineralization to surface, it is easy to see this project being fast tracked to production b/c of the minimal mining costs, the extensive near surface high grade mineralization and its proximity to the North American auto hub and other strategic graphite suppliers like Asbury or Timcal. Quatre Milles is an easy deposit to put in production with high grade zones that will maximize mining returns.
Near surface high grade to maximize returns…? WOW!
What makes Quatre Milles an exciting opportunity is the fact that there is a significant near surface high grade zone. The numbers look great when you imagine a 25 year mine averaging close to 2.5% between $2,000 and $3,000 graphite, but when you can mine a grades ranging from 4% to 10% in the early years of the mine, it means your costs are going to be very low and your output is going to be very high. In the end, the NPV increases substantially because there is more revenue in the early years. It also makes your lenders very happy too when the payback of your project promises actually pay back and is less than 1/2 the time it will take payback the same amount of capital invested in Bisset Creek. While Bisset Creek is mining 2.22% the first 5 years, Quatre Milles may see a head grade between 4% and 6%. The difference in cash flows between 2% and 6% is huge, an $18M to $88M spread.
So what do you want?
Roughly $250M to $400M in cash flow for the first 5 years at Quatre Milles…
Less than a $100M in cash flow from Bisset Creek
This is not rocket science people
NEAR SURFACE HIGH GRADE, YOU CAN'T ASK FOR ANYTHING MORE
If Quatre Milles went into production the same time as Bisset Creek producing 95%C large flake with prices at the current $1,500. Who is laughing? Lomiko mining Quatre Milles at grades between 4% to 10%; or Northern Graphite, who is squeaking by at just over a 2% grade over the first 5 years?
What would you rather have?
1. A 60Mt deposit at 2% and no high grade OR
2. A 50Mt deposit at 2.5% AND a 5Mt -10Mt zone grading 6% - 7%?
It certainly gives the operator of the mine a lot more mining options at different graphite prices than Bisset Creek has. Quatre Milles could survive a price drop to $1000 per tonne where Bisset Creek could not afford a price drop of that magnitude.
Lomiko's shallow high grade results include…
- 8.68m @ 6.18% starting at 4.5 meters
- 4.13m @ 7.28% starting at 9.25 meters
- 5.4m @ 4.53% starting at 5.0 meters
- 2.9m @ 9.87% starting at 2.0 meters
- 4.77m @ 10.8% starting at 1.35 meters
- 9.9m @ 8.81% starting at 11.95 meters
- 13.3m @ 5.15% starting at 6.9 meters
Lomiko's shallow high grade results extend the shallow high grade zone originally discovered by Graphicor in 1990 in the Central Pit Zone to the SE by a 100 meter width and along a strike length of 500 meters. Within the Central Pit Zone most of Graphicor's results came from the NW section of the Central Pit Zone which remains untested by Lomiko.
Graphicor's near surface high grade results with the Central Pit Zone include…
- 28.6m @ 8.07% starting at 3.94 meters
- 3.44m @ 8.79% between 1.54 and 8.05 meters (two horizons)
- 2.09m @ 9.66% between 2.05 and 6.8 meters
- 4.7m @ 3.95% starting at 9.4 meters
- 7.75m @ 9.17% between 2.14 and 15.46 meters (5 horizons)
- 7.59m @ 8.6% starting at 0.94 meters
- 9.59m @ 4.64% starting at 0.69 meters
- 3.38m @ 9.76% starting at 2.21 meters
The average width of all the shallow results is 7.75 meters. This number is skewed a bit as Graphicor's results only picked the highest grade parts of the core. I expect the zone to broader when Lomiko drills over that section albeit, the grade a bit lower. Between the 2 drill programs, 70% of the drill holes hit near surface high grade graphitic zones. It certainly gives credence to the target of at least 3Mt-5Mt high grading material between 6% and 8% that averages less than 5 meters from surface.
A Wheel Barrow, a Bucket and a Shovel
All you need to mine high grade graphite at Quatre Milles is a wheel barrow, a bucket and a shovel. As ridiculous as this may sound, it is true. Average mineralization is 2.78 meter depth and there is extensive high grade at surface. I cannot stress enough how valuable high grade right at surface is. One of the biggest advantages about a mine at Quatre Milles is that fact that ore being run for through the mill for the first few years will average at least 4%. A wheel barrow, a bucket and a shovel gets you mining graphite at Quatre Milles. LMR is a $3M market cap company? More like $30M in my books. No matter where graphite prices run to over the next little while, there is such a pricing discrepancy between LMR and the rest of its peer group…there is no other EXTREME VALUE BUY ON THE MARKET. Not mismatched in price like Lomiko is.
