Nextsource Materials Inc (NSRCF)

[riverrock]

I can not agree that Nextsource Material's problem is the mining permit as Energizer/Nextsource has paid the costs and developed Molo for production.


Until recently both the vanadium and graphite prices have been adversely effected by market conditions and failed expectations. Earlier the large number of new entries into the graphite space created a false belief of heavy competition. Then there were the more experienced companies that never achieved production after China took control over the graphite sector.


Given the above situations and Nextsource Materials being active in developing both her Green Giant Vanadium and Molo Graphite properties meant that further new shares would have to be issued in order to provide the funding to further develop those properties to production.


Below are thoughts on how Nextsource Materials may circumvent the above mentioned problems without further dilution.


Nextsource Materials Inc. should consider forming Two Separate Divisions within its Corporate Framework and then to allocate its existing shares on a equitable basis to each of the newly formed companies:

The First Company (Nextsource – Graphite). Will focus on production of Super Flake Graphite.

The Second Company (Nextsource – Vanadium). Will focus on production of Vanadium Electrolytes for both sale and leasing.


Presently Nextsource Materials Inc has 462,495,711 sharers outstanding.


If Nextsource Materials were to create - the Two Separate Companies on a 50/50 basis – there would be 231,247,856 shares in each of the new companies. In addition both of the companies would employ the Modular Plant Design methods. All of a shareholders stock holdings in Nextsource Materials would be divided between the two companies.


Not all shareholders will agree on the 50/50 basis to form the new companies. This could be, as (Nextsource – Graphite) would be closer to production than (Nextsource – Vanadium) and other percentage values might have to be agreed upon.


For example on a 60/40 basis (Nextsource – Graphite) would have (462,495,711 x 0.60 or 277,497,426 shares and (Nextsource – Vanadium) would have (462,495,711 x 0.40 or 184,998,284 shares rather than both having 231,247,856 postulated under a 50/50 basis. Thus on a 60/40 basis earnings for (Nextsource – Graphite) would be a bit lower. And based on 277.5 million shares rather than 231.2 million shares


Using the 50/50 basis below
(Nextsource – Graphite) will focus on production of Super Flake Graphite.
(Nextsource – Vanadium) will focus on production of Vanadium Electrolytes for both sale and leasing.


Based on costs for Molo's Modular US $18.4 million Plant with Total Capex at US $21.5 million and estimated mining and shipping costs of about US $690/tonne to produce the 17,000 tonne of Super Flake Graphite annually taken from the estimated $1014/tonne sale price, there could be a profit of about US $0.024 per share based on 231,247,856 shares outstanding. On the other hand graphite prices look to be increasing as EV battery demand is growing. It is not out of hand to see a price of US $1,600 tonne for Super Flake Graphite by 2019 when Molo is planed to be in production.. At US $1,600 per tonne its possible that (Nextsource – Graphite) could earn US $0.067 per share during 2019. At a PE ratio of 20:1 this could amount to a price of about $1.34 per share.


Considering a 50/50 JV with the Institutional Investors
Graphite is the main focus of this post and (Nextsource – Graphite) might also consider a 50/50 JV, but only with the Institutional Investors to further lower dilution. The recent heavy trading in next/nsrcf may signal that the Institutional Investors hold over 50% of Nextsource's presently issued common shares. If they agree to a 50/50 JV and hold more than 50% of (Nextsource – Graphite) those shares over 50% will – not be eligible for the JV.


If a 50/50 JV with the Institutional Shareholders is agreed upon, they would put up all the funds to build the Phase 1 Plant and surrender their 50% share holding to (Nextsource Materials - Graphite) which will be held in her Treasury to be used for her part of Molo's Phase 2 development if she sees fit.
(Nextsource Materials – Graphite's) outstanding share count would also be halved to 115,623,927 shares - without a reverse split as the result of such a JV. When production starts at Molo both (Nextsource Materials – Graphite) and the Institutional Investors would start paying 50% of the costs of operating and maintenance of the Molo Project. Both would earn 50% of the profit from Phase 1 and later if Phase 2 is developed both would share 50% of the costs to build and operate the Phase 2 Plant and share equally in its profits..


I believe such a JV would be fair to all, the Institutional Investors, the Company Insider's and the Retail shareholder's. Such would not create dilution of the shares held by the Company Insiders and Retail shareholders. The JV would provide both equal costs and profits to both (Nextsource Materials – Graphite) and the Institutional Investors.


The above 50/50 basis and the the JV thoughts could also be applied to (Nextsource – Vanadium)

http://www.stockhouse.com/news/press-releases/2017/06/01/nextsource-materials-inc-announces-positive-updated-feasibility-study-for-phase