Analyst on a “great window” for silicon action
I’m always pepped about clever technological solutions that provide a sharp edge in today’s market. Canadian Metals Inc. (CSE: CME) (“Canadian Metals”) have long been committed to the idea of a plant that can turn large volumes of silica sand into multiple valuable silicon products, incorporating the ability to vary the dual-output and precisely meet the needs of numerous markets simultaneously. The Hybrid-Flex approach offers clear and significant advantages in protecting Canadian Metals from the fluctuating nature of technology-related commodities; silicon and ferrosilicon both have great long-term outlooks, and a smoother road over a thirty-five-year quarry-life makes for an attractive prospect indeed.
The Materials & Markets
Silicon can be deployed to a variety of niches; its primary use is as an alloy with aluminium, but it is essential in silicone and silane chemicals, and increasingly in demand for use in photovoltaic cells. The market for ferrosilicon is largely in steel and cast iron, with lesser offtake possible for non-ferrous alloys. The buffer created by supplying both materials grants Canadian Metals long-term security with which to track alongside the growing need for renewable energy solutions.
A huge confidence-boosting milestone in the silicon industry was a three-fold increase in demand for high-grade polysilicon in just a two-year period from 2008 to 2010. As only a small quantity of silica sand gets to grow up to be technology-grade, it is likely that the call for this type of silicon will soon rival that of presently high-volume markets, as energy-storage applications for the metal continue to diversify and increase.
According to the completed Preliminary Economic Assessment, the company’s proposition to establish a producing mine at their 100% owned Langis Project is viable, profitable, and is estimated to be capable of initial annual output volumes of between 0 to 78,667 tpa of ferrosilicon, and 0 to 52,000tpa of metallurgical silicon.
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As well as benefiting from a broadened and diversified end-market exposure, the proposed technique brings economies-of-scale and procurement advantages as both products require more-or-less the same resources and highly similar technology.
The resource itself is an old sandstone quarry in the Appalachian geological region, and with an estimated minimum life of 35 years based on measured resources, the site is considered a world-class silica deposit. Politically and logistically speaking, the operation benefits from being located in the mining-friendly province of Quebec, close to cheap hydroelectricity and key infrastructure. Furthermore, the management team have a collective relevant experience of over a century to dedicate to the project, inspiring a lot of trust in Langis.
Every completed milestone on the way to production increases confidence and attracts a little more investment. While some equity investors may buy on the basis that the material will ultimately sell, some wait months for the trickle of reports to prove the theory; as expected, upon the release of a positive PEA in 2016, massive movement on company share prices was seen.
The total CAPEX of the project was revealed as US$302.6m, and with a favourable best-case NPV (7.3% discount rate) of US$543m, the operation was proved able to provide a payback period of as little as 3.75 years, sending stocks rocketing.
Since the outcome of the PEA gave the green light, a full Feasibility Study is due later this year. The time between right now and the Feasibility Study is a great window in which to buy a piece of silicon action, before further proof-of-concept brings hordes of additional investors knocking down the door of Canadian Metals’ Langis Project.
Lara has been an analyst for over ten years, starting her career as an equity analyst at Foord Asset Management and more recently as the ... <Read more about Lara Smith>