Miscellaneous init innovation in traffic systems SE: MTS Partners with INIT for Account-Based Fare System in San Diego

As previously announced in the adhoc release on 14 December 2018, the Metropolitan Transit System (MTS) has now signed the contract with INIT Innovations in Transportation, Inc – a wholly owned US subsidiary of init SE – for the delivery of an account-based, open architecture electronic fare system in San Diego. The total contract value is more than USD 30 million including the option operation and maintenance.

"Fare collection is at the core of our business and purchasing options are more diverse than ever. It’s incumbent that we keep pace with the technology our customers demand," said Paul Jablonski, MTS chief executive officer. "INIT has a track record of success partnering with transit agencies to develop customized next generation fare collection solutions. We look forward to rolling this out in 2021."

INIT will also provide more than 100 cash and about 70 cashless Ticket Vending Machines (TVM) to facilitate the convenient purchase of tickets and fare media. Ticket office terminals and mobile sales units will be included in the project to allow MTS to sell fares during large events.

Additionally, INIT will deliver about 900 fare validators for use on MTS buses and at rail station platforms. The validators will accept closed-loop payments such as an MTS-branded smartcard and be capable of accepting open payments such as bank-issued debit/credit cards and mobile wallets using Google Pay, Apple Pay or Samsung Pay.

The core intelligence of MTS‘ next generation fare system will be INIT’s back-office processing and revenue management solution, MOBILEvario. MOBILEvario utilizes an open architecture design to integrate with various third-party vendors for a fully unified system. Due to MOBILEvario’s multi-client capability, MTS will have the ability for a region-wide, interoperable fare structure.

MTS chose INIT because of their goal to implement proven technologies and secure a provider that can ensure a smooth transition to the new system.

About MTS

MTS operates 95 bus routes and three Trolley lines on 53 miles of double-tracked railway. Every weekday 300,000 passenger trips are taken on MTS bus and Trolley services in 10 cities and the county. In FY 2018, MTS served 86 million riders.

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Altair stärkt strategisches Wachstum mit neuen Führungskräften

Altair (Nasdaq: ALTR) erweitert sein Team mit Amy Messano als Chief Marketing Officer (CMO) und Ubaldo Rodriguez als Senior Vice President, Global Sales. Damit baut das Unternehmen seine weltweite Vertriebs- und Marketingorganisation weiter aus, um sein strategisches Wachstum zu stärken.

Amy Messano wird Altairs Marketing unternehmensweit und regional sowie das Solutionsmarketing leiten. Bis vor kurzem war sie Vice President Integrated Marketing & Communications bei Aptiv (vormals Delphi) und hatte davor eine Senior Marketing Position bei Microsoft inne.

Ubaldo Rodriguez wird Altairs weltweites Umsatzwachstum vorantreiben und berichtet an Altairs Chief Revenue Officer Nelson Dias. Rodgriguez war bis vor kurzem VP Sales Americas bei ANSYS, wo er seit 2004 verschiedene Vertriebs-Positionen bekleidete.

„Wir freuen uns sehr darüber, Amy und Ubaldo in unserem Team begrüßen zu können. Amy bringt einen fundierten Marketing-Hintergrund im Bereich Software und Wachstumstechnologien, einschließlich Zukunftsmobilität in unsere internationalen Marketingteams mit. Wir sind überzeugt, dass Ubaldo mit seinen Erfolgen im Bereich Umsatzwachstum unseren Vertriebsmitarbeitern zu weiterem Erfolg verhelfen kann“, sagte James Scapa, Gründer, Chairman und Chief Executive Officer von Altair. „Ihre Erfahrungen und ihr Know-how erreichen uns zum richtigen Zeitpunkt, wo wir gerade dabei sind, unsere Softwareplattformen mit weiteren Technologie-Lösungen auszubauen.“

„Ich kenne Altair als Wettbewerber seit vielen Jahren, und die beeindruckende Weiterentwicklung durch Investitionen in Forschung und Entwicklung sowie Technologieübernahmen hat das Unternehmen zu einem Zentrum der Softwarebranche gemacht“, sagte Rodriguez. „Das Wachstum und die Bandbreite von Altairs Softwareportfolio in Kombination mit seinem disruptivem Geschäftsmodell bietet eine spannende neue Möglichkeit, um Organisationen weltweit mit leistungsstarken Lösungen an Altairs Wertschöpfung teilhaben zu lassen.“

Altairs globale Ausrichtung bietet umfassende, hoch entwickelte Softwarelösungen für eine breite Palette an Industriezweigen und Geschäftsbereichen. „Die Diversität der Altair Kunden und der starke Technologiefokus sind eine einzigartige Kombination mit einer überzeugenden Zukunft“, sagte Messano. „Ich freue mich, Teil eines dynamischen und smarten Teams zu sein.“

Der bisherige CMO Jeff Brennan wurde zum Chief Product Officer von Altair 365 ernannt. Als Plattform für die Zusammenarbeit in der Cloud vereint Altair 365 Simulationslösungen für generatives Design, Engineering und Manufacturing in einer einzigen, intuitiven Anwenderumgebung. Diese neue Position steht im Einklang mit Altairs Wachstumsstrategie in einer sich verändernden, dezentralen Berechnungslandschaft.

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Sibanye-Stillwater strategic update


Salient points

  • The Group achieved a record safety milestone of 5 million fatality free shifts on 4 January 2019
  • Production from the second stope at the Blitz project commenced in October 2018. Together with record palladium prices, this is expected to provide a significant increase in revenue from the US PGM operations
  • The SA PGM operations have benefited from higher rand PGM basket prices in H2 2018 with consistently good operational performance and 4E PGM production for 2018 of approximately 1.17 Moz, which is ahead of guidance for the year
  • Post the South African Competition Tribunal’s approval of the Lonmin Acquisition (subject to certain specific conditions imposed on Sibanye-Stillwater), AMCU filed an appeal on 19 December 2018. The parties await a final hearing date to be set down
  • Industrial action affecting the SA gold operations since 21 November 2018 continues. Strike plans have successfully been implemented to limit losses during the ongoing strike action with approximately 34,600kg (1,1Moz) of gold produced for 2018
  • Group liquidity remains sound. The debt maturity profile has been prudently structured, with major debt repayments only due from mid-2022

Sibanye-Stillwater (Tickers JSE: SGL and NYSE: SBGL – http://www.commodity-tv.net/c/search_adv/?v=298294) wishes to update stakeholders on relevant events since it last updated the market on 1 November 2018.

Record safety milestone achieved

On 10 December 2018, Sibanye-Stillwater’s South African operations (both gold and PGM), achieved a notable safety milestone of 4 million fatality free shifts, with the Group recording 5 million fatality free shifts on 4 January 2019. These safety milestones represent are notable and represent a record safety performance for the Sibanye-Stillwater Group. Sibanye-Stillwater remains committed to providing a safe working environment for all employees.

The considerably higher palladium price and continued production build up at Blitz, benefits revenues from the US PGM operations

The palladium price has increased by more than 60% from US$744/oz to over US$1,300/oz, since the acquisition of Stillwater was announced on 9 December 2016. The current 2E PGM basket price of US$1,190/oz is 19% higher than the average 2018 2E PGM basket price of US$996/oz. Higher basket prices, together with increased production due to initiation of mining operations in a second stope 

block at Blitz in October 2018, is expected to positively impact revenue at the US PGM operations. 2E PGM mined production for 2018 is expected to be approximately 590,000oz, in line with guidance for the year.

Robust performance from the SA PGM operations sustained

The SA PGM operations continue to perform well, with 4E PGM production for 2018 expected to be approximately 1.17Moz, ahead of published annual guidance and costs at the bottom end of guidance. The robust palladium and rhodium prices (up more than 40% in US$ terms in 2018), together with the weaker rand:dollar exchange rate (depreciating by 16% during 2018), boosted the rand 4E PGM basket price by 19% during the course of the 2018 year to more than R15,700/oz, significantly enhancing revenue.

