Equitorial’s New Business Model Reduces Risk, Accelerates Cash Flow
Shareholders of Canada’s nearly 1,700 publically traded mining companies are a pretty resilient bunch. That said, over the last several years, declining commodity prices have resulted in mine shut downs, decreased exploration and an ongoing malaise that has resulted in the most challenging financing environment in a generation. In 2012, the top 100 mining companies on the TSX Venture raised 41% less in equity financing than in 2011.
The immediate need within the mining industry for innovative measures to reduce investors’ concerns regarding exploration, operating economics, environmental and investment risk is of paramount importance.
In today’s volatile mining climate any company providing a unique technology or business model that can potentially alter the valuation metrics of the entire sector is significant and worthy of further consideration.
Equitorial Exploration Corp. (TSX.V: EXX) (OTC: EQTXF), through its 45% owned subsidiary, First Nevada Mining Corp., (FNMC) has developed a unique, patent pending metal extraction process and an innovative new business model for the mining sector. Equitorial holds an option and a Right of First Refusal to purchase the balance of FNMC.
“The business efficacy of this portable and patent pending metal extraction technology cannot be overstated,” states Dean Pekeski, President of Equitorial Exploration. “First Nevada has developed a processing model for mining companies, at little or no up-front cost to them, to accelerate cash flow, improve market valuations, provide much needed capital, and operate with a significantly lower environmental impact.”
In the current environment, there are a significant number of potential mines with smaller ore bodies that are considered uneconomic using traditional metal extraction processes because of high up front CAPEX costs. Many companies are unable to advance their project due to the challenging financial environment resulting from lower metal prices and the dearth of exploration and development capital. Bringing a system to market that can address these issues for companies with a small ore body should attract significant investor potential.
Central to FNMC’s business model is the proprietary portable recovery system, developed by FNMC at a cost of over $3.5 million during the past 3 years, which can be set up on-site and processing ore within a week. Moreover, the system offers reduced energy and operating costs along with minimal or no tailings ponds when compared to conventional mineral recovery processes.
The systems multi stage gravity concentration, which results in a mass reduction of up to 90% with very little metal loss, allows small-scale miners to produce a high value concentrate with low CAPEX and operating costs. This higher-grade concentrate is then sold or subjected to further intensive downstream processes. While the system reduces the amount of ore to be processed, it also concentrates it to much higher grades. The system is completely scalable and can ramp up to 2,000 tonnes a day or more.
Why intensively process 100% of the ore when the metal is contained in only 10% or less? Additionally the system reduces or eliminates the need for or use of toxic cyanide or mercury.
Water use is often a major inhibitor to processing, as permits are difficult if not impossible to obtain in many jurisdictions. The system’s integrated water recycling circuit uses proprietary technology to efficiently recycle process water thus limiting environmental discharge and conserving water. The self-contained water processing and recycling units are so efficient that only minimal amounts are lost to evaporation and limited waste moisture levels. FNMC’s ‘Intelligent’ plants are self-managing and can actually be monitored remotely on a smart phone.
The system’s combined water clarification and filtration technologies allow operators to recycle virtually all of the process water used at a typical mine site. This conserves water, minimizes environmental discharge and significantly reduces or eliminates the necessity for tailings ponds.
The financial arrangement for the business model is a simple profit sharing with the mine operator after costs. Needless to say, the benefits to the operator are myriad. By providing the operators of smaller mineral deposits near term cash flow, a reduction or elimination of the need for tailings dams and a simplified and accelerated permitting process due to the limited environmental footprint the value in these small deposits may be unlocked.
Immediate cash flow may reduce or negate the need for external financing as the funds from processing can be put back into mine development and production. That said, the operator’s increased return on investment and production-based valuation metrics make it a much more attractive candidate for capital investment. Employing the funds from operations would of course be non-dilutive financing.
These proprietary technologies deliver real growth alternatives to a mining industry and shareholders that have experienced significant challenges in recent years. The Company is engaged in aggressive marketing of its solutions and is already experiencing several inbound processing enquiries per week.
Dean Pekeski continues: “As a company and philosophy, EXX’s mandate is to reduce or negate the significant risks to both our shareholders as well as those in the mining industry. First Nevada’s technology offers a unique marriage of growth, environmental stewardship and renewed viability to miners that, as a result of global economic forces can’t advance their deposits. FNMC offers aggressive solutions that address and deal head on with these very real impediments to growth.”
Pekeski, a professional geologist and current EVP of Western Potash and his team bring significant experience to Equitorial with a proven record of international mining success. Management has confidence that they can deliver sustained and ongoing shareholder value.
The Bottom Line
Equitorial’s uniqueness as a potential investment is vast and should appeal to several investor-centric groups; mining, environmental and technology.
Not only can the technologies be applied to ore bodies, but also to economic treatment of tailings. Given the recent issues with tailings ponds as illustrated by the Mount Polley spill/disaster, the timeliness of this technology is fortuitous and likely represents significant growth potential, both in the mining sector and the multi-billion dollar environmental remediation market.
Given the self-contained nature, the portable and flatbed transportable technology can be placed almost anywhere, including environmentally sensitive areas as well as the most arid and unforgiving of locations. The technology also has military and government soil remediation, contamination and heavy mineral cleanup applications.
Shareholders should note that management has structured the Company to exhibit severe barriers to entry by developing proprietary natural flocculation formulas. Within FNMC there are two patents pending on the technologies and processes and one on the business model. It is both first to market and appears to have a virtually open path to rapidly advancing its growth.
The word appears to already be permeating through the mining community as EXX is fielding several expressions of interest per week.
Here is an apparently peerless company that is both a low risk and low cost operator, has developed cutting edge extraction and environmental technology and boasts a management team that has a significant personal financial stake in the success of Equitorial.
Those few facts alone should engender significant and growing investor interest.
EXX trades at $0.25 with a market cap of $7.31 million.
For more information on Equitorial’s proprietary technology please click here.
Bob Beaty for The Bottom Line Report.
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