Excellent post from skippy on stockhouse.
The following macro market observations should be generally accepted:
the market is quickly rationalizing the graphite space
funding is extremely challenging
any serious funding (eg. institutional, strategic,etc) will be based on independent financial analysis, using such tools as DCF and NPV, contrary to some (for example on the NGC BB) that feel that "gut feel" is a decent criteria
typically, one assesses the current shareholder support base for subsequent financing phases (eg. who has the money to top up in subsequent rounds of major financing?). Refer to the current major shareholder bases for NGC and FMS, which raises serious questions given that FMS has 8 key external players to NGC's 2....Moreover, York's (Chairman of FMS) ~$450K in insider purchases over the last year implies strong confidence - what are the numbers for insider purchases (excluding stock options and warrants) for NGC over the last 12 months???
the current market accepted independently scripted documents state that the FMS NPV 240M vs NGC's ~100M
pure graphite based plays such as Flinders, with good cash, grade (>10%), and production potential in late 2014, subject to what I estimate to be sizable new funding (contrary to their initial view) are experiencing significant downward pressure on their market cap (eg. now at 28M based on 46M shares @ $0.61 closing on March 7/13). If Flinders is experiencing such dramatic pressure, guess who else will? A few suggestions follow!!!!!!
Q1/13 Major announcements (FMS)
the recently announced very positive metallurgical testing suggest a 9% process improvement , significantly contributing to the current independently publsihed NPV10 of 246M.
In reference to TeTsuo' s subsequent analysis, a new FMS NPV calculation would suggest a value ranging btwn 394M and 544M (simply based on the recent process improvement)
the recent announcement of Fall/12 exploration results imply significant additional adjacent resources and @15%+ grade (and I assume having similar metallurgical characteristics)
we should anticipate a new announcement in the near future wrt the Infill Drilling program of Fall/12. I assume it will further confirm and significanly increase the current M&I. Subsequent detailed technical reports could easily suggest a LOM extension to 40+ years vs the current 22 year LOM in the NPV10 246M published PEA
Projections (Skippy99) - do you own due diligence
only companies with high grades, good distribution of flake sizes and purity will survive (eg. must exceed 10% grade). Why bother financing at less than 5% grade due to inherent cash costs and lower NPVs, and increased risks associated with cyclical parket variances on graphite prices, such as we're currently witnessing
companies with cash costs > $500 will not survive
FMS's current cash costs (reference TeTsuo's recent suggestions) could be as low as $319/t, However, I feel that FMS will further reduce their cash cost to below $250/t. Gary has publicly stated that several new initiatives will deliver further improvements. I hope that such will be announced in the coming months. I would also refer to the recent Byron King transcript of his PDAC interview with Gary - it's quite compelling
Based on the above, an updated NPV10 calculation could suggest the following:
LOM extension to 40 years
use TeTsuo's recent calculations
cash costs of $319/t
improved market value for the higher value products from FMS (based on the recent announcements and analysis)
a new NPV10 in the order of 750M+
Now "S-Team", pls provide us your best view wrt your new NPV so that interested investors can judge the merits of at least NGC and FMS oppportunties.
Your dear friend Skippy
Company Institutional M-Fund # (shares) Value
NGC (2 funds)
Geologic 4.5M 10M
Dynamic Venture 400K .38M
FMS (8 funds)
Front Street 5.4M 3.4M
RBC Global 3M 1.7M
AGF 1.6M 1.12M
Caisse de Depot 1.6M 1.12M
RBC Global 3M 2.1M
Caisse de Depot 1.6M 1.0M
CIBC Cdn 1.5M 1.08M
AGF(CDN) 655K .41M
AGF(Global) 494K .27M
GWL Canadian 427K .27M
AGF Global 32K .21M
Read more at http://www.stockhouse.com/bullboards/messagedetail.aspx?p=0&m=32292414&l=0&r=0&s=FMS&t=LIST#673bxIbP04ZJXUqT.99
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