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MCrook

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  • Investing In Graphene: The Good, The Bad And The Ugly [View article]
    IPO in May 2010. NI43 completed proven 16% high grade, $246m NPV10 pea delivered, locked cycle testing leading to pilot plant results with 98-98.3% product grades. Further Graphite claims in Quebec, poison pill, significant REE grades from drilling with Soquem (Government 50% in) at Kwyjibo, purification and anode agreements made with Hydro-Quebec, Brazilian property optioned, further Lac Knife drilling results, Teppapex contracted on permitting, 2 further Quebec Graphite discoveries with grab samples 4-45% and Chairman has bought stock over $250k on open market. With Grafoid (22% owned) agreements with Rutgers, Waterloo, Cap-therm, CVD, with a patented graphene production method, with confirmation through a patent with Hydro-Quebec of its use as an advanced battery material. $33m raised, $17m remains in cash.

    No, nothing been going on there at all. Just talk.
    Sep 4 08:43 AM | Likes Like |Link to Comment
  • Investing In Graphene: The Good, The Bad And The Ugly [View article]
    I agree with some of the comments regarding not lumping Focus Graphite / Grafoid in with the bad (ie; non-existent progress) of other Graphite Juniors such as Northen or Lomiko.

    The research on this element of the article much have been very light indeed. Grafoid (21% owned by FMS) have an existing patented bi-tri layer Graphene product and have just submitted a new joint Graphene battery material patent with Hydro-Quebec, the world's foremost energy storage research institiute.

    They have been developing Graphene composite materials with Rutger's since 2010 and have a host of other R&D/application based agreements with Waterloo University, Cap Therm, CVD etc..

    Grafoid recently raised $3.5m and Focus Graphite supply the raw materials to them, from their Lac Knife high grade deposit.
    Sep 2 06:34 AM | Likes Like |Link to Comment
  • The Graphite Investment Boom Is Just Starting [View article]
    I've undertaken DD on the two nearest term producing Canadian Graphite projects and came to a different conclusion. I would be pleased if you could comment on my analysis.

    NGC information is from the NGC website
    NCG (ore grade 1.81% / resources are indicated or inferred)
    Mesh Size Price ($) Distribution Revenue ($)
    +48 Jumbo* 3,500.00 49.60% 1,736.00
    +80 Large 2,750.00 26.00% 715.00
    +100 Medium 2,250.00 5.50% 123.75
    +200 Small 2,150.00 11.40% 245.10
    -200 Powder 400.00 7.50% 30.00
    Average Revenue/t 2,849.85

    *I have given NGC Jumbo flake a 27% price premium over published NGC price of $2,750.

    20,000 tonnes * $2,849.85 = $56.9m per annum revenue.

    Next, if we take a look at NGC's nearest competitor, Focus Metals (FMS) and how their revenue compares:
    FMS information is from the FMS website/SGS NR 10/04/12.
    FMS (ore grade 15.67% / resources are measured, indicated and inferred)

    Mesh Size Price ($) Distribution Revenue($)
    +48/+100 Large 2,750.00 46.10% 1,267.75
    +150/+200 Medium 2,250.00 39.00% 877.50
    Balance* Sml/Powder 1,275.00 14.90% 189.98
    Average Revenue/t 2,335.23

    * $1,275 is a simple average of small flake and powder price.
    20,000 tonnes * $2,335.23 = $46.7m per annum revenue
    NGC certainly do have a good premium on revenue per tonne over the nearest competitor, due to a higher large/jumbo flake distribution (+22%).

    But, let us then consider production costs:
    There are no public companies producing currently in North America and no published BFS to refer to from either of these mining development companies.

    FMS has though had feasibility studies completed in the past and have published an expected production cost of $250/t, based on a 15.67% ore grade on their website. If we assume this information
    is optimistic, let us say their cost of production will be $400/t (I'm taking a more prudent approach to FMS).

    When you then compare the ore grades 15.67% (FMS) and 1.81% (NGC) it is clear NGC have to mine and process considerably more ore to produce a tonne of Graphite.
    For a tonne of graphite NGC must mine/process 55.24 tonnes of ore. In comparison FMS will need to mine/process 6.38 tonnes of ore. NGC must therefore mine and process 8.65 times more ore per tonne of finished product, due to the lower ore grade going into the plant.

    Let us then assume that mining and processing 8.65 times more ore does not fully equate to 8.65 times the cost. I think it is fair though to assume at least 5 times the cost, as we have the basic mining cost, grinding and milling, flotation and disposal of waste ore/tailings. To process the ore the plant will need to be considerably larger, with more personnel/higher manpower costs and higher energy costs. The overburden at Blisset Creek (NGC) is also greater, 10m vs Lac Knife (FMS) at 6m, so it costs more to
    get at the deposit in the first place for NGC.
    NGC could therefore be looking at an estimated production cost in the region of $2,000 per tonne.

