Flinders-Big North Deal Could Spur Consolidation, Higher Prices: Chris Berry

Chris Berry, president of House Mountain Partners and co-editor of the Disruptive Discoveries Journal, published a report on Flinders Resources Ltd.’s (TSXV:FDR) proposed acquisition of Big North Graphite Corp. (TSXV:NRT), commenting that it “appears to be the spark necessary to ignite consolidation and eventually higher prices in the Energy Metals space.”

He states:

[I]t appears that both FDR and NRT have won here. FDR has a proven model for mine development and is putting that format to the test at El Tejon. As is the case with many deals, there is a tendency to overpay. Based on my math above, it seems clear that FDR DID NOT overpay (on a fully diluted basis) and has acquired a promising asset which can be accretive in a relatively short period of time. No cash will change hands, no debt has been issued, and though there is share dilution for FDR shareholders, that damage is mitigated by the fact that Woxna is now in production and should the stronger graphite markets many (myself included) are forecasting return, the leverage from higher average selling prices should create value through a higher market cap and strong balance sheet.

NRT shareholders stand to benefit from owning shares in a proven graphite developer/producer and no longer need to worry about the challenges facing so many junior mining companies in the current environment with respect to financing, etc. The deal won’t close until later in 2014, but I see no reason why it wouldn’t.

Click here to read the full Disruptive Discoveries Journal report.
Click here to view the Big North Graphite Corp. (TSXV:NRT) profile.