Approximately 74% of the Group’s adjusted EBITDA* in the first six months of the year was derived from the PGM operations, increasing to 85% in Q3 2018. In Q3 2017, PGMs contributed 49% of Group adjusted EBITDA. The strategic benefits of the Group’s commodity and geographic diversification are clearly evident, with operational disruptions in the gold division offset by rising PGM prices and the solid operational performance of the PGM operations.

Strike action at the SA gold operations

Strike plans at the SA gold operations have been implemented in order to limit losses during the Association of Mineworkers and Construction Union (AMCU) strike action, which has been ongoing since 21 November 2018. This has been achieved by optimising production through the active deployment of employees reporting for work to specific production areas and minimising overhead costs by shutting down services (ventilation, refrigeration, etc.) to areas which are not operational. As per convention, employees who do not report for work are not paid, with wages generally accounting for around 50% of operating costs at the deep level gold mines.

Due in part to the successful implementation of these strike plans, gold production (excluding DRDGOLD production) for 2018 is expected to be approximately 34,600kg (1.1Moz), which is marginally below previous guidance of between 35,000kg and 36,000kg (1.13Moz and 1.16Moz) for the year.

We are saddened that there have been four employee fatalities, and several other employees have sustained injuries as a result of violent behaviour related to the strike. Sibanye-Stillwater condemns this intimidation and violence, and has engaged the unions directly and ultimately through the Labour court (the Court) and the Commission for Conciliation, Mediation and Arbitration (CCMA) in order to try and restore peace and stability to the operations.

Despite an apparent moderation in incidents of violence and intimidation following an interdict on violence from the Labour Court and the establishment of picketing rules by the CCMA at the end of November 2018, violent episodes, including burning of houses occupied by non-AMCU members in Blybank near Carletonville, have resumed in 2019. 

During the course of the strike, the collective membership of the National Union of Mineworkers (NUM), UASA and Solidarity has increased to over 50% of the employees at the South African gold operations and on 13 December 2018, an amended wage agreement was signed with NUM, UASA and Solidarity, which allowed the agreement which was reached on 14 November 2018, to be extended to all employees at its South African gold operations, in terms of Section 23(1)(d) of the Labour Relations Act, No 66 of 1995 (S23(1)(d)).

On 22 December 2018, the Court ordered the CCMA to complete an independent verification exercise and report back to the Court on 7 January 2019. Management and AMCU have not been able to agree on the terms of reference for the verification exercise and the CCMA adjourned the proceedings. The CCMA has subsequently received guidance from the Court on the way forward with regards to the verification exercise, which will now proceed. We continue to pursue a peaceful end to 

this strike and are confident about the veracity of the employee union affiliations presented to the Court.

For reference to more information on the strike action, please refer to the various media releases on https://www.sibanyestillwater.com/….

The Lonmin acquisition

Approval by the South African Competition Tribunal for the proposed acquisition of Lonmin Plc (Lonmin), was received on 21 November 2018, subject to certain specific conditions imposed on Sibanye-Stillwater.

On 19 December 2018, AMCU filed an appeal against this decision with the South African Competition Appeal Court. Sibanye-Stillwater and Lonmin are awaiting a final hearing date to be set down.

Sibanye-Stillwater remains fully committed to the transaction, which it considers to remain compelling from both a strategic and value creation perspective and will enhance the sustainability of the Lonmin operations for the benefit of all stakeholders.

For further information in relation to the expected synergies, please refer to page 17 and pages 58 to 60 of the offer announcement dated 14 December 2017, available on https://www.sibanyestillwater.com/….

Balance sheet strength and flexibility

Group liquidity remains sound with the 2018 Stream financing allowing for a 28% reduction in bond obligations (from US$1,500 million to US$1,085 million). The Group’s debt maturity profile has been carefully structured, with major debt repayments only due from mid-2022. As at 31 December 2018 the Group had approximately US$417 million (R6 billion at exchange rate of US$/R14.48) undrawn and available within its revolving credit facilities.

2018 Year end results presentation

Sibanye-Stillwater’s operating and financial results for the six months and the year ended 31 December 2018 are expected to be released on Thursday, 21 February 2019.

* The Group reports adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) based on the formula included in the facility agreements for compliance with the debt covenant formula. Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of performance under IFRS and should be considered in addition to and not as a substitute for, other measures of financial performance and liquidity.


This announcement contains forward-looking statements, including “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “target”, “will”, “would”, “expect”, “can”, “unlikely”, “could” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements, including among others, those relating to our future business prospects, financial positions, debt position and our ability to reduce debt leverage, plans and objectives of management for future operations, plans to raise capital through streaming arrangements or pipeline financing, our ability to service our Bond Instruments (High Yield Bonds and Convertible Bonds), our ability to achieve steady state production at the Blitz project and the anticipated benefits and synergies of our acquisitions are necessarily estimates reflecting the best judgement of our senior management and involve a number of known and unknown risks, uncertainties and other factors, many of which are difficult to predict and generally beyond the control of Sibanye-Stillwater, that could cause Sibanye-Stillwater’s actual results and outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in the Group’s Annual Integrated Report and Annual Financial Report, published on 2 April 2018, and the Group’s Annual Report on Form 20-F filed by Sibanye-Stillwater with the Securities and Exchange Commission on 2 April 2018 (SEC File no. 001-35785). These forward-looking statements speak only as of the date of this announcement. Sibanye-Stillwater undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this announcement or to reflect the occurrence of unanticipated events, save as required by applicable law.

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Kees Dekker Versus Trilogy Metals: An Analysis

1. Critical Investor Introduction

This time Kees analyzed Trilogy Metals, which sports one of the highest grade copper projects worldwide (Arctic). I found Kees‘ report interesting enough to obtain company feedback, and after a lengthy process of 6 weeks here is the summary of the end product for your convenience. Kees found several reasons to increase opex meaningfully compared to the PFS, so as a consequence the post-tax NPV8 came down significantly (from US$1412.7M to US$803.8M @US$3.00/lb Cu), and I estimated the adjusted IRR at 23% (from 33.4%), which are still strong numbers. At a current market cap of US$226M one could argue that Trilogy is undervalued, as Bornite hasn’t been taken into consideration yet.

However, Trilogy is using an open pit scenario for Arctic with a high strip ratio because of the poor rock competence, otherwise I believe an underground scenario would have been more profitable for Arctic. As Bornite is very close to Arctic, about 30km away, chances are that the underground resource of Bornite represents similar issues, and the open pit component of Bornite is most likely too low grade to be economic at the moment, as the operating cost of Arctic already outscores estimated Bornite revenues per tonne for both the PFS and Kees‘ own estimates. The strip ratio for Bornite most likely seems to be lower than Arctic , but not so much for resulting operating cost to be significantly lower than revenues. Therefore I am not inclined to add much value for Bornite, as it is just a leveraged play which needs a higher copper price in my view to be economic. I found the LNG discussion between Kees and Trilogy management very interesting, it seems Arctic is dependent on LNG but hasn’t secured access to it yet.

All in all, taking into account the very nordic location for Arctic, PFS stage and several question marks, I believe Trilogy is fair valued at the moment. See for yourself in the following summary by Kees Dekker, and the full version can be found on www.criticalinvestor.eu, so you can make up your own mind about this company.

All presented charts are provided by Kees Dekker, unless stated otherwise.

All pictures are company material, unless stated otherwise.

Trilogy Metals – A Very Good Investment Opportunity for the Medium Term

2. Introduction

Trilogy Metals Incorporated ("Trilogy") (NYSE:TMO) (TSX:TMQ) is a Canadian gold mining company, that started off on 27 April 2011 as NovaCopper Incorporated, a wholly-owned subsidiary of NovaGold. The NovaGold security holders approved on 28 March 2012 a spinout involving NovaCopper shares being distributed to NovaGold shareholders as a return of capital. The shares were then listed on the Toronto Stock Exchange ("TSX") and New York Stock Exchange ("NYSE") on 25 April 2012.