    8.65 times more mining and processing per tonne of finished product = 5 times the production cost of production (my estimate).
    If we then use the FMS estimated production cost of $400 * 5 = $2,000/t for NGC.

    So the comparative gross margins for NGC and FMS could stack up as follows on 20,000 tonnes production:

    ($m) 20,000 tonnes NGC FMS
    Revenue (from notes above) 57 46
    COS ($2,000/t vs $400/t) -40 -8
    Gross Margin 17 38
    Gross Margin (%) 30% 83%

    The stated capex figures are also interesting and should be challenged. FMS estimate $65m, NGC state $85m.
    Is it really possible to set up a plant for 31% greater cost for NGC, that has to process 765% more ore annually to achieve 20,000 tonnes of Graphite production? This looks unlikely to me, so either FMS is potentially over estimating the capital requirements or NGC under estimating the same imo.

    A larger capital requirement would then inevitably lead to higher interest payments on a greater debt burden and we must also consider an increased cost of maintenance associated with a larger plant. Costs below gross margin are therefore also likely to be greater for NGC.
    There is also an issue regarding sensitivity to price changes. A worsening situation in Europe, a Chinese economic slow down
    could all have a negative potential effect on price going forward. New technology may well mean demand continues to grow unabated, but there is a higher risk for the marginal producer with lower gross margin and operating costs.

    When I considerer potential production costs for NGC at $2,000/t against an average revenue of $2,849/t, prices do not need to reduce as much for NGC compared to FMS for issues of lack of profitability to arise.

    I do appreciate my figures are open to debate. If companies choose to upgrade Graphite to the 99.999% purity range, income will be considerably higher with increased gross margin to match, both companies could choose to upgrade, indeed I feel NGC must provide this type of production to have a robust economic model.
    Additionally, my quoted FMS production cost per tonne of $400/t ($250/t stated by FMS, increased by me for prudence) could be incorrect and $250 may be more appropriate, if so the $2,000/t stated for NGC is then also overstated.

    Finally the factor I am using of x5 to estimate the NGC cost of production to process 8.65 times more ore may also be inaccurate.

    There are favourable aspects to NGC also. They have a considerably tighter share structure and they also have a much larger total resource. FMS on current data have a 40 year mine life at 20,000t per annum. NGC have a mine life of 2,750 years at the same production. There is certainly the opportunity to increase production from 20,000t per annum for NGC, with the associated benefits of econcomies of scale. NGC also look to be 6-9 months
    ahead of FMS in production terms, with the early bird advantage.
    In summary, when I consider both projects NGC does not look to be the best graphite prospect from an economic perspective both in gross margin and EBIT terms. FMS appears to have a considerable advantage, the reason being that old mining adage of "Grade is King". Whilst my numbers use supposition and must include inaccuracies due to lack of available data, I do think this certainly should give investors something to think about regarding the quality of NGC as a long term investment when compared to its nearest competitor. This is more of an issue once the initial Graphite bubble is over and the realities of economic production begin.

    Dislosure:
    I am an Accountant and part-time private investor. I own shares in FMS. I do not own shares in NGC.
    Apr 12 05:21 AM | 6 Likes Like |Link to Comment
  • Invest In Graphene With GrafTech International [View article]
    Out of the juniors in the Graphite space, FMS looks to be the one with the most interest in Graphene specifically. They have a MOU with Rutger's with their company scientist as part of the Rutger's group, looking at near term applications for advanced materials (plastics strengthened with graphene to replace metals as an example). They also have a 40% stake in a graphene development / IP related private company, Grafoid Inc. Grafoid Inc maintain they have a process to extract cheap graphene from Graphite ore, but this is yet to be published. Grafoid Inc are the lead sponsor at the Graphene Conference in Brussels 10th to 13th April 2012 and their scientist, Gordon Chui speaks on the ecomomics of scaleable production. Here is his abstract, if you have not seen it. I am a FMS shareholder and my hope is to see initial details revealed of the Grafoid process at the conference.

    http://bit.ly/HEFnQd

    Regards, Mark.
    Apr 2 10:54 AM | 1 Like Like |Link to Comment
  • Is Graphite The Next Bubble In The Resource Sector? [View article]
    Northern's jumbo flake is particularly impressive, tight share structure and high quality management. The only issue is the low 2.9% grade, so production costs will be relatively high. Focus do not have as much large flake, so revenue per tonne is lower. At 16% ore grade though their production costs will be considerably lower, margin per tonne likely higher. In the long term Focus appear to have a much more credible approach to Graphene, with the MOU with Rutgers University. For me NCG and FMS are the premier stocks to hold. NGC likely first to production, good for the medium term, with FMS being the long term hold, by virtue of grade when you consider potential longer term fluctuations in pricing.
    Mar 19 06:31 AM | Likes Like |Link to Comment
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