Jared Lazerson, chief executive of MGX Minerals Inc (CSE:XMG, OTCQB:MGXMF), tells Proactive they’ve furthered their reach into the emerging energy space with the acquisition of ZincNyx Energy Solutions Inc.
Canadian group ZincNyx Energy Solutions has developed a modular energy storage system (ESS) designed for energy storage in the 5 kW to 1 MW range for extended periods..
Its technology consists of three main systems each using zinc and air to store energy in the form of zinc particles.
International Cobalt Corp. (CSE:CO) focuses on primary cobalt projects, and while it has a couple of good land packages under its control in Idaho, a recently closed $10 million financing means the company now has the wherewithal to consider additions to its portfolio as well. Chief Executive Officer Tim Johnson explains the outlook for cobalt, why supply constraints are here to stay, and how International Cobalt is positioning itself to take advantage of the favourable supply/demand environment.
What outlook for the cobalt market do you hold at International Cobalt and how does that shape your strategy in terms of project acquisition and allocating human and capital resources?
We think prices will remain strong both near term and long term. Basically, we just cannot see anything on the horizon that’s really going to change the amount of cobalt coming on line. In December 2017, Glencore announced it was going to double their production in the DRC (Democratic Republic of the Congo) and there was no effect on the market whatsoever. As long as the battery space stays strong, we think cobalt will stay strong.
This environment really puts us into acquisition mode – we are actively looking for new projects in the space. Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years. We want to be right in the middle of the mix.
Walk us through the components of your project portfolio. What has you the most excited and what work is upcoming?
We’ve got two projects in the Idaho Cobalt Belt and we bracket eCobalt Solutions’ advanced project. Although there has been a fair amount of historic work done on our landholdings, the majority of it by Noranda in the 1980s, our team has not really had boots on the ground yet except for a site visit.
We anticipate doing a full geological work-up on both projects, to include extensive soiling and mapping. I’d say half of our Blackbird project has not been mapped geologically.
So, we are excited to get to work on the projects and because there are many companies in the belt, including us, there is going to be a lot more exploration. It is a world class belt as far as cobalt goes, so you are going to see lots of news coming out of it.
You mentioned that you are in acquisition mode. What types of additional projects would appeal to you, and how do you assess them?
We are looking for primary cobalt. We are not as interested in nickel secondary cobalt or silver secondary cobalt. Primary cobalt projects are few and far between and we are doing a lot of digging to find good ones, looking mostly in North America. We have feelers out in Africa as well, but any acquisitions we make in the near term are likely to be North American.
Cobalt really is an underexplored mineral. It is not like the molybdenum days of the early 2000s, when once moly started to rise in price everyone had a near-term moly mine. A lot of work will be needed to bring supply on line.
Does that mean most of the projects are early stage?
Right now, most of the cobalt supply is from secondary sources such as nickel and copper. There hasn’t really been a focus on looking for primary cobalt projects, so anything you find is quite early stage. It is not like you are going to find something that was almost a mine and didn’t make it because of prices and now it is coming back up. And if you do find that it is most likely in the DRC. You know anything you get into is going to be a long-term project and you’ll have to structure your efforts to support that.
The financial markets are supporting mining exploration companies once again. What observations do you have on the current health of the market, and particularly with regard to the cobalt space?
Cobalt is definitely popular. There are a lot of financial professionals we have talked to who would like to get in on the space, but there are limited opportunities to do so. It has to do with the maturity of the exploration cycle – there really aren’t a lot of high-quality projects out there and the price of cobalt does not seem to be going down. Any decent projects have high valuations, and those are the projects the money is looking for.
What kind of timeline are you giving interested parties in terms of the work you have planned. And are you only interested in projects you can own 100%?
We are open to looking at other opportunities, whether it be joint ventures or strategic investment. Because we are an early entrant into the Idaho space you kind of wait to see how things shake out. I think the belt will potentially see consolidation, as there are some smaller players getting good results but there are no majors there yet. Once some of the juniors have more success the majors will come knocking.
Cobalt is hot and there are lots of entities jockeying for position. Are they mostly Canadian companies or are some from other jurisdictions?
There are a few Australian companies in the space, and money is coming out of Australia as well. We got some backing out of Australia and other companies we have seen did as well. Some groups that had success in the DRC are starting to look for safer jurisdictions.
How are you going to pay for the acquisitions and work on the project portfolio?
