Stockhouse Ticker Trax
is published to subscribers every Monday (annual cost only $195
). We focus on best-in-class high growth
small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
For the experienced investor, Ticker Trax provides an extra set of eyes and ears (idea generation) and for those learning to invest in micro cap stocks, we provide stock picks and market education.
; (1) new research (stock picks) weeks in advance of being featured on this weekend column (2) exclusive
access to our list of junior gold exploration companies (critical for peer valuation), (3) exclusive
access to our list of Cash Rich micro cap companies (our Virtual Vulture Fund) which contains 80 companies with almost $3 Billion.
Both tables are updated monthly.
GeoMegA Resources Inc.
, Stock Forum
) was first featured to Ticker Trax subscribers on January 20th
at 25 cents and while the share price has already moved 45%, I am still releasing the report to free weekend readers as the market cap in relation to the growth potential is still very attractive.
Under our new Ticker Trax policy (for the benefit of paid subscribers) we are waiting a minimum of three weeks before any new company research is released publicly. If a stock has moved too high in the interim, a decision may be made to keep it exclusive to subscribers.
In the case of GeoMegA, they have several very important develops unfolding in Q1 and Q2 so the potential growth remains significant.
As you will read below, the next important development will involve their new separation technology for rare earth elements (REE’s).
Geomega had been flat all year because the rare earth (REE) sector was weak. However on Wednesday January 15th
they issued a news release that pushed their price from 12 cents to 24 cents on $1/2 million worth of buying. That following week it ran as high as 34 cents but then pulled back as short term traders took profits.
For the past several weeks the stock has hit a solid wall of resistance at 30 cents but Thursday it broke through that barrier on strong volume. I have heard no reason for the increased buying but I assume we will find out more in the weeks ahead.
Similar to what drove the big buying on January 15th, the next major event we are looking for is whether or not they are able to separate Heavy REE’s with their new technology
. If this is proven, the upside potential may be very significant – and the stock could be difficult to buy on that news.
On the surface this has the potential to be a MAJOR technological development in the world of Rare Earths (REE's). IF I am right
, then there is huge upside left. If I am wrong
- a person could risk losing half their money over the next 12 to 18 months.
I have seen it happen many times with biotechs where a process discovery (within 12 months) leads to a large takeover or an incredibly high valuation - even when the small company has yet to produce a single dollar of revenue.
Our speculation would be that this REE technology has explosive Biotech style potential (obviously within due course as they prove up stages and move towards full commercialization).
GeoMegA (GMA.V 37 cents)
Shares Outstanding: 44 million / Market Cap at 37 cents: $16 Million
GeoMegA was one of the first Canadian companies to ignite an REE sector rally in early 2011. It went public in Q3/10 near 50 cents and following drill results in Q1/11 it gained 800%.
Over the next couple years they spent $14 million drilling 33,000 metres on their northern Quebec Montviel rare earth (REE) project. The end result is large REE tonnage with "what appears" to be economic grades.
Unfortunately (as we all know) the junior mining sector suffered for the past three years and the REE sector peaked in the first half of 2011 and never recovered. Geomega slowly disappeared from the REE spotlight.
During this same time however, the following was underway:
1) At one of the world's leading engineering & research schools (Polytechnique Montreal
) they were working on something called Pearse Technology
. By early 2012 their team of engineering physicists demonstrated the feasibility of the technology by building and testing a prototype.
Since that time though, the technology (by the International science and REE community) was believed to be "too theoretical" with respect to using it for rare earth separation.
"The École Polytechnique de Montréal is an engineering school/faculty affiliated with the Université de Montréal in Montreal, Quebec, Canada. It ranks first in Canada for the scope of its engineering research."
2) January 2013 Geomega acquired all the rights, title and interest in the rare-earths-element physical separation process (the Pearse technology) in exchange for common shares of the company and licensing fees. The separation process exploits free-flow electrophoresis technology to create separation between the rare earth elements
Geomega also started the process of filing patents in multiple jurisdictions
3) October 2013 Geomega signed a co-operation agreement with FFE Service GmbH based in Munich
, Germany. The co-operation's objective was to develop a high-throughput (metric-tonne-per-day) rare earth elements separation process based on free-flow electrophoresis technology. Dr. Weber (CEO of FEE) is a world leader in free-flow electrophoresis.
Note that Electrophoresis is very complicated but explained through animation here:
4) January 15, 2014 - Geomega validates the Electrophoresis "theory" by announcing that they have successfully separated rare earths using the Pearse technology
If commercialized this has the potential to dramatically lower capital and operating costs for the rare earth industry plus significantly reduce the environmental footprint
(a huge issue in China where solvent based processes account for 95% of the world's REE supply).
JAN 15 NEWS RELEASE
Geomega physically separates REEs with electrophoresis
2014-01-15 06:35 ET - News Release
BREAKTHROUGH IN PHYSICAL SEPARATION OF REE
Geomega Resources Inc., in co-operation with FFE Service GmbH (Munich, Germany), has successfully concluded tests confirming physical separation of rare earth elements. Based on free flow electrophoresis (1) technology, Geomega's physical separation process has the potential to dramatically reduce the capital required to build separation facilities compared to conventional techniques (that is, fractional precipitation, ion exchange and solvent extraction), optimize REE recovery and improve the environmental performance of operations. Following months of process optimization, a series of three tests have been conducted with the following characteristics:
Selected REEs in synthetic mixture are europium, ytterbium and lanthanum;
1) All REEs are separated simultaneously and not sequentially;
2) Purity level is 100 per cent.
3) The process uses NO organic solvent which should have a very positive impact on the mitigation of environmental risks in addition to reducing operating costs.