At the time of the spin-out NovaCopper owned the Ambler project in Northwest Alaska and the rights to the adjacent property, referred to as Bornite Lands, through an exploration and option agreement with an Alaska Native Corporation, Nana Regional Corporation Incorporated ("NANA"). The Ambler project had been purchased by Novagold in December 2009 from two Kennecott subsidiaries in 2009 for US$24 million in cash and US$5 million in Novagold shares. The two properties, Arctic and Bornite, combined were from then on referred to as the Upper Kobuk Mineral Projects ("UKMP").

In February 2012, before the listing, a preliminary economic assessment ("PEA") had been completed on the Arctic deposit within the Ambler project area based on 30.8 million tonnes ("Mt") of Indicated and Inferred Resources with very high grades of copper (approx. 4.5%) and good grades of zinc (approx. 5%), plus gold, silver and lead credits. The study, which assumed underground mining, arrived at a net present value at a discount rate of 8% ("NPV8") of US$533 million and an internal rate of return ("IRR) of 26%.

One year later a PEA study was completed assuming open pit mining and an expanded throughput rate, halving the life of mine ("LOM") from 25 years to 12 years. This did not improve the economics compared to the previous PEA: an NPV8 of US$537 million and 17.9% IRR. In addition, discussions were entered into with the Alaskan authorities towards advancing the Amble Mining District Industrial Access Road ("AMDIAR") to give better access to the UKMP projects.

Progress in advancing AMDIAR has been very slow with the Environmental Impact Study ("EIS") only authorised by Alaska’s Governor in October 2015 and a project kick-off meeting held in early December 2016 (more than one year later!). The latest news is more promising with the draft EIS now scheduled for release for public comment by the end of March 2019.

Between 2012 and 2017 the Arctic project advanced slowly, probably because of the low prevailing base metal prices. Records show the company consistently spending below the guidance for the year, carefully managing its cash resources until April 2017 when it entered into an option agreement with South32 Limited ("South32"), a large diversified base metal company. The option was for a 50/50 joint venture with respect to Trilogy’s UKMP assets and the Exploration and Option to Lease Agreement with NANA Regional Corporation, Inc. ("NANA"). To keep the option agreement valid South32 must contribute a minimum of US$10 million each year, for a maximum of 3 years. During these years South32 may exercise its option at any time to form the 50/50 joint venture. To subscribe for 50% of the JV, South32 will contribute a minimum of $150 million, plus any amounts Trilogy spends at the Arctic Project over the next three years to a maximum of US$5 million per year, less an amount of the Initial Funding (the US$10 million annual funding) contributed by South32.

Since South32’s involvement, and with much better market conditions, the UKMP projects advanced much more rapidly.

In mid December 2017, with a major shareholder wishing to dispose of its shares, South32 acquired approx. 6.5 million shares (6% of the outstanding shares) and Rick Van Nieuwenhuyse, Trilogy’s CEO increasing his shareholdings by approx. 1.7 million shares to 2.8 million shares, or approximately 2.6%.

The above paragraph can be seen as a great endorsement of South32 (and the CEO in his personal capacity) of the prospects for the UKMP assets.

On 20 February 2018 the company announced the results of the PFS for the Arctic project, assumed to be developed as an open pit operation, with an after-tax NPV8 of US$1,413 million and IRR of 33.4%. This report was filed on the Sedar website and constitutes the basis for the valuation of the Arctic project in this report.

In July 2018 another resource estimation for Bornite added almost 35,000 tonnes of contained cobalt at an average grade of 0.019% to the 2.9 million tonnes contained copper resources at an average grade of 1.74% Cu, defined in 2016.

Figure 2_1 shows the share price performance of Trilogy since April 2012 on the Toronto stock exchange compared to the copper price over that period.

It is not clear what caused the sharp drop in share price immediately following listing, but this could be related to large Novagold shareholders disposing of the share as the base metal nature may not have been in line with a precious metal focused investment strategy. Since then the share price has roughly followed the fortunes of the copper price until the beginning of 2018 when it started to rise despite a sharp drop in the copper price. On 14 December 2018 the price dropped 12% following disappointing infill drill results for Bornite.

3. Historical Performance

Table 3_1 gives the historical financial performance from 1 December 2010 (financial yearends are on 30 November) until 31 August 2018 for Trilogy.

Table 3_1 shows that:
– Trilogy almost fully expensed its exploration work.
– Outlays were high until 2013 with the numbers in the 2011 financial year reflecting activities funded by Novagold’s. In 2012 the financing was fully provided by Novagold.
– After 30 November 2013 Trilogy’s management reduced its annual expenses to a remarkable constant ± US$8.6 million, only to increase expenditure with improving metal prices and the involvement of South32.
– The remarkable feature of historical financial performance is that it required very little shareholder support by first drawing down the cash balance and then acquiring cash through an all paper transaction in 2015 (see yellow highlighted cell), followed by South32 funding, which is accounted for under "Investment".
– Given the US$24 million acquisition in 2009 by Novagold and the total spent of US$100.3 million since November 2010 total investments in the projects are probably approximately US$125 million.

The table above illustrates that management hardly called upon its shareholders for funding. It has spent US$100 million and needed to tap shareholders for only US$36 million, most of which occurred in 2018 for US$28.8 million. One of the reasons for this is management being very modest with their own remuneration. In the nine months to 31 August 2018 they spent US$2.9 million on salaries, general and administrative expenses and investor relations. In addition US$0.4 million were spent on professional fees on an annualised basis. Stock-based compensation was more generous at US$1.3 million. One can conclude that money spent is really for advancing projects, slowly in the years before South32’s involvement, much more rapidly since.

The following section will look into what past expenditure has achieved for the current shareholders in terms of project value.

4. Valuation of the Arctic Project

4.1 Mineral Resources

The technical information, illustrations and wording in Section 4.1 and Section 4.2 of this report have been drawn from a NI. 43-101 compliant technical report in support of the PFS, dated 6 April 2018 by Ausenco Engineering Canada Incorporated ("Ausenco") unless specifically stated otherwise.

The PFS is based on mineral resources amounting to 39.5 million tonnes, which is 45% more than the resources in 2013 (see Table 4.1_1 for the comparison).

The 2017 resource estimate is based on only 17 additional in-fill holes compared to the 135 holes used for the 2013 resources. The large increase in resources can to a minor extent be explained by the lower grade because of a lower cut-off grade resulting more favourable input parameters. According to Trilogy management, the increase in total resources is explained by much wider than previously interpreted widths of the massive sulphide intersected by the infill holes and different geological interpretations that have added previously excluded material.

Figure 4.1_1 contains two cross sections through the copper grade block models, which have been extracted from pages 14-32 and 14-33 of the Ausenco technical report, to illustrate the shape and extent of the Arctic deposit.

4.2 Mineral Reserves

The pit optimisation parameters for the reserve pit shell are based on slightly more conservative values than for the resource pit shell as shown in Table 4.2_1.

For the reserves estimation dilution was applied to the undiluted resources in two steps:
– Planned dilution, including waste that is included in the 5 m x 5 m x 2.5 m smallest mining unit ("SMU"). The small size SMU assumes mining equipment that can be highly selective in what is broken and loaded.
– Contact dilution: assumes that the grade of a given SMU block will be diluted "by 20% of tonnage from each of the four adjacent blocks". This does not make much sense as stated because it implies that the particular SMU would have 80% material from adjacent blocks. If an adjacent block is classified as Inferred Mineral Resource, its grade is considered to be zero. If the adjacent block is classified as Indicated, but below cut-off, dilution is taken at the grade of the adjacent block.

Table 4.2_2 gives the mineral reserve statement as declared by Ausenco.