We recently closed a $10mln financing. Our plan is that the new capital would support at least two years of exploration. We are talking all of our ground proofing this summer, a potential initial drill program in the fall, followed by another drill program in 2019. That is the plan with our existing assets, so things could change, of course, if we completed acquisitions.
International cobalt has enjoyed a good start to 2018 in the markets and on the corporate front. Is there anything else you’d like to comment on?
Just that we are very happy with our land position in the Idaho Cobalt Belt. The historic data we are turning up is proving our theory right. There are new reports being made available by the Idaho Geological Survey all the time and each time we find one we get excited again. Most of the work is by Noranda so we have high confidence in its quality and really want to get boots on the ground and follow up on everything.
The main revenue-producing component of Global UAV is its services division, consisting mainly of photogrammetry and geophysical surveying, but it offers a full-service package in the field of unmanned aerial vehicles (UAVs)
Global UAV Technologies (CSE:UAV) is one of the few listed operators in the fast-growing field of unmanned aerial vehicles (UAVs).
Formed just more than a year ago, Global UAV has quickly merged complementary businesses, allowing it to be a “one-stop shop” for those requiring UAV – or “drone”, if you prefer – services and for those who want to offer their own drone services.
The group has been assembled quickly through acquisition. The focus has been on buying companies with proven technologies that provide cash flow. As a result, unlike many nascent technology companies, it is already earning revenues, including a modest profit in the third quarter of 2017.
Admittedly, those revenue and profit numbers are small at the moment, as might be expected of a company capitalised at less than C$20mln. With revenues rising rapidly and a high-margin business model, however, there is every reason to believe the stock is readying for take-off.
Using drones to provide information on the physical properties of a land mass
One of the group’s subsidiaries, Pioneer Aerial Surveys, is the industry leader in drone geophysics and field operations.
In simple English, the company’s drone service can provide information on the physical properties of a land area. This service is a more cost-effective operation than manned surveys and can reach places a manned aircraft or ground crews would find hard to access.
Pioneer Aerial’s UAV-MAG surveys are in high demand from mineral exploration and mining companies worldwide.
In a similar vein, Global UAV’s other services subsidiary, High-Eye Aerial Imaging, provides low altitude, high definition, LiDAR (light detection and ranging), aerial surveying, photography, videography and other aerial mapping services.
Again, mining companies are keen on this stuff, but so too are the construction, engineering and agriculture industries, to name a few.
The company manufactures its own drones
The company uses its own drones, designed and manufactured by its NOVAerial Robotics division.
Its flagship Procyon 800E helicopter is used by international customers and is considered one of the best UAVs in its class. The single-rotor helicopter style design of the Procyon provides higher payload capacities and longer flight times than a typical commercial-grade multi-rotor UAV.
As a small progressive company that keeps abreast of industry trends, Global UAV president James Rogers thinks their products and services will keep them “ahead of the pack.”
The company also has a division, UAV Regulatory Services, which provides an online service called Easy SFOC.
This service assists clients with the preparation of special flight operation certificates (SFOCs). These certificates are required for the operation of recreational and commercial drones in Canada.
“It can be a fairly complex process to apply for that [an SFOC], so UAV Regulatory essentially offers a consultancy service to consumers who are interested in starting their own business. We can guide them through the regulatory requirements to help them get their licenses,” explained Michael Burns, CEO of Global UAV.
Together, these four businesses within Global UAV provide a fully integrated profile of manufacturing, services and regulatory compliance unique to the UAV industry and its customers.
“Right now, the main revenue-producing component of Global UAV is our services division, consisting mainly of photogrammetry and geophysical surveying,” Burns explained.
“The geophysical surveying services have been very lucrative for us. We have been the leader in this commercially since 2014 when we really brought this technology to market. We set ourselves up as a commercial supplier of the UAV-MAG services through Pioneer Aerial,” Burns continued.
“We’re able to offer to our customers either a full-service package, where they can hire us to come and do the work, or we can also do a sale. If a customer would like to purchase the equipment and get set up as a user, we can sell them a drone, train the customer and set them up with all the regulatory framework.” Burns added that it is a very attractive model for small companies.
The top line is heading higher – rapidly
A chart of quarter-by-quarter sales for Global UAV shows the sort of vertical take-off one might expect from the company’s drones.
