1) Acquisition of the 7P Plant (Stage 1) for $310,000
2) Financing (up to $3M from Loan Facility & $1M from PCY option payment)
- sb enough to pay for 7P Plant and the $3.5M in upgrades to get it into
production by summer 2013
3) Source(s) of partially processed Wisconsin sand already found
4) 400,000 tpa x $25/T = $10,000,000/yr Profit or $833,000/mth
(over 2.5c per share; at a P/E of 10 gives a 1yr NI price target of over 25c/share)
5) 8 large potential Frac Sand customers nearby in Medicine Hat, Alta (all within 25km of
the 7P site) and some of these customers are also expanding. In addition, these same
customers had bought other sand from 7P in the past too.
6) Once Stage 2) is complete (acquire a Wisconsin Sand Quarry) profit margins increase.
Using Minago DFS as a rough comparison, they talked about Frac Sand price
FOB Minago of $63/T and a cost of $6.50/T which gives a Profit Margin of $56.50/T
or more than double the $25/T for purchased sand
400,000 tpa x $56.50/T = $22,600,000/yr Profit (or target price of over 57c/share)
7) Once Stage 3) is complete (build Winnipeg Dry Plant at 1.14M tpa capacity) and even
with purchased sand initially this would be
1,140,000 tpa x $25/T = $28,500,000/yr + the $22,600,000/yr (from Stages 1 & 2)
= $51,100,000/yr Profit (or a target price of over 1.29/share)
8) Once Stage 4) is complete (Minago Frac Sand 1.14M tpa supplied to Winnipeg plant)
1,540,000 tpa x $56.50/T = $87,010,000/yr Profit (or a target price of 2.20/share)
All this before the rest of the Minago Nickel Mine is even built.
Use of Retained Earnings, the Loan Facility (only if/when reqd) and possible
Frac Sand offtakes (only if/when reqd) can be used to finance the later Stages.
My target prices use current shares o/s since I am assuming no share dilution to
finance stages 1) to 4).
Encouraging and shows NI's huge potential if Mgmt executes their strategy well.