The table shows that Indicated resources have been diluted by between 22% and 25%. The explanation for the reserve tonnage being less than an extra 20%, instead of increased by the dilution rate is due to mine losses incurred.

4.3 Economic Valuation – Arctic Project

4.3.1 Introduction

For this valuation the input parameters as suggested by the PFS have been modelled, also to verify that the taxes have been modelled accurately. Thereafter input parameters have been amended, or flexed to determine their impact on the cash flow.

4.3.2 Metal Prices and Marketing Terms Assumed

This valuation has modelled For the Base Case of this valuation, the spot prices on 14 December 2018, US$1,239/oz Au, US$14.55/oz Ag, US$2.78/lb Cu and US$1.18/lb Zn and US$0.99/lb Pb and an exchange rate of C$1.338 per US Dollar were used to determine the value of the discounted cash flow.

Based on the marketing terms assumed by Ausenco for the various concentrates this valuation shows that the copper concentrate accounts for more than 63% of total revenue and copper metal is responsible for slightly more than 60%. Zinc adds another 21% to revenue. The Arctic project is therefore dominantly a copper-zinc project. The contribution of lead is negligible, but recovery of the metal is necessary to clean the copper concentrate and to capture the precious metals as by-products. The precious metal content is the reason for the lead concentrate being the highest value product. The high off-mine costs for zinc result in only 51.9% of the value of the metal produced being paid for.

Using the metallurgical recoveries, concentrate grades and metal prices assumed in this valuation, results in a 6% drop in at-mine revenue of US$438 million, of which US$260 million is accounted for by using the metallurgical performance suggested in the text of the PFS report and not the unsubstantiated improved PFS cash flow model assumptions.

4.3.3 Production Schedule

This valuation has adopted the production schedule in the feasibility study, which includes a three-year pre-production period, a first year of production at 85% of steady state plant throughput of 3.65 million tonnes per annum ("Mtpa"), followed by ten year steady state production and treatment of the remaining reserves in year 12.

The PFS cash flow model calculates the financial performance as if the go-ahead decision has been made. This valuation assumes that the three-year preproduction starts on 1 January 2020 with first construction activities during the year. This may be too optimistic and an additional 1-2 years required for studies and permitting.

4.3.4 Operating and Capital Expenditure

Table 4.3.4_1 shows the cost structure suggested in the PFS study compared to the 2013 PEA study, giving the same breakdown as used in the PEA.

The cost provisions have all been reduced from the PEA, partially by assuming that certain consumables (e.g. liquefied natural gas instead of diesel) are available, lower consumable and spares costs, or lower staffing levels.

The much lower processing cost is purely because of much lower power and consumables/spares provisions. The lower power cost is due to much lower electrical power unit cost generated on site of US$0.173/kWh generated with liquefied natural gas ("LNG"), compared to US$0.322/kWh in the PEA, generated with diesel. According to the PFS the LNG will be supplied "via existing fuel supply networks near Port Mackenzie, Alaska."

The phrasing is somewhat misleading as Trilogy actually assumes the implementation of the massive (US$43 billion) Alaska LNG Project (however, production planned for overseas exports), alternatively the completion of expansion of the LNG facility at Fairbanks, which if approved, financed and constructed would have more production by 2020. At the time of the PFS publication date the Pentex Alaska Natural Gas Company ("Pentex") was owned by the Alaska Industrial Development and Export Authority ("AIDEA"), the same agency is responsible for the access road construction, and which was according to Trilogy "eager to finance expansion of the plant". Pentex was however sold in June 2018 to the Internal Gas Utility ("IGU"), which is a public corporation with has a its mission "to provide low cost, clean burning, natural gas to the largest number of customers in the Fairbanks North Star Borough ("FNSB") as possible, as soon as possible". With that AIDEA has lost much control over promoting the project.

Access to the Arctic Project is proposed to be via a road, referred to as Ambler Mining District Industrial Access Project ("AMDIAP") approximately 340 km long, extending west from the Dalton Highway where it would connect with the proposed Arctic Project area. The plan is for AIDEA, a state-owned private company, to raise the finances and construct the road and recover its investment through a toll levy. The PEA study assumed that the toll would be based on a US$150 million 30-year bond at 5% interest rate, with the Arctic Project paying US$9.7 million each year for its 12 year LOM. In the PFS this has increased to US$300 million and a 6% and 15-year. Yet, the toll was assumed still US$9.7 million annually for 12 years. No explanation is given why the annual toll has not increased. The PFS has however also included a road maintenance fee of US$2/tonne treated.

When benchmarking the suggested operating costs against the open pit Red Dog mine in Alaska, the unit costs compare very low, less so the mining cost. A NI 43-101 technical report by Teck dated 21 February 2017 gives mining cost of US$3.00/t mined for waste and US$3.15/t for ore with milling costs of US$29.11/t, Indirect cost (defined as overhead for mining and milling, camp and personnel transport costs) of US$7.011/t and G&A cost (defined as overheads for other service departments) of US$17.66/t. The mining unit rate of Teck therefore excludes technical services and supervisory costs, which seem to be assumed included in the Trilogy rate. Moreover, applying the rates for annual Indirect and G&A expenses to the current mill rate of 4.18 Mtpa, more than US$100 million is spent on these items alone each year.

Because of the unsatisfactory motivation for the various operating cost estimate reductions and the Red Dog cost structure, this valuation has added a 20% adjustment to increase the unit operating cost to US$55.73/t.

In addition, annual corporate overheads of US$5.6 million per annum were included.

4.3.5 Capital Expenditure

Table 4.3.5_1 shows the capital cost estimates suggested for the PFS compared to the provisions in the 2013 PEA study.

The information provided in the PFS is impossible to reconcile to the PEA values as they use different breakdowns.

The table shows a general decline in LOM capital expenditure with higher initial capital expenditure more than compensated for by lower sustaining capital expenditure. This is mainly due to very large savings on the tailings dam and a change in approach to waste handling, now assumed stored in a much cheaper, combined facility. There is nothing that stands out as very much underestimated, but it is difficult to determine what the total plant cost is including construction indirects, EPCM, etc. One would expect that the total plant in a difficult and isolated location such as Arctic with a monthly capacity of 3.65 Mtpa would cost more than US$210 million. Owner’s cost of slightly more than US$7 million per annum looks very low for a project such as Arctic.

This valuation has adopted the provisions and will investigate through sensitivity analysis the effect of higher capital expenditure.

A mine that produces concentrates needs to make substantial investments in working capital, with a long pipeline of concentrates shipped to the off-taker and being paid with a delay. This valuation comes to a peak investment of US$76.1 million, fully recovered at the end of the LOM, ignoring the risks of obsolesce, degradation and realisation costs.

4.3.6 Royalties and Taxes

There are two royalties of 1% NSR applicable, one for the benefit of NANA and the other a retained interest by Falconbridge, now owned by Osisko Royalties. The latter is subject to a buy-out at any time of US$10 million. This valuation has assumed exercising the buy-out at the start of year 1. The PFS seems to ignore this outlay.

For the calculation of taxes reference was made to a 2012 slide presentation by PWC at the American School of Mines entitled Basics of U.S. Mining Taxation and a note by PWC with the title Corporate Income Taxes, Mining Royalties and Other Mining Taxes; A Summary of Rates and Rules in Selected Countries, dated June 2012.

Applicable taxes for mining companies in Alaska are:
– As from 1 January 2018 Federal Income Tax at 21.0%, which is a great reduction from the 35% applicable at the report date of the PEA.
– Alaskan State Tax another ("AST") 9.4%.
– Alaskan Mining License Tax ("AMLT") – 7.0%

This valuation comes to a slightly higher tax amount that the PFS cash flow model.

Obviously this valuation’s tax model introduces a slight negative bias into the results.

