05/06/2023

GreenRoc Mining  (GROC) is an AIM-listed graphite mining development company with all of its projects based in Greenland. The company has c.134.5m shares in issue and at the offer-price of 5.1p, it has a market capitalisation of £6.8m.

JORC Resource

One of the things that seems attractive is that GreenRoc already has a JORC resource on its Amitsoq project, located in almost the most southernly point in Greenland, at 4.71m tonnes of contained graphite. Moreover, the grades of graphite ore are extremely high, at 20.41% global average, one of the highest in the world and these high grades have been consistent in both the Lower Graphite Layer (LGL) and Upper Graphite Layer (UGL). Typically, higher grades equal lower costs, which we will hopefully find out about the economics of the project later in 2023. Additionally, the orebody is open in almost all directions, suggesting further drilling could make the size of the graphite resource much bigger than what is already published.

If one does the most basic of maths calculation and say what is the value of the product under the ground, it comes at $1,000/tonne x 4.71mt = $4.71bn. If you then shave off 90% to factor in lack of conviction on the accuracy of the JORC report, dilution, known unknowns such as CAPEX/OPEX you still get a value of $471m which if you exchange for GBP comes to a value of £378m (£1: $1.2447 at time of writing). This is c.55 times the current market capitalisation of the company and it is this sort of upside that was observed in early 2019 with Eurasia Mining i.e., the huge disparity between the market capitalisation and the potential value of the product in the ground.

Purity Values

What is not mentioned is that for a relatively small investment, if the company, with its high purity values of 99.97% graphite, decided to spheronise the mineral (the last stage before the material goes into an electrical vehicle battery), the price per tonne that they could be getting would probably be in the region of $3,000-$3,500 but come 2027, when the company is earmarked to commence production, the price for graphite and spheronised graphite could change significantly.

Gigafactories

In Europe, the amount of graphite required to feed the European Gigafactories was just 170,000 tonnes in 2022. By 2030 that requirement is expected to go to 1.1m – 2.2 million tonnes! By 2027 it is forecast as the inflection point when global demand for graphite outstrips supply, with a severe disparity predicted by 2030; this would suggest that high prices for graphite are here to stay unless there are some technological changes in the composition of EV batteries or some catastrophe or an act of God event that curtails economic activity.

Amitsoq

On the permitting front, Greenland is very keen, with the support of Denmark, to get its own mining industry underway. Despite its natural beauty, Amitsoq will aesthetically return to more or less its former state post commission as the mine is underground. Despite all this there are no anticipated environmental, exploitation or mining permitting issues anticipated. The CEO seems to have a close relationship with the Minister of Mineral Resources and Justice and from what we hear, there seems to be a lot of genuine positive interest from the local population of Nanortalik, the nearest town some 20km away from Amitsoq.

One of the key advantages of the location of the Amitsoq project is that there are no expensive roads or railways required to ship the graphite/ore. The depth of the fjord is believed to be circa 40 metres deep (enough to fit an Ultra Large Crude Carrier vessel) so there is absolutely no problem in getting large vessels along the side of the land.

Taxation in Greenland is surprisingly modest (Nordic countries are renowned for high taxation), with Royalties set at 2.5% of production and 15% Corporation Tax.

ERMA / EU

GreenRoc also has the backing from the European Raw Materials Alliance (ERMA), an organisation co-funded by the European Union. ERMA offers a range of services to approved projects such as Amitsoq, including the introduction of potential investment partners and financial support for technical development. ERMA had this to say about GreenRoc.

“GreenRoc’s graphite resource is of global importance and,….., will enable the European Union to achieve a certain level of independence for the electrical vehicle supply chain. European Raw Materials Alliance has approved the Amitsoq Graphite project and will engage to support its development and financing to produce these critical raw materials for the benefit of the European Union goals”.

Leonhard Nilsen & Sønner

One positive element is that a major family-owned Norwegian construction business called Leonhard Nilsen & Sønner A/S (LNS) signed an MoU with GreenRoc, providing a framework for LNS and GreenRoc to explore the commercial opportunities relating to Amitsoq, and the potential appointment of LNS as the civil, mining and/or logistics contractor for Amitsoq during the construction and operational phases.

LNS is a significant civil and mining contractor with decades of experience as a mine operator in Norway and Greenland, as well as in large-scale construction and infrastructure projects encompassing underground mine development and the development of tunnels, ports, roads and airports.

GreenRoc and LNS have entered phase 1 of the discussions, focused on a detailed review of the construction and operational requirements for Amitsoq.  A successful outcome from this phase will lead into work on heads of terms and definitive agreements. The MoU also envisages discussions between the parties on other possible commercial outcomes, such as debt/equity financing, joint venture and procurement (of staff, equipment, and services) at Amitsoq or GreenRoc’s other projects.

GreenRoc’s CEO

The CEO Stefan Bernstein, a Dane, has been working in Greenland since 1987, mainly as a geologist and has bought 1,090,000 shares in the open market between 3.5p and 4.5p. Mining Investment company Alba Minerals owns 60m shares and an investment vehicle owned by a member of the Khashoggi family invested £2.1m at 10p/share when it IPO’d in September 2021. Over 61% is held by long-term, sticky hands with the free float less than 39%, implying that it will not take a lot of volume for the price to move one way or another.

Conclusion:

The company only has one full-time and one part-time employee including the CEO Stefan Bernstein. At some stage he will need to beef up the team, so that the CEO can delegate tasks such as accounting, engineering, and geology. The asset is world class, as credited by ERMA, the logistics and marketability of the graphite is almost ideal and permitting is not anticipated to encounter any issues. Production is not expected to take place until 2027, by which time the market for graphite is forecast to look very rosy indeed.