Analysts at PI Financial have initiated coverage on Nouveau Monde Graphite (TSX-V:NOU) (NOU), a first mover in the anode material supply chain for battery manufacturers.
The analysts awarded NOU a ‘Buy’ rating and C$8.50 price target, representing a significant upside on the stock’s current price of C$4.90.
“The about 70% upside rests on NOU’s de-risked path to strong customer and investor demand for a vertically integrated, carbon-neutral and localized (natural) graphite-based anode material platform,” they wrote in a note to clients.
The analysts wrote that their target price also considered NOU’s Matawinie graphite deposit, proprietary technologies, low-cost hydroelectric power and favourable locations.
Based in Quebec, NOU is the developer of a 103-kilotons per-annum high-purity flake graphite project in Saint-Michel-Des-Saints and a battery material plant with 42 kilotons of anode material output in Bécancour.
It has partnered with other companies in the sector, namely Mason Graphite Inc (TSX-V:LLG, OTCQX:MGPHF) and Black Swan Graphene (TSX-V:SWAN), to advance the development of North American sources of graphite and graphene.
“NOU's memorandum of understanding for graphite material offtake is expected to move to definitive stage with Panasonic, lowering capital access risk and boosting incremental growth upside,” the analysts also noted.
They highlighted that NOU stands to benefit from trends in the electric vehicle (EV) space.
“With looming EV demand, major industries require incremental graphite supply for faster electrification goals as it is the only suitable material for battery anode,” they wrote.
“NOU stands to be a major beneficiary of the 13 EV new US battery gigafactories and doubling of that capacity, which the US Department of Energy sees operational by 2025.”
NOU could additionally lower reliance on Chinese sources of graphite, according to PI Financial's analysts.
“NOU is an alternative to the still dominant China-centric graphite supply chain, offering major OEMs future supply of local, cost competitive, natural based graphite anode material supported by low-cost freight and hydro,” they wrote.
They pointed out that NOU has built demonstrative facilities with 2,000 tons per annum of anode material output, with the phased ramp giving it an operating head start for its Phase 2 stage.
“This will de-risk the buildout plans, as NOU is in a solid position to reach financing and commercialization faster,” they wrote.
“In Phase 3, NOU targets 500 kilotons per annum of flake graphite concentrate production at the Uatnan project assuming it adds 51% interest in the joint venture with Mason Graphite.
“The preliminary economic assessment indicates a project after-tax net present value at C$2.2 billion.”
Contact the author at emily.jarvie@proactiveinvestors.com
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