4.3.7 NANA’s Beneficial Interest

Whereas NANA may well elect to purchase a 25% interest by paying the 25% of moneys invested minus US$40 million, it has been assumed here that they will elect for a 15% free carried net profit interest ("NPI"). According to the CEO of Trilogy, participation in net profits kicks-in after Trilogy/JV Company has earned a 9% return on its investments. The NPI is fully deductible for tax purposes. To avoid circular references in the cash flow model, this valuation has calculated the NPI on an after-tax basis, which should have little overall impact on the return to Trilogy/JV company.

4.3.8 Results

Table 4.3.8_1 compares the financial performance as per PFS with that for this valuation. 

The net effect of the changes to the input parameters, being longer lead time, more plant feed, lower metallurgical recoveries and less favourable concentrate qualities, the buy-out of the Falconbridge royalty, 20% higher operating cost, the inclusion of investments in net current assets and more conservative tax calculation, is substantially lower cash flow for the Arctic project before having to give NANA its 15% share after earning a 9% return.

Under both scenarios the cash-operating margin is very high at between 64.2% and 71.5%. With an effective tax rate of 22%, much cash flows to the bottom line. The initial capital expenditure is less than 1.3 times annual at-mine revenue, which compares low to other mining projects. The pay-back period on an undiscounted basis is 2.8 years and the IRR is 18.1% assuming all funding to cover initial capital expenditure is arranged upfront and parked in risk-free financial instruments, which generate no real return.

The conclusion is that, at current metal prices, Arctic is a very robust project.

Sensitivity analysis shows that for every percentage point increase in copper and zinc prices the NPV8 increases by US$23.4 million (i.e. 2.9%) and for every percentage point increase in the LOM capital expenditure (i.e. US$8.5 million) the NPV8 drops by US$5.3 million (0.7%). The small negative effect of operating cost and capital expenditure increases relative to the Base Case values again demonstrate the robust nature of the project.

5. Review of the Bornite Project

The latest resource estimation in a NI.43-101 compliant technical report, dated 20 July 2018, by BD Resource Consulting incorporated ("BDRC") and Sim Geological Incorporated ("SIM") arrives at the numbers reproduced in Table 5_1.

The contained copper in the Bornite resource statement is approx. three times as large as the copper contained in Arctic reserves. Assuming the same 87% metallurgical recovery assumed for the floating cone used for the resource estimation and a concentrate of 30%, which reflects the bornite and chalcocite content at the copper price of US$2.78 on 14 December 2018 and the same marketing terms used for Arctic, total at-mine revenue of US$11.5 billion would be earned should all resources be mined. This excludes any byproduct revenue from cobalt, silver and gold. In terms of revenue, this would make Bornite almost 60% larger than Arctic.

The at-mine value of a tonne of open pit resource is US$39 and of a tonne of underground resources it is US$115. These are values that in principle should give good cash margins indicating that Bornite is a valuable asset. It is not really possible to give a value for the project, but at a (conservative) cash margin of 40% it would generate US$4.6 billion to cover capital expenditure and taxes, exactly the same as this valuation calculates for Arctic.

As Bornite will be able to benefit of some of the infrastructure of Arctic (e.g. access road, some of the camp and buildings), capital intensity will be reduced.

In conclusion, the share price should reflect a considerable premium for the Bornite project over and above the value of Arctic underpinning value of Trilogy.

6. The Enterprise Value of Trilogy Metals at 14 December 2018

At the share price of C$2.46 on 14 December 2018 and with 131.53 million shares issued the market capitalisation of Trilogy is C$323.6 million, or US$241.8 million.

At 31 August 2018 the company had 9.01 million options outstanding. The company unfortunately does not give exact details on exercise prices apart from weighted average prices for a number of options. All exercise brackets are at the current share price well in the money. Furthermore 1.55 million restricted and deferred share units were outstanding at 31 August 2018.

The company has 6.52 million warrants outstanding at an exercise price of C$1.52, therefore also in the money.

At 31 August 2018 the company had net current assets of US$15.5 million and no long-term loan.

Based on the above an Enterprise Value for Trilogy of C$313.7 million (US$234.4 million) is derived as shown in Table 6_1.

As the economics of the Arctic project are very robust, and Bornite shaping up as a very attractive bulk mineable deposit, it is highly unlikely that South32 will not exercise its option by April 2020. The JV company will receive US$150 million from South32 plus a maximum of US$5 million per annum Trilogy spends on the Arctic project minus South32 contributions of US$10 million per annum to advance Arctic and Bornite. Assuming that the option will only be exercised in April 2020, the JV company will receive US$135 million.

In other words, Trilogy’s intrinsic value is half of US$135 million plus the value of Arctic and Bornite. Based on this valuation Trilogy’s share in the option cash contribution and Arctic project are worth:

½ x (US$135 million + US$803 million) = US$469 million.

The value calculated above totally ignores any value for Bornite, which is substantial.

Conclusion: the market valuation of the UKMP projects is far below their intrinsic value, probably far below half. The probably reason for this is that development of any mine is still seen as years away.

This ends the summary of Trilogy Metals by Kees Dekker. If you have an interest in contacting Kees Dekker, this is possible through using the contact form on my website www.criticalinvestor.eu, which also hosts the full report as mentioned. Stay tuned for more analysis by Kees coming soon.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and has no position in this stock. Kees Dekker is also not a registered investment advisor, and has a long position in this stock. All facts are to be checked by the reader. For more information go to www.trilogymetals.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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EnWave Announces Fourth Quarter and 2018 Annual Consolidated Financial Results

EnWave Corporation (TSX-V:ENW | FSE:E4U) (“EnWave”, or the "Company" – http://www.commodity-tv.net/c/search_adv/?v=297852) today reported the Company’s consolidated financial results for the fourth quarter and year-ended September 30,  2018.

EnWave’s annual and interim consolidated financial statements and MD&As are available on SEDAR at www.sedar.com and on the Company’s website www.enwave.net.

Key Financial Highlights for 2018 and Q4 (expressed in ‘000s):

  • Continued revenue growth with Q4 2018 revenue of $7,355 compared to $3,630 for Q4 2017, an increase of 103%. Annual revenue of $22,825 for 2018 was higher than the previous year of $15,954, an increase of 43% of $6,871. NutraDried’s revenue increased by 252% to $16,503 for 2018 compared to $6,556 for 2017, driven by increased sales and distribution of its product Moon Cheese®.
  • Achieving gross profit of $8,910 for 2018 compared to $4,300 for 2017, an increase of $4,610 or 107%. Gross margin as a percentage of revenue was 39% for 2018 compared to 27% for 2017.
  • Reported positive net income for Q4 2018 of $75 compared to a net loss of $1,060 for Q4 2017, an improvement of $1,135. Decreased the annual consolidated net loss to $945 for 2018, compared to $2,986 for 2017, an improvement of $2,041 year-over-year.
  • Strengthened cash flow profile by reporting Adjusted EBITDA(*) for 2018 of $2,932, compared to $6 for 2017, an increase of $2,926. Adjusted EBITDA(*) for Q4 2018 was $1,300, compared to negative $278 for Q4 2017, an increase of $1,578. The increase in Adjusted EBITDA(*) throughout fiscal 2018 represents the Company’s growing ability to generate cash from its operations.
  • Further invested in selling activity with S&M expenses of $3,731 for 2018 compared to $2,160 for 2017, an increase of $1,571. S&M expenses increased as part of the strategy to invest in marketing, selling and promotional activities of Moon Cheese®. The Company also continues to invest in its business development strategy to commercialize its proprietary REVTM
  • Controlled growth in G&A and R&D expenses while maintaining appropriate spending to scale and support growth and to maintain the Company’s intellectual property. G&A expenses and R&D expenses were lower at 11% and 5% of revenue, respectively for 2018, compared to 13% and 7% in 2017.
  • Strengthened the balance sheet by completing a prospectus offering and concurrent private placement of 9,530,000 Units of the Company at $1.05 each for combined gross proceeds of $10 million on November 15, 2017. Each Unit consisted of one common share and one-half of one common share purchase warrant (each whole common share purchase warrant, a "Warrant"). The Warrants were accepted for listing by the TSX Venture Exchange and commenced trading under the symbol ENW.WT on November 22, 2017.