In the first quarter (the three months to January 31), sales were C$22,386; in the second quarter they soared to C$181,204, and in the third, they rose to C$333,529.
The third quarter – to the end of July – saw the company move into the black, with net income of C$154,956.
A NOVAerial drone typically sells for US$30,000 to US$40,000. Therefore, the company does not exactly need the manufacturing clout of General Motors to keep that top line moving north at a rate of knots, especially as a high-margin business that gets the bottom line heading in the right direction as well.
According to auditing and consulting services provider PwC, “the drone revolution is disrupting industries ranging from agriculture to film-making”.
PwC values the emerging global market for business services at US$127bn, with infrastructure (US$45.2bn) and agriculture (US$32.4bn) the two biggest markets, while mining, where Global UAV is already strong, is valued at US$4.3bn.
In conclusion, the market opportunity is enormous. As James Rogers observed, however, North America is not awash with listed pure-play UAV companies, with big names such as Facebook, Google, Amazon and Boeing certainly having their fingers in the pie.
“Global UAV offers a ground floor entry opportunity to get into the drone sector.”
Mining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream – the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District.
Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR). Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021). Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades.
“I tried twice in the last 20 years to get Bunker Hill but wasn’t able,” Reid explains. “When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”
Sure enough, he got it, although the deal originally agreed with the heirs of the long-time owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE.
The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981. For many years early in its life it was said to be one of the largest mines in the world.
“Bunker Hill leads the way as one of the most important mines ever in American history,” says Reid. “It produced over 35 million tons of high-grade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver. When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined.
“Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.”
That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical. Just US$15mln would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid.
Why, then, if all that ore is just sitting there has the mine remained inactive for so long? The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the Mine itself was not involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA Superfund. That is mostly completed now as the Valley is in much better condition.
The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for US$25mln over 10 years. Another US$20mln would go to the EPA, this amount a partial acknowledgement of costs accumulated for clean-up over the years. An operating Bunker Hill Mine would also pay the EPA $1 million per year to continue operating the wastewater plant.
“The EPA has proven to be a good partner — they are reasonable,” says Reid. “People want to see the mine back in production for a number of reasons, one of them being jobs. But also, this mine, if left alone, will only get more troublesome as parts internally break and water starts leaking from different areas. If it’s in production, however, we’d have the cash flow and earnings to build up the closure bond, and to take care of many longer term problematic areas.
Reid is not only a formally trained geologist, but also a former analyst and successful investment banker. He thus has detailed insight into the metals markets Bunker Hill would once again serve.
“Zinc is in a deficit in terms of the raw metal,” Reid explains. “We are still losing production even with the price being up, and some mines that have been dragged back into production are running out of ore. The zinc concentrate market is even tighter – it looks like concentrate could be in deficit for another three years.”
And while one might think the omnipresent talk about future battery technologies would undermine the lead market, Reid says it is “amazing” how tight the lead concentrate market is right now.
Details regarding the path to production for Bunker Hill are still to be decided but could entail initially toll milling (utilising another entity’s mill), although ultimately the company will want to build its own mill plant.
“My estimate is that starting the mine utilising a toll milling arrangement is estimated to be about $10 million including working capital,” explains Reid. “I’m in active discussions with a number of financiers and toll milling partners and we hope to be in production in 2018. The longer term goal, though, is to build our own expandable process plant right on site, which is also part of the Patented Land package involving the entire Bunker Hill Mine site.”
It is an amazingly near-term timeline for a small company that began trading less than a year ago, but given the Bunker Hill Mine’s size, grade and favourable jurisdiction, plus the strength of Reid and his team of local professionals, the market is buying in, having taken the company’s share price as high as $3.15 since its debut.
Also amazing to observers who know how the financial markets work is that Reid, his team and that the one large shareholder have put their shares into a voting trust and none of the shares can be sold until there is a change of control, which is another way to say that Reid must sell the entire company for the insiders to ever realise on their share positions. We’re talking approximately 15 million shares out of the company’s 33 million outstanding.
That lock-up suits Reid just fine. He knows he has a monster by the tail and his track record suggests that few people could be better at finding a buyer when the time comes.
“This is one of the most important lead-zinc resources in the Americas that is not producing currently,” Reid concludes. “And then once we put it into production we’ll follow up with a drill programme to beef up reserves and resources. Bunker Hill is a big one. It will outlast us all.”