Graphite One Inc. (GPH:TSX.V) was awarded US$37.5 million by the U.S. Department of Defense (DOD) to see the company's namesake project in Alaska through the feasibility study stage, reported ROTH Capital Partners analyst Joe Reagor in a July 18 research note.
"We believe this is a significant positive development for Graphite One as [the grant] covers up to 50% of the cost of completing feasibility study work on the project," Reagor wrote. "Additionally, we view this as a positive endorsement of the project by the U.S. government."
Attractive return, Buy rating
Based on the news, ROTH updated its model on the Canadian graphite company to reflect recent financial results, news, the DOD grant and the portion of the feasibility study work Graphite One Inc. will have to fund.
After these changes, ROTH's price target on the mining developer remained the same, at CA$2.50 per share. The company's current share price, in comparison, is about CA$1.57.
From this level, the return to target represents a compelling gain of 59%.
Graphite One Inc. remains a Buy.
Additional funding needed
To advance its graphite project, ROTH expects that Graphite One Inc. will raise capital to cover its share of the costs of feasibility study work, Reagor wrote. As such, the investment bank factored into its model on the British Columbia-based company a conservative equity raise in H2/23 consisting of 27.6 million common shares sold at CA$1.45 apiece.
However, noted Reagor, the graphite company may instead pursue other less-dilutive funding sources.
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