Significant Accomplishments in 2018:

  • Completed the acquisition of the 49% non-controlling interest in NutraDried, bringing the Company’s ownership to 100% of the equity interest in NutraDried Food Company, LLC. NutraDried is a wholly owned subsidiary in the business of manufacturing and distributing Moon Cheese®. This purchase was completed at valuation multiples of 1.3 times 2018 net income and  3 times 2018 revenue.  NutraDried financial returns have improved dramatically since the purchase.
  • Expanded sales and distribution of Moon Cheese® with additional product rotations in a number of Costco divisions; Q4 2018 was the single highest ever quarterly sales for Moon Cheese® of $6,532.
  • Launched REVTM technology into the rapidly growing cannabis industry and signed a royalty-bearing Commercial License Agreement (“CLA”) with Tilray® providing rights to use REVTM technology for processing cannabis in Canada and Portugal. Secured purchase agreements with Tilray® for a 10kW REVTM machine and two 60kW REVTM The first 60kW processing line is scheduled to be installed in early 2019.
  • Signed a CLA with Arla Foods (“Arla”), the world’s largest manufacturer of organic dairy products and an innovation leader.  The CLA grants Arla the exclusive right to use REV™ technology to process dairy products in Denmark, Sweden, Finland and Norway. Arla purchased a 10kW small-scale machine to initiate commercial production.
  • Received purchase orders from Bare Foods Co. (“Bare Foods”), a leading American snack food company recently acquired by PepsiCo, and installed three small-scale commercial 10kW REVTM machines to initiate and expand commercial production of healthy fruit snack products
  • Signed a royalty-bearing license with AvoLov, LLC (“AvoLov”), a U.S. based snack company to produce a new, and innovative avocado snack product. AvoLov purchased a 10kW REVTM machine to initiate commercial production.
  • Signed a royalty-bearing license with Howe Foods, the second largest producer of bananas in Australia. Howe Foods purchased a small-scale 10kW REVTM machine to initiate commercial production.
  • Signed a royalty-bearing license with Nomad Nutrition, a Canadian company focused on distributing premium, shelf-stable, nutrient-packed gourmet products that are made from locally sourced organic ingredients. Nomad Nutrition purchased a small-scale 10kW REVTM machine to initiate commercial production.
  • Advanced a research project with the U.S. Army to develop innovative field rations for warfighters and sold the U.S. Army a 10kW REVTM machine to facilitate an accelerated path to improved Close Combat Assault Ration deployment. EnWave’s strategy is to work closely with the U.S. Army and its suppliers to jointly develop nutrient-rich field rations for potential distribution to the U.S. Army.
  • Doubled the Company’s production capacity of Moon Cheese® through the installation of a second 100kW nutraREV® machine and a 10kW REVTM The expansion was facilitates continued sales growth of Moon Cheese® and positions for future projected demand in the consumer marketplace.
  • Delivered the first scaled-up Good Manufacturing Practices (“cGMP”) freezeREV® machine to Merck after passing factory acceptance testing. The machine is undergoing testing at Merck’s facilities prior to planned future development work by Merck to use freezeREV® technology as a continuous dehydration alternative to lyophilization.
  • Signed a Collaboration and License Option Agreement with GEA Lyophil GmbH, (“GEA”), a Liquid Dosage organization of the Business Application Pharma of the GEA Group. EnWave and GEA will jointly evaluate a potential partnership to facilitate the manufacture and deployment of continuous cGMP REV™ lyophilization equipment into the global pharmaceutical sector.
  • Jointly ended the collaboration agreement with Sutro Biopharma Inc. (“Sutro”) to deliver a commercial powderREV® During factory acceptance testing EnWave and Sutro were unable to satisfy certain quantitative bioactivity measures for the excipient-free, dried cell-free extract formulation.
  • Hired Mr. Mike Pytlinski as the new CEO of NutraDried. Mr. Pytlinski brings nearly 30 years of experience in marketing and strategy with consumer packaged goods companies.

Sales Pipeline:

Currently, the Company has 11 prospective royalty partners actively engaged in Technology Evaluation and License Option Agreement (“TELOA”) projects and the U.S. Army in an advanced stage of technology evaluation. The Company’s objective is to convert these TELOA projects into royalty-bearing commercial license agreements and to secure purchase commitments for REVTM machine capacity. The Company also has several existing royalty partners that have tested the market with small-scale REVTM machinery and are evaluating the business case to scale-up to large-scale REVTM processing lines. The Company anticipates several long-term projects in the pipeline to convert to CLAs as well as additional REVTM machine capacity to be ordered by existing partners in 2019.

EnWave’s strategy is also to address the expanding medical and recreational cannabis processing sector in legalized jurisdictions. The Company has validated the business model for licensing its patented REVTM dehydration technology for the rapid dehydration and decontamination of cannabis with Tilray®, and the business case is sound. The strategy in the near-term is to secure additional royalty-bearing licenses for processing of cannabis, as well as additional equipment purchase orders for REVTM machine capacity in Canada and other legalized markets.

EnWave has been growing its prospective royalty partner pipeline as it commercializes REVTM across the food, legalized cannabis and pharmaceutical sectors as part of its strategy to build a large, diversified royalty-bearing portfolio.

(*) Non-IFRS Financial Measures:

Adjusted EBITDA is not a measure of financial performance under IFRS. We define Adjusted EBITDA as earnings before deducting amortization and depreciation, stock based compensation, foreign exchange gain or loss, finance expense or income, income tax expense and non-recurring impairment charges. This measure is not necessarily comparable to similarly titled measures used by other companies and should not be construed as an alternative to net income or cash flow from operating activities as determined in accordance with IFRS. Please refer to the discussion included in the Company’s annual MD&A for the year ended September 30, 2018.

About EnWave

EnWave Corporation, a Vancouver-based advanced technology company, has developed Radiant Energy Vacuum (“REV™”) – an innovative, proprietary method for the precise dehydration of organic materials. EnWave has further developed patent-pending methods for uniformly drying and decontaminating cannabis through the use of REV™ technology, shortening the time from harvest to marketable cannabis products. 

REV™ technology’s commercial viability has been demonstrated and is growing rapidly across several market verticals in the food, and pharmaceutical sectors including legal cannabis. EnWave’s strategy is to sign royalty-bearing commercial licenses with industry leaders in multiple verticals for the use of REV™ technology. The company has signed over twenty royalty-bearing licenses to date, opening up nine distinct market sectors for commercialization of new and innovative products. In addition to these licenses, EnWave has formed a Limited Liability Corporation, NutraDried Food Company, LLC, to develop, manufacture, market and sell all-natural cheese snack products in the United States under the Moon Cheese® brand. 

EnWave has introduced REV™ as the new dehydration standard in the food and biological material sectors: faster and cheaper than freeze drying, with better end product quality than air drying or spray drying. EnWave currently has three commercial REV™ platforms:

  1. nutraREV® which is used in the food industry to dry food products quickly and at low-cost, while maintaining high levels of nutrition, taste, texture and colour;
  2. powderREV® which is used for the bulk dehydration of food cultures, probiotics and fine biochemicals such as enzymes below the freezing point, and
  3. quantaREV® which is used for continuous, high-volume low-temperature drying.

An additional platform, freezeREV®, is being developed as a new method to stabilize and dehydrate biopharmaceuticals such as vaccines and antibodies. More information about EnWave is available at www.enwave.net.

