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As highlighted, the stratified pricing structure in the graphite market means in-situ
values are a function of flake size (biggest flake = highest price). Hence we have
attempted to calculate in-situ value for each company based on current graphite
prices and available flake classification data. On this front, NGC is a market leader
while other companies offer little flake distribution data, focussing instead on grade
which is potentially less significant in our view. Where data is available we have simply
assumed an initial 50:50 split between large/medium flake and fine flake/amorphous
material. The larger portion is distributed as 10% jumbo, 20% large and 20% medium
with the lower grade fraction split as 25% fine and 25% amorphous. With the small data
pool and necessary assumptions, this method has limitations. However, it does clearly
imply that NGC is trading at a significant discount to its peers on this basis. Again this
is surprising, particularly as NGC has shown through its BFS that recovery rates of
large and jumbo flakes is very significant, making up 70% of the concentrate produced.
Applying the group’s average EV/in-situ value percentage (4.1%) to NGC implies an
EV of US$90.4m or C$1.84/share.