A series of holes approximately 100 meters wide and along a strike length of 500 meters consistently tested near surface high grade zones. Only one hole out of the 12 did not hit a high grade zone, and that hole, QM-12-04 graded 2.17%Cg over 70.0 meters. This zone is extensive.
There were tons of these mismatched priced value type of investment opportunities in the GOLD SECTOR LAST APRIL/MAY. Calvista Gold who recently agreed to a takeover bid by AUX at $1.10 WAS TRADING UNDER $0.20… THOSE TRADES ARE LONG GONE. EVEN THE CREAM OF THE CROP COPPER STOCKS HAVE BOUNCED OFF THE BOTTOM. RIGHT NOW, THE EXTREME VALUE HIGH LEVERAGE OPPORTUNITY IS RIGHT HERE WITH LOMIKO.
Wait…!!! That is not the end of the high grade
There is a second high grade zone that you can infer similar tonnage and grade which averages a 40 meter depth. The grade is not quite as high as the near surface zone but will still average close to 6% and make up another 3Mt to 6Mt zone over the entire property. Let me put Quatre Milles in perspective, while Zenyatta is still digging through overburden at 40 meter depth, Lomiko is already into their second high grade zone. Most of these intersections are closer to surface than Mason Graphite's shallowest hole and Lac Gueret's rich zones begin at over a 100 meter depth.
The deeper high grade intersections include …
- 19.52m @ 6.23% starting at 31.48 meters
- 6.53m @ 6.57% starting at 31.2 meters
- 2.6m @ 6.69% starting at 44.2 meters
- 6.0m @ 5.84% starting at 33.5 meters
- 11.9m @ 6.31% starting at 31.2 meters
- 3.35m @ 8.0% starting at 37.5 meters
- 5.3m @ 4.53% starting at 38.0 meters
- 7.54m @ 6.72% starting at 57.82 meters
- 5.46m @ 8.02% starting at 64.67 meters
THE CHEAPEST GRAPHITE STOCK WITH CONFIRMED MINING POTENTIAL
Graphite prices may be in the dumpster recently with prices for large flake falling off a cliff this fall having tanked in the last 6 weeks to $1,400 (94%) - $1,800 (97%) for large flake. This after a dreadful summer sent graphite stocks into free fall with fears that prices are going back down to $1000 per tonne. It has graphite investors running for the hills, but you know the saying… 'when the blood is in the streets… that is when you want to be buying.' Nothing about the graphite story has changed. In fact it has gotten better. Tesla's Model S was recently named 'Car of the Year' and Tesla unveiled new super quick charging technology that will make consumers feel they won't be left out in the cold stranded for hours waiting for the cars to charge up.
In addition, discoveries such as Mason Graphite's 20% Lac Gueret, Standard Graphite's Mousseau and Zenyatta's Albany deposit have all put the pressure on the companies that lead the charge out of the gate like Northern Graphite and Focus Metals. None of that should matter to Lomiko though, the company is so cheap and the phase one results so promising… RISK/REWARD heavily favors someone with money identifying Quatre Milles promise. The game has changed so much for this $3M market cap company that there is no other company on the exchange that is as undervalued as Lomiko currently is.
Certainly not in the graphite sector!!!
The game has changed. No one has figured it out. The potential of Lomiko has grown from maybe a $100M market cap mine into a half a billion market cap mine. The discovery of wide zones of mineralization similar to Bisset Creek in addition to the near surface high grade has increased the potential of Quatre Milles by at least a factor of 5.
