Resource World Magazine

20 www.resourceworld.com A P R I L / M A Y 2 0 1 7 I n our last article we highlighted a company called A.I.S Resources and their bid to advance their Guayatoyoc lithium-brine salar in Argentina. There is a growing need for lithium in the battery market, but many don't realize that there is roughly 10-to-20 times more graphite in a lithium-ion battery than lithium! Global annual consumption of natural graphite has increased from about 600,000 tonnes in 2000 to roughly 1.2 million tonnes in 2015. Demand continues to grow at a rate of about 5% per year as a result of the mod- ernization of emerging economies like India and China. Demand for graphite in more traditional sectors like the steel and auto- motive industries continues to be strong but is now also used increasingly in batter- ies and fuel cells, as well as for nuclear and solar power. That being said, we have come across an exciting company called Graphite [NOU- TSXV]. There are a lot of graphite deposits in the market, but in our opinion, only the best will have any chance at becoming suc- cessful. As with all companies we look at, a good management team is our number one consideration. When considering graph- ite projects, metallurgy, location, access and infrastructure are also key factors to consider. Montreal-based Nouveau Monde Graphite is led by Eric Desaulniers, MSc. P.Geo., a professional geologist with a spe- cialization in geophysics. Desaulniers has been at the helm of NOU since he founded the company in 2012. He has managed to not only discover the Matawinie graph- ite deposit but has been able to raise over $12 million to advance the project to the Preliminary Economic Assessment (PEA) stage. The PEA economics look promising and boasts a pre-tax NPV of US $403.7 million (8% discount rate) and an IRR of 31.2%. The PEA was based on an old resource con- taining 46.8 million tonnes in the indicated category averaging 3.97% Cg (total Carbon in graphite form). An additional 34.7 million tonnes averaging 4.08% Cg was classified as inferred. With an estimated initial capital cost of US $144.5 million to build, the operation is expected to produce 49.9 tonnes of graphite concentrate/year at an average cost of CDN $660/tonne. Average sale price of the con- centrate is estimated at US $1,492/tonne. Recently the company published an updated resource for the West Zone repre- senting just one portion of the deposit. This new resource moved 14.6 million tonnes of material from inferred into the indicated category. The West Zone now hosts 32.9 mil- lion tonnes averaging 4.50% Cg (indicated) and 0.2 million tonnes averaging 4.84% Cg (inferred). This improved resource now ren- ders the PEA economics obsolete (according to NI-43-101 rules); however, the company is working to complete a Pre-Feasibility Study by September 2017. In our opinion, the Matawinie Project is attractive because it contains a high propor- tion of large and jumbo flake graphite from which a high purity concentrate can be easily produced. In addition, the project is only 130 km from Montreal and accessible year round via public roads. It is connected to the most affordable electrical grid in North America with easy access to water. One other key point is the fact that the project is located close to the Imerys' Lac- des-Iles graphite deposit, the only currently producing graphite mine in North America. That mine supplies 25%-to-30% of North America's graphite concentrate and it's expected to be depleted by 2020. These facts merge together to form a com- pelling story; one that is financially robust, technically superior and in an ideal mining jurisdiction. The company also has recently beefed up its management team, adding six highly qualified directors, including CFO, Charles-Olivier Tarte, who has graphite experience, as it transitions from a graphite mine developer to an aspiring producer. We are of the opinion that Nouveau Monde Graphite is a strong company with a lot of upside potential. The current mar- ket capitalization is just $29 million with 84.9 million shares outstanding (117 million fully-diluted). n Stew Vorberg and Doug Wood are Investment Advisors with Mackie Research Capital Corporation (MRCC). This article was prepared, in part, under contract by Thomas Schuster. The opinions, estimates and projections herein are those of the authors and may not reflect that of MRCC. The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no repre- sentation or warranty, expressed or implied, is made as to their accuracy or completeness. The issuer(s) mentioned in this article may not be suitable for all investors. Please con- sult an investment professional for advice regarding your particular circumstance. Neither the author nor MRCC accepts liabil- ity whatsoever for any loss arising from any use of this article or its contents. Information may be available to MRCC which is not reflected herein. This article is not to be con- strued as an offer to sell or a solicitation for an offer to buy any securities. The informa- tion contained in this article is not intended to constitute a research report. Stew Vorberg and Doug Wood are beneficial owners of the company highlighted in this article. Broker's Picks by Stew Vorberg and Doug Wood Nouveau Monde Graphite driving Matawinie Project forward

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