Submitted by: Submitted by immortalradion
Views: 321
Words: 532
Pages: 3
Category: Business and Industry
Date Submitted: 12/14/2010 12:29 AM
Graphite Mining
Decision
- Wilson + Thompson of Northern Mining deliberating on prospect of acquiring largest graphite deposit in Ontario
-wonder how much GMC is worth and how much they should offer for the mine
- decide whether or not to spend $1.5 million on the mine
Industry Analysis
- capital intensive business with cost structure made up of mainly fixed components
- significant upfront costs required and large investment in fixed assets
Economy/Environment
* Exchange rate fluctuation effects cross border business
* Potential separation of Quebec may alter economic activity in the region significantly.
* US and Canadian prime rates were at 7.25%
* Cost cutting in other industries means clients are demanding lower prices on our product
Market Analysis
* China’s saturation of market with low quality graphite
* Technological developments may reduce the need for natural graphite
* Industry operates on 1 year pricing contracts
* Graphite has a wide variety of uses, so depleted demand in one area may be offset
* 35% course, 40% medium, 25% fine demand
- 3 segments: fine, medium, curse
- global production has declined because of customer’s increased quality requirements, political instability, depleted resources, decreasing prices and unreliable resources
Fine Fraction
- China is largest supplier
-aggressive marketing and supply approach by the China for middle and fine flake graphite has had a negative effect on the prices of the two fractions
- will be hard for China to meet requirements of North American clients: delivery on time, consistent quality, flexibile of size distribution, long-term availability, day to day client service
-expected to grow 5% per annum
Medium Fraction
-consumers taking longer time to approve producers because of tough quality requirements
- main suppliers are Brazil, China, Canada
-graphite production costs in China rising due to inflation costs Chinese...