acquisition of the Quatre Milles Graphite Project in southwestern Quebec
makes the mining company a serious contender for any graphene portfolio. The mine holds deposits of large flake graphite close to Canada’s largest graphite mine, Lac des Iles, and is well explored with 26 historic drill holes totaling 1,625 meters in 3 near surface interconnected flat lying graphite beds
. The potential of the mine is matched by the aggressive development strategy of the company and promises a very profitable return on investment.
In a now familiar story for Canada’s graphite mines, the discovery of Quatre Milles occurred at a time when the Chinese were flooding the market, forcing the delay of the mine’s development until now. With a project highlight drill result of 28.6 meters at 8.07% graphite (Cg), and most test holes averaging at least 4% graphite, Quatre Milles is thought to hold a minimum grade twice that of Northern Graphite.
A number of other factors besides the superb grade of material makes Quatre Milles an excellent mining investment choice. For one, the deposit of large flake mineralization is near surface and open for expansion, with historical drilling indicating the potential to define a much greater resource than the ~10Mt zone defined. Mining is all about grade, tonnage and mineralization and Lomiko have these in spades at the Quatre Milles mine. It’s located close to the necessary infrastructure and could be fast tracked by February if permits are received in time. The project currently requires 2,500m – 3,500m test drilling to confirm and expand the known mineralized areas. With Quatre Milles holding all the key determinants of mining success production should follow quickly.
According to Christopher Skidmore, of Beat the Market Stock Picks,
Lomiko has 41% inside ownership including long-term holders Byron and Pinetree Capital. Lomiko will attract favorable financings because the project is considered low risk with high margin potential and is not capital intensive. With a clear plan and strategy, it should not be hard for Lomiko to raise $5M to $10M needed to develop Quatre Milles over the next 18 months and still be well under 100M fully diluted when it comes to financing mine construction. When Focus Metals came to the market with Lac Knife in 2010 at between $0.05 and $0.10 the company has successfully increased their share price 10 fold and raised well over $30M in financings and warrants for Lac knife.
And the figures for Quatre Milles suggest similar sizeable returns.
Putting the numbers on the table, Quatre Milles is potentially a minimum 10Mt deposit of large and medium flake graphite, grading between 4%-8% with current metrics that indicate potential for a 3,000tpd mine over 10 years. At current prices and at a capital expenditure of $100M to get the mine to production, Quatre Milles stands to net $100M per year in cash flow and is worth in excess of $600M NPV discounted at 6% over a 10 year mine.
Current prices as of January 10th 2012…
Large Flake +80 (94% to 97%C)…. $2,500 to $3,000
Medium Flake +100 (94%-97%C)… $2,200 to $2,500
Medium Flake +100 (90%C)…. $1,500 to $2,000
Medium Flake +100 (85%-87%C)… $1,500 to $2,000
Amorphous powder 80%-85%C… $600 to $800
Demand, and the low level of substitutability for graphite, is set to keep the price of graphite high for the foreseeable future. The market is gearing up for the flood of graphene based products that are expected to feature in the latest technologies and the price will match the increased demand. Technologically focused manufacturers will continue to pay a premium for the raw materials required for their products, especially when the raw material is high grade. It is expected that there will be a 100,000 tonne deficit of supply in the next couple of years which could increase considerably if lithium ion batteries dominate the energy cell market by 2015.
Exciting Graphite Discovery!
· High Purity Large Flake Graphite (Battery grade)
· Large target multiple graphite zones – deposit wide open
· Advanced – drill tested – low risk exploration
· 28.6 meters grading 8.07% graphite
· Holes average 4% – 8% with peak value of 15%
· 1Mt resource potential
Located in the top mining region in the world
· Quebec (exploration tax credits)
· Located near Canada’s largest operating graphite mine
· Potential mining synergies
· Fast-track potential – drilling as early as Feb.
Great Value – Even Better Value Creation!!
· LMR currently undervalued at $0.075 and $4M market cap
· $10M acquisition value
· Potential >$100M market cap graphite miner
Graphite… A metal entering criticality
· Graphite forecasts increasing demand from ~1Mt to ~2.5Mt over the next 10 year cycle
· Several graphite mines needed to meet upcoming demand 10 – 20 (depending on size)
· Current prices expected to increase further due to Chinese restrictions, little substitution and no new supply
· High degree of price sensitivity @ 6%
· HIGH NPV / HIGH IRR / LOW CAP-EX
· Potential to fast–track to production (3 years)
With thanks to Christopher Skidmore at Beat the Market Stock Picks