Safe Harbour for Forward-Looking Information Statements: This press release may contain forward-looking information based on management’s expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product development, market position, expected expenditures, and the expected synergies following the closing are forward-looking statements. All third party claims referred to in this release are not guaranteed to be accurate. All third party references to market information in this release are not guaranteed to be accurate as the Company did not conduct the original primary research. These statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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DEUTZ AG: New three-pillar growth strategy in China

  • Joint venture with leading construction equipment group SANY
  • Expansion of service business with HORIZON
  • Manufacturing alliance with BEINEI
  • Revenue of half a billion euros expected in 2022

DEUTZ AG is restructuring its market presence in China, entering into partnerships with three major Chinese companies – SANY, HORIZON and BEINEI – in order to benefit from the high-growth Chinese market. "China is the largest individual market for engines in the world," says Dr Frank Hiller, Chairman of the DEUTZ Board of Management. "Thanks to its new partners, DEUTZ now has the ideal production network for efficiently supplying local customers with DEUTZ drive systems. At the same time, we have access to an extensive service network that we will systematically enhance with digital solutions."

DEUTZ and SANY, China’s largest construction equipment group, signed a memorandum of understanding in Beijing. The two companies are forming a joint venture in which DEUTZ AG will be the majority shareholder with a stake of 51 per cent. Initially, the plan is to supply SANY with around 75,000 new engines for off- and on-road applications in 2022. These engines will comply with the China 4 and China 6 emissions standards. One of the leading engine manufacturers in the off-highway segment, DEUTZ AG is thus stepping up its activities in the on-highway segment as well. DEUTZ AG’s initial investment in the new joint venture is in the mid double-digit millions.

"We chose DEUTZ because it is one of the world’s top engine manufacturers," says Lincoln Liang, a member of the Sany Group’s board of directors. "In this joint venture, we will benefit from working with an agile company that is looking to the future and driving forward technological innovation. DEUTZ thus brings to the table exactly what we need for our engine development."

In addition, DEUTZ AG is entering into a cooperation agreement with HORIZON in order to strengthen its position in the attractive service business as well. With more than 80 branches, HORIZON is the largest player in the Chinese construction equipment rental business. It will become a local service partner for DEUTZ, servicing engines in the field and taking over the aftermarket sales business in China. HORIZON is also the ideal partner with regard to digital fleet service solutions.

Another element of the new strategy for China is a local contract manufacturing alliance with engine manufacturer BEINEI. This will act as a production hub for the Asian market. The DEUTZ management team is to oversee the manufacturing of approximately 20,000 engines in 2022 at a new factory in Tianjin.

In October 2018, DEUTZ AG sold its shares in DEUTZ Dalian, the Chinese joint venture that it had entered into with First Automotive Works (FAW). The new strategy now enables DEUTZ to fundamentally overhaul its market presence so that it can meet the growing demand for sophisticated engines not only in China but also in other Asian markets. On the back of its three pillar growth strategy, DEUTZ is aiming to generate revenue of around half a billion euros in China in 2022.

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Thermal Spray Coating Market Analysis – Industry Forecast 2024 | Praxair, Inc, Oerlikon, Air Products, Bodycote, Saint-Gobain, Sandvik, H.C. Starck

Global Thermal Spray Coating Market to exceed USD 13 billion by 2024; according to a new research report by Global Market Insights, Inc. Strong application outlook in medical devices, gas turbines and aerospace & automotive components, due to superior corrosion & wear resistance and cost-effective properties will drive thermal spray coating market size. Increasing preference for HVOF process over hard chromium plating due to relatively shorter processing time and comparatively lesser environmental impact are among key factors fueling industry growth.

Request for a sample of this research report @  https://www.gminsights.com/request-sample/detail/1347

Rising demand for dimensional restoration, using as thermal barriers, electrical conductors and electromagnetic shielding will propel the flame spray coating demand. Moreover, ability to recoat damaged or worn substrates in several end-use industries including energy & power, marine and aerospace industry will provide positive outlook for product demand.

Aerospace & defense market generated over 2.5 billion business in 2016. Rising demand from aerospace components including jet engines, turbine blades and landing gears owing to excellent heat barrier, wear & oxidation resistance and effective protection will drive product demand. Moreover, reduced maintenance cost, improved fuel efficiency and high speed of aircraft engines provides positive outlook for industry growth.

Fluctuating metal & mineral prices along with alloy material innovations are among key factors influencing flame spray coating price trend. Line-sight-coating causing reduced reach in deep and small cavities may hamper product demand, as it increases porosity on the surface. Moreover, low degree of adhesion particularly for small substrates may hinder industry growth.

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Healthcare market is anticipated to witness growth over 7% in terms of revenue up to 2024. Effective retard from radiation along with shielding from electromagnetic waves particularly for MRI and other magnetic based medical equipment will create new opportunities for industry growth.

Ceramic flame spray coating market accounted for more than 30% of the industry share in 2016. Higher demand from aerospace and electronics industry due to its high heat and corrosion resistance will fuel industry demand. Moreover, low friction, superior hardness, ductility, along with superior surface finish will support product demand.

Browse key industry insights spread across 550 pages with 452 market data tables & 21 figures & charts from the report, “Thermal Spray Coating Market ” in detail along with the table of contents:


Combustion flame demand is expected to surpass 600 kilo tons by 2024. Increasing adoption for larger substrate applications particularly in oil & gas and aerospace industry are among major factors driving industry demand. Emergence of advanced technologies with improved performance including HVOF and HVAF process will support business growth.

Global thermal spray coating market was led by North America accounting for more than 30% in 2016. Presence of major aerospace and automotive companies along with comparatively higher adoption of flame spray coating will propel regional demand.

Global flame spray coating market share is moderately consolidated with top three players accounting for more than 30% of the industry share. Oerlikon Metco, Praxair Surface technologies, H.C. Starck, A & A Coatings and Bodycote are among major industry players. Collaborations, joint ventures and long-term agreements among different participants across the value chain are major strategies observed.

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Body Worn Insect Repellent Market Research – Forecast Report 2024 | Orvis, 3M, BASF, Avon, LANXESS, Omega Pharma, CVS Pharmacy, SC Johnson

Body Worn Insect Repellent Market to exceed USD 1 billion by 2024; according to a new research report by Global Market Insights, Inc. Increasing incidences of arthropod borne diseases across the world is a major factor leading towards body worn insect repellent market growth. Growing healthcare awareness programs to create consciousness among consumers also stimulates the demand for bug resistance products. Severe efforts taken to prevent epidemics is likely to play a key role in the increasing adoption for these repellents in the upcoming years.

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Wide spread of malaria, chikungunya, dengue etc. have increased the necessity for body worn insect repellents. Oils and creams are widely used for keeping mosquitoes and bugs away. Oil and creams are further classified into plant based and synthetic based on the ingredient content. The preference for plant-based insect repellents are increasing in the market due to the rising awareness of natural or organic products for the skin and its minimum side effects. 

Lack of awareness about the products can act as a challenge for the body worn insect repellent market growth. The availability of various traditional substitutes such as lemongrass extract, eucalyptus oil, peppermint oil, neem oil etc. are expected to hinder the market growth in the future. Limited product knowledge is also expected to hamper the market growth in the upcoming years.

Insect repellent oil & creams generated over USD 200 million revenue in 2017. Increasing health awareness along with ease of usage will propel the product demand. Plant based product has witnessed the market revenue share of over 36% in 2017. Plant-based products will observe rapid growth in the coming years due to its minimum side-effects and increasing consumer inclination for eco-friendly products. 

Increasing number of sales platform is one of the major factor leading towards product penetration. The online distribution channel is the fastest growing segment in this market. Easy product availability along with the competitive pricing and discount offers will enhance the product demand. 