Given the scale and scope of this discovery at Quatre Milles, Lomiko should be named in the same breath as the companies like Northern Graphite, Focus Metals, Zenyatta, Energizer Resources, Flinders and Mason Graphite. The deposit and results should speak for themselves. Lomiko has the grade for high returns in the early years plus they clearly have demonstrated significant tonnage with long intervals of disseminated graphite across the entire property. Best of all, there is no other project in Canada with results like Lomiko's that start right at surface. The Quatre Milles deposit is flat lying, at surface with a gentle dip which is the ideal situation for low cost mining just like Northern Graphite's Bisset Creek. When you have an ore body that is amenable to low cost open pit mining with costs virtually guaranteed to come in under $20/t of ore mined, it makes you competitive against companies with deeper but higher grading ore bodies. These companies will have mining costs 3 to 5 times that of Quatre Milles of even Northern Graphite. A great example is how both low grade copper porphyries and high grade VMS projects are both sought out to mine. VMS projects typically grade up to times that over their porphyry cousins but also have tougher metallurgy, are often underground mines and lack the tonnage to be a significant producer or have the longevity. The same principles apply in the graphite sector. Just because a deposit has grades 10 times that of the low grade disseminated deposits does not mean it will produce ten times the profits. For example Mason's exceptional intercept of 88.5m grading 21% graphite at Lac Gueret starts at a 144 meter downhole depth. QM has the best of both worlds and something that none of these other guys have…
SHALLOW HIGH GRADE GRAPHITE
Typically these differences tend to even out and why Bisset Creek back in 1989 was up for consideration as a mine. Certainly when comparing Bisset Creek studies to Lac Knife studies and their comparable cash flow statements and mine lives, the similar pre-tax NPV's tend to back things up. Although what you should note when comparing the two is that Bisset Creek is a real mining study with a mine plan while Focus Graphite released a PEA. The difference in confidence is immense. For example while Bisset Creek does not take into account any value added process or sales from upgrading to spherical graphite and only assumes a basic mining situation, the Focus Graphite PEA includes contracting out for spherical graphite as well as prices of $10,000 a tonne for their 99.95% spherical graphite. A price in my opinion is ludicrous for the long term. It may hit that price in times of very high demand, but for the industry to get batteries down to a manageable cost, especially vehicles $5,000-$6,000 seems like a much more suitable price for everyone involved. Certainly if Northern Graphite's estimates of about $1,000 per tonne all in upgrading costs are accurate, $10,000 is way too high and everyone and their monkey would be trying to find battery grade graphite if you could upgrade it for only $1,000 per tonne.
What blows my mind is no one has caught on to the significance of Quatre Milles. Not one. Not when Lomiko stock is trading at $0.045. Paul stepped up to the plate when many packed it in this summer and delivered a home run for shareholders. When it comes to the actual deposit and how it rates versus company valuation, hands down if you want to make 200% to 1000% on your investment….
LOMIKO IS A TOP 10 PENNY STOCK CANDIDATE FOR 2013 ACROSS ALL SECTORS
So while LMR sits at $0.045 and a $3M market cap and their peers trade 10 to 20 times the value of Lomiko, it is like taking candy from a baby buying the stock at these prices.
Quatre Milles, what more do you want?
Near surface high grade zones
Tonnage to compete with the big boys like Bisset Creek and Kearney and Eagle
Tonnage for longevity and the grade for sustainability
LOMIKO IS A TENTH THE VALUE OF NORTHERN GRAPHITE…
… AND SITTING ON WHAT SOME MIGHT SAY IS A BETTER PROJECT.
Metallurgy results are still forth coming, but deposits in the Grenville Province are known for high purity and large flake. Bisset Creek and Quatre Milles are in the some group of rocks and are both disseminated graphite deposits. I doubt there will be much difference between the two. When I initially saw the first pictures of Quatre Milles samples, my first reaction was the samples looked almost identical to the Bisset Creek samples I handled at the Gold Show last January. I am betting that initial met results will come in at greater than 90% just like Bisset Creek and Green Giant initial results did. The market has missed the mark on Lomiko, at a current $3M value; the high leverage investment potential is second to none in the graphite peer group. No other graphite company trading at the current price has the potential to give you 1000% like Lomiko.
Paul Gill took a company from discovery to takeout once before, it looks like he just might do it again. I am still here holding strong for the big ride. Pennies can be like roll coasters and can sometimes make you sick to your stomach with the volatility, but if you buy at the right time (like now), the can make you oodles and oodles of fast cash AND BIG MONEY… WHEN YOU HIT THE GRAND SLAM.
Graphite companies with legitimate projects
||8Mt - 10Mt @ 15%
||>100Mt @ ~6%
||421.3m @ 6.12%
||10Mt @ ~8%
||16.3m @ 12%
||10Mt to 20Mt @ 20%
||88.5m @ 21%
||100Mt @ 1.5%
||38.7m @ 2.49%
||40Mt @ 3%-5% to 200m depth
||170m @ 6.6%
||100Mt @ 4%-5%
||173m @ 5.39%
||10Mt to 15Mt @ 8% - 10%
||70m @ 2.17%
||50Mt to 100Mt @ 2% - 3%
||93.8m @ 2.11%
Happy Trading J
Christopher Skidmore Beat the Market Stock Picks "
Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advice on this blog and there is no solicitation to buy or sell any particular company