Dundee Initiates Coverage on Nemaska Exploration

Dundee Securities initiated coverage on Nemaska Exploration (OTC Other: NMKEF; TSX-V: NMX) today with a “Buy” rating and a 12-month target price of $1.10.  This target price represents a 134% increase over the Company’s current share price of $0.47.  Below is an excerpt from the report, a complete copy of which is available here.

“Nemaska Exploration’s Whabouchi hard-rock lithium project appears to be well on its way to a positive Definitive Feasibility Study at the end of this fiscal year and spodumene concentrate production by year end 2012. Nemaska anticipates production of over 200,000 t of 6.5% Li2O spodumene concentrate annually at gross margins of ~50%. Capital costs are estimated at US$86 million.

We view Nemaska as a relatively low technical risk way to play the lithium market as it plans to pass the processing risk on to its buyers. The Whabouchi hard rock spodumene deposit is amenable to conventional open-pit mining and processing. It does not have those processing complexities, particularly as a lithium concentrate producer, typically seen in its brine counterparts such as brine chemistry or evaporation pond management. Located in the mining friendlyprovinceofQuebec, the company enjoys excellent infrastructure and support from the Cree Nation community of Nemaska.”

We see this project as undervalued…. Nemaska currently trades at a 33% discount or an EV of C$28.59/t LCE compared to its hard rock peer group average of C$43.00/t LCE. Our 10% DCF model provides for an NAV of $1.10/sh, most of which is derived from the DCF component. We don’t provide much value for its high-grade Sirmac pipeline project, and almost no value for its non-core non-lithium projects which are currently booked at C$7.5 MM and subject of a spin out into a new company.

Complete Report

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