Ming Analysis

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...