Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
"Access to clean water is essential for human health, food production, mining and energy generation. Yet less than one percent of water on the globe is fit for consumption"
Shares outstanding: 70 million / Market Cap $10 million (trading 25% below net book value)
> 2012 revenue forecast of $10 million (marginal loss)
> Strong sales pipeline and growth forecasts for 2013 and 2014
> Recurring revenue from plant operations
> New CEO making impressive improvements
> Current EV/Revenue multiple is 0.2x; industry average is 1.5x to 2.2x
> founded in 1998
Blue Chip client base includes: major utility operators and regulators, Xstrata, Barrick Gold, Cameco, Grupo Mexico, Kinross Gold, Jiangxi Copper, Freeport-McMoRan, Capstone Mining, Teck Corporation, EPCOR, Koza Gold, Breakwater, EcoMetales, USEPA, Newalta
Industrial Water Treatment Solutions - future revenue growth driven by water scarcity and government regulation. Share price appreciation through earnings and cashflow growth, investor awareness programs, and industry mergers or acquisitions.
This will be a 2013 speculation for us and the most attractive short term risk is in the 16 to 18 cent range. This would be reassessed when financials are filed each quarter or if we see large material contracts signed.
Financials ending September 30th:
> Cash, Investments, Receivables: $10.5 million
> Book Value of Plant & Equipment: $5.7 million
> Debt: $2.8 million
Strategic Alliance Partners: Newalta (Canada's largest industrial waste management & environmental services firm), ecoMetales ( industrial waste management firm wholly owned by Codelco, Chile's largest mining company), Lanxess (international manufacturer of ion exchange resins used for water treatment with annual sales of 9 Billion euro)
Bioteq Core Competencies
1) metal recovery and contaminant removal - Applications: acid mine drainage, ground and surface water drainage, lime plant effluent, tailings water, smelter wastes, coal mine drainage
2) Gold Processing (SART) - Applications: gold deposits containing copper or zinc
3) sulphate removal - Applications: power generation cooling towers / oil & gas - produced water and shale frac water
PORTFOLIO DIVERSIFICATION - WATER
Diversification with penny stocks is very important and water is an area we haven't looked at before. Water scarcity and regulation is nothing new but over the past couple year’s people have started taking water a lot more serious. China's economic growth has placed enormous demands on water resources because (ignoring what people drink) there is very little produced on this planet that isn't water dependent.
You can take almost any industry and it is water dependent in one fashion or another. Two areas in particular (mining and oil /gas) are critically dependent upon water in the production process or drilling. The same holds true for coal fired power production which accounts for the majority of power produced worldwide.
Legislatures in 34 U.S. states have enacted almost 100 separate laws relating to oil, gas and mining so far in 2012, as the surge in exploration and production pushes regulation high up the agenda for state lawmakers. A large portion of these laws are related to environmental impact and how water is being utilized (or abused). This has been a particularly important issue in shale gas exploration - it is not uncommon for companies to use several million gallons of water when doing a frac on a horizontal oil or gas well.
While this trend is evident in the United States, it is indicative of what is occurring (or enroute) in dozens of countries. Obtaining drill permits is becoming more difficult because regional governments want to know the impact on the water table. Putting a new mine into production is critically dependent upon the water source and what happens when the water is being discharged.
> Bioteq is a world leader in sulphide precipitation
> Selective metal recovery process produces a marketable metal product that can create a revenue source for mining companies
> Technologies reduce or eliminate waste & contaminants
> Reduce long-term environmental liabilities
> Produce clean water that meets very strict water quality criteria for discharge or re-use
> Solutions provide lower life cycle cost of treatment
> Lower capital and operating costs
> Convert waste into value - recovers marketable metals
Global Operations & Proven Technologies:
> 16 water treatment plants designed and built in 6 countries over past decade
> Bioteq operate 9 plants at 4 sites + provides technical support for an additional 4 plants
Catalysts for Growth:
> tightening water quality regulations
> water scarcity concerns
> corporate social responsibility
> life cycle costs (reducing the full cost of operation over the life of a project)
Historically, revenues reached $7 to $8 million per year and plateaued - positive cashflow was not achieved on a sustained basis. Their focus today is on achieving revenue growth and sustained positive cashflow. This process was underway in 2012 with appointment of a new (highly qualified) CEO.
> Commercially proven technologies have been deployed since 2003, minimal "technology risk" today
> Focus today is on a measured approach to technology development, commercialization, & IP protection - building the base for future growth
> Priority is application of Sulf-IX™ technology in large attractive new verticals such as cooling towers and natural gas fracing, as well as mining
> New technologies are in development for selenium removal & recovery of high value metals like Rhenium
New CEO in 2012
Jonathan Wilkinson, B.A., M.A, CEO, Director - Senior executive with extensive experience in clean tech sector and public markets. A Rhodes Scholar, Mr. Wilkinson obtained degrees from the University of Saskatchewan, Oxford University and McGill.
Very Experienced Board of Directors
George Poling, B.Sc., Ph.D., Chairman of the Board of Directors - Chairman of Intercontinental Potash Corp, Professor Emeritus and former Head of Dept. of UBC Mining
Bruce Burton, C.A., M.B.A., Director - 35+ years as senior executive in mining and resource industries, former CFO of Dundee Precious Metals, former president of BlackRock Ventures
Chris Fleming, Ph.D., Director - Senior Metallurgical Consultant, SGS Canada, 37 years in research and research management, authored or co-authored 70 technical publications, awarded 14 patents
Peter Gleeson, Director - 30+ years of experience in executive management, investment fund analysis, and board advisory roles for the technology and mining sectors, with specializations in corporate finance and contract negotiation.
Ron Sifton, C.A., Director - Retired Executive Vice President and Chief Financial Officer of Newalta Corporation
The company’s corporate presentation provides more extensive due diligence:
Disclosure: Danny Deadlock owns 60,000 shares of Bioteq
In addition to this weekend column and the bottom fishing research sent to paid Ticker Trax subscribers on Monday, I also provide free MicroCap alerts throughout the week
These are based upon News or Abnormal Price/Volume Activity on the several hundred stocks we track from our own research,
brokerage analysts, or 3rd
party newsletter writers.