Monday, 25 March 2013

Stratmin Global Resources (STGR)

When Did The Penny Drop?


A little while back I was contacted about Stratmin Global with a great pitch no doubt echoing the great words of the one and only dynamic Red Hot Penny Tipster Tom Bulford, Having looked briefly at the board of directors Stratmin appointed I hardly fell about with the excitement levels that Mr Bullford seemed to have in regards to the imminent potential being released.

Having addressed the maverick journal along with the RTO data thus now trying to establish this early significant attraction which TB projected at 66p, I found myself drawn to making a quick call to a friend out in Europe whom I toured the industry with. We spoke long and hard of the slow down in refractory associated industries that would house the graphite based bricks such as Steel,Glass and Cement and we also debated on the ever evolving methodology of lining furnaces/incinerators/vessels with a rammed/gunned lining apposed to brick... The outcome was clear, Speed and cost seems to take pole position.

This confirmed that the industry once heavily reliant on brickwork installation had moved on as it struggled through the last decade. This is not to say that speed and budgeted cost are delivering the best outcome it simply means the evolution of the industry since 2000 has relied on these principles.

Although the old school products such as refractories and crucibles are playing second fiddle to the mod high tech industry use its worth noting a ' Old School +3.7% forecasted rise in refractory production and growing demand as the industry rebounds in 2013 ' Particularly in the US.

Now after the glory days of £1.20 being targeted or the investors dream of  reactor pebble bed lets hit the backside of reality right here: The stock has had a rude awakening pulling back 31p with a Full fib retrace. The stock looked oversold via the technical indicators Friday with the share bouncing back to 37.5p indicating a bullish engulfing of the Thursday session, However I would leave a proportional percentage of your proposed investment pot for the possible 31p retest we have to remain scantly aware of the European uncertainty and its effect across the markets

Today's Buy rating has taken into consideration stratmins slow turn of foot as well as the global mining sector  receding (Bwming Index showing a low point in 2013). China and India's data appears to be sending out mixed messages which again is not helping the industry or investment opportunists.

''Graphite is one of the most interesting areas in mining at the moment, and one driven by the same fundamentals as rare earth elements.''

Lets look at the pro's

Large flake graphite is used in higher tech applications such as, Smart phones,lithium batteries and pebble bed reactors to name a few. The production at stratmin is 12,000t of graphite, large flake high quality graphite which in its raw format is forecast to a six fold rise in demand by 2020. Stratmin have an indigenous board on the ground in Madagascar who are on the verge of securing delivery of its milestone shipment to the US  along with resource upgrades forecast to double production figures from further appraisal of both of its licences.

The firm expects to be able to sell its product for US$1,400-US$1,600 a tonne, with extraction costs in the order of around US$500 a tonne demonstrating decent clear margin which is feasible and beneficial to most economic environments.

The speculation comes from the near term transparency that the low cost producers are sure to highlight although until such a time i recommend reducing risk as the stock moves towards a initial 50p Target Price leaving some margin to average in.

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(These are but opinions derived from my own experiences and thoughts and do not adopted as statement of fact)

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