The next series of separation tests aims to isolate neighbour REEs such as neodymium versus praseodymium and dysprosium versus terbium
. Results will be disclosed as they become available.
"Not only the separation occurs simultaneously, the slower and less abundant heavy REEs are the easiest to isolate using our physical approach.
A lot of process optimization and engineering work ahead of us but the confidence level in commercial scale-up is now very high.
The world is funding research and development for a sustainable alternative to solvent extraction dominated by China, this breakthrough developed with our partners over the last two years leads us to believe we are close to succeeding
," comments Simon Britt, president and chief executive officer of Geomega.
Added value of REE separation
The selling price of a mixed REE concentrate is evaluated according to the distribution of each REE and the impurities of the composition. As finished products require high-purity individual REEs, the value of the REEs in a mixed concentrate is reduced by a significant percentage, that is between 25 per cent and 100 per cent. The reduction is based on the criticality of each REE. Currently, the most critical REEs are neodymium and dysprosium due to increasing demand for powerful permanent magnets.
NRCC Boucherville research facilities
The tests were performed in Munich, Germany, by FFE Service. The company conducted all analyses at the National Research Council Canada laboratory in Boucherville, Canada. The analyses were done on every sample using ICP-EOS spectrometer.
Dr. Pouya Hajiani, process engineer, and Dr. Gerhard Weber, chief executive officer of FEE Service, supervised and approved the technical information of this news release.
TICKER TRAX COMMENTARY CONTINUED….
Geomega as a resource exploration company has very abnormal “technology related” blue-sky potential. Typically within the resource sector we would only see this “blue-sky potential” during the drilling stages.
The REE industry relies upon a chemical separation process (solvent extraction separation method) that is both expensive and VERY risky to the environment. Across China this has become a huge issue
and for new REE projects outside Asia, companies are facing years of environmental delays and expense.
(China Issues White Paper on Rare Earth Industry – Extensive Environmental Damage)
While GMA's rare earth project in Quebec (in particular the Dysprosium and Neodymium
) could be very valuable, I am not factoring this into the valuation yet - it will be recognized by the investment community if they are able to fully commercialize the Pearse Technology. Fully proven (which will still take time) this technology "could" be worth a small fortune.
Investors have little interest in REE's right now - yet rare earths remain a VERY concerning topic around the world. Super magnets in particular are critical to microphones, speakers, hard disks, smart phones, electric motors (hybrid cars), aircraft and wind turbine generators.
China dominates because of their large reserves and well established mines. However REE's are available in MANY regions of the world but high capex, high operating costs and environmental concerns
are restrictive for mine development (and very time consuming to put a mine into production).
Below is just ONE example of the environmental disasters in China from REE mining. It may be difficult to read but the header of the image below says: EVERY YEAR the mines near Baotou, China produce about 10,000,000 tons of wastewater, much of it either highly acidic or radioactive, and nearly all of it untreated. More than 4,000 Olympic size swimming pools.
In theory, Geomega’s new technology has the "potential" to revolutionize the REE industry
and remove dependence on China - a huge issue in particular for the United States, Japan, and South Korea
Geomega's share structure is very good and the market cap doesn't reflect the value of their REE reserves let alone the potential value of this technology
- not only for their own mine but licensing to others.
Is this potential worth several hundred million dollars like a biotech can be? I really don't know. If they can separate ALL the REE's including the critical heavies (on a mine scale) - then maybe it could be.
This article in Mining Weekly from July 2013 highlights the fact that the "production of REE's is a chemical engineering challenge"
Dysprosium was a separate update for Ticker Trax subscribers but if you do your own research into GeoMegA's rare earth project, pay particular attention to the size of the Dysprosium and Neodymium within their deposit
- and note the reference to Dysprosium below.
The coming shortfall in Dysprosium has also been validated in MIT research papers.
AMERICAN REE CONCERNS
The United States $400 Billion F-35 fighter program is critically dependent up REE's and recent shortages forced the Pentagon to waive laws banning the use of Chinese components in military equipment. Dysprosium
, terbium and yttrium are particularly important in fighter jets and missile systems.
The National Defense Authorization Act (on the United States Senate legislative calendar this year) would authorize the National Defense Stockpile Manager to spend up to $41 million to acquire materials like dysprosium and yttrium determined to be essential to the country's defence, industrial and civilian needs. This dollar value appears small but is simply for an emergency stockpile.
The total industry REE demand is enormous and driven by technology but the world is dependent upon China. Any new separation technology that would make new mines more economic and environmentally friendly would attract the attention of the global REE industry
I am viewing Geomega like I have (very successfully) viewed our biotech investments in the past. A higher risk speculation that takes time to mature, but if proven "could" produce exponential capital gains.
Geomega has now validated what industry only believed was a "theory".
We would be watching to see the success OR failure of the next stages of separation
. If that occurs, then the valuation could change again - quite dramatically.
It is expected that news will come within the next two to four weeks (subject to any unforeseen delays).
Beyond that a person would need to see how they finance a full scale pilot plant and commercialize the entire process. Fortunately the world is eager to distance itself from REE dependency on China so financing may not be the issue.
If Geomega is able to prove that they are able to separate ALL the REE's, then I suspect someone large could be VERY interested in taking them over (as the licensing rights alone could become very valuable).
If the market cap of the company does not move in line with the stages of technology development (as we saw in the news release mid January), then the odds of them becoming a takeover target increase substantially.
An interim update on Geomega and Dysprosium was previously released to Ticker Trax subscribers and we will continue following them with subscribers so long as the company is successful in separating (all) the REE’s with this new technology.
Geomega has recently released a new PDF presentation for investors and it is very insightful.
Disclosure: Danny Deadlock owns 50,000 shares of GMA.