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Global Body Worn Insect Repellent Market, By Product

  • Apparel
    • Trousers
    • Shirts
    • Jackets
    • Head Nets
  • Oil & Creams
    • Synthetic
    • Plant Based
  • Stickers & patches
  • Spray


Global Body Worn Insect Repellent Market, By Distribution Channel

  • Supermarkets
  • Online Stores
  • Convenience Stores


Browse key industry insights spread across 388 pages with 598 market data tables & 16 charts & figures from the report, “Body worn insect repellent market” in detail along with the table of contents:


Asia Pacific body worn insect repellent market is anticipated to witness over 8% growth up to 2024. The regional industry growth is primarily driven by countries including China, India, and Japan owing to a large number of population. This region also comprises of huge rural and semi-urban population currently affected by vector-borne diseases including malaria, Chikungunya, and dengue.

North America holds more than 30% overall body worn insect repellent revenue share in 2017. The increasing awareness of insect born disease among the population and the availability of products due to the presence of large distribution channel and online websites are enhancing the overall demand for the body worn insect repellent market in this region.

Global body worn insect repellent industry share includes S. C. Johnson & Son, Avon products, Sawyer Products Inc. and 3M Company. New product launches, acquisitions, development of natural products and promotion of products through e-commerce websites are the major strategies adopted by industry participants. Other considerable companies include E.I. du Pont de Nemours and Company, ExOfficio LLC, Omega Pharma and Spectrum Brands Holdings.

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Aseptic Packaging Market to exceed USD 70 billion by 2024 with major key players Amcor, Krones AG, Scholle IPN, Ecolean, Sealed Air Corporation

Global Market Insights, Inc. adds a new Aseptic Packaging Market research report for the period of 2018-2024 focuses on the major drivers and restraints for the global key players providing analysis of the market share, segmentation, revenue forecasts and geographic regions of the market.

According to Global Market Insights, Inc. Aseptic Packaging Market size will likely surpass USD 70 billion by 2024.

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Food and beverages industry holds more than half the market share owing to increasing application in several liquid foods, ready to eat meals and beverage products. The food and beverage industry segment will grow significantly, as aseptically packaged products have good taste, with higher nutrition value and also lasts longer. This segment will grow at a CAGR of over 7% over the coming years.

Among all the products, carton packaging segment is currently growing in dairy applications, as it provides secure packaging, and further helps in extending shelf life of food products, by protecting it from oxidation.

The major players operating in the market

  1. Amcor
  2. Krones AG
  3. Scholle IPN
  4. Ecolean
  5. Sealed Air Corporation
  6. IPI srl
  7. Printpack Inc

Growing demand for packaged food due to consumers’ willingness to put in minimum effort on food preparation will propel market growth. Greater participation of women in workforce and growing dual person household incomes are propelling the demand for packaged food products, which in turn boosting the aseptic packaging market.

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In 2016, Asia Pacific is one of the leading regions favoring ready-to-eat food products, dairy products, frozen meals, cake mixes, and snacks, which will significantly affect the market towards growth in this region. Increasing consumption of packaged food products by consumers in the emerging countries, owing to rapidly changing lifestyles will positively influence the aseptic packaging market over the coming years.

Aseptic packaging products require less packaging materials, light weight, and easy to recycle. These features are making them most favorable packaging materials. Moreover, the sustainable properties such as product sterility, and longer shelf life offered by them would result in a significant growth of this market all over the world.

Few of the other challenges faced by the aseptic packaging market include high R&D costs with high initial investment is setting up a unit.

Asia Pacific held a significant share in 2016 and is set to surpass USD 25 billion by the end of forecast period. Increasing demand for dairy product packaging is set to fuel the regional aseptic packaging market growth. Europe will exhibit a decent growth rate over the projected period due to increasing demand for packaged food products.

Browse Complete Summary of this report @ https://www.gminsights.com/industry-analysis/aseptic-packaging-market

Key players present in the aseptic packaging market are Amcor Limited, DuPont., Tetra Laval International S.A, Krones AG, Scholle IPN, Lamican International Oy, Ecolean AB, Sealed Air, Goglio S.P.A, Agropur Cooperative, IPI, Printpack and others.

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Adriatic Metals: A Polymetallic Explorer With Significant Potential


This time Kees Dekker analyzes Adriatic Metals, an Australian junior exploring a very high grade polymetallic project called Rupice in Bosnia Herzegovina. Kees and I had our doubts as the last drill results at the border of the drill permitted area took a very long time until release, but when they did came in, the results appeared to be pretty good again. Kees does a good job calculating metal value including recovery and payability, basing his cash margin on this, and hereby maintaining a conservative stance which seems healthy for an early stage exploration play. 

With the corporate tax in Bosnia Herzegovina standing at a very cheap 10%, and a potential operation dealing with very small tonnage and thus low capex, there is no doubt in my mind that this could be a very profitable mine somedays. If I would take a 2Mt resource for the entire mineralized envelope (Kees takes 1.58Mt for the deeper part only), a decent 10y LOM would deliver a 570tpd (350 days per annum) operation, and using an average small scale underground capex/tpd of US$80,000/tpd, the total capex would come in at US$45.6M. Let’s use some margin of error and take US$50M and add 50% of capex as sustaining capital to opex as underground development seems relatively limited. Using the calculated cash margin of US$290M (without sustaining capital) of Kees as a base, this would result in a NPV8 of US$80M, and the calculated cash margin of US$370M would result in a NPV8 of US$120M. This is all very conservative, and considering the current market cap of about US$40M and exploration ongoing there is a lot of upside. This could be a small gem.

Next up is the analysis itself by Kees Dekker.

1. Executive Summary

Adriatic Metals ("Adriatic") (ASX.ADT, FSE:3FN) is a recently listed Australian company with two complex base metal – precious metal deposits in Bosnia Herzegovina.  Its share price has shown a spectacular appreciation over the past few weeks.  However, at its current share price Adriatic has an Enterprise Value of approx. US$37 million, assuming full dilution, which must be considered modest compared to the value of the deposits in its portfolio.

This study concludes that the company is still vary good value based on the cash operating margin one can expect from mining the resources of one deposit (called Veovaca) and the volume of the deeper portions of an ore shoot at another deposit (Rupice), derived from published drill results.

The deeper, very high-grade portion of the shoot at Rupice, defined over an estimated 200 m plunge, 40 m width and 55 height, has the potential to generate a total operating cash of US$370 million (assuming that its BaSO4 content can be upgraded to a drill mud additive product) and US$290 million (without BaSO4 sales).  Each 50 m additional plunge extent established from further drilling would increase the cash margin by US$90 million (incl. BaSO4 sales), or US$70 million (without BaSO4 sales).

This study arrives at prospective at-mine revenue from Indicated Resources at Veovaca of at least US$260 million based on at-mine revenue of US$56/t in-situ, which as an open pit mine could well generate cash from operations of at least US$130 million.   This assuming that the BaSO4 content in the resources can be concentrated to a marketable product.  If not, this deposit is of little to no value.

There are a number of upsides to Adriatic apart from adding to the deposits dimensions, being the value of the shallower portion of the Rupice shoot, exploring targets in the vicinity and at the same stratigraphic level, and upgrading the BaSO4 concentrate to a higher grade product for which the sales price is a multiple higher than the drill mud additive product.

The main risks are related to testwork showing poor metallurgical performance for the mineralisation and the difficult and ambiguous legislative environment in the jurisdiction, which complicates obtaining the necessary rights and permits to advance projects and securing the rights to new discoveries.

This share being an exploration play is definitely not for widows and orphans, but, for the less risk adverse, constitutes an attractive opportunity on a risk/return basis

2. Introduction

Adriatic Metals ("Adriatic") (ASX.ADT) is an Australian company with a number of complex base metal – precious metal deposits in Bosnia Herzegovina.  The company was listed on the Australian stock exchange in May 2018 and its price has since risen spectacularly from A$0.20 to peak at A$0.585 on 29 June 2018.  On that day it announced a parallel listing on the Frankfurt Stock Exchange (under the code FSE:3FN). 

According to an announcement dated 23 May 2018 the company has 82.95 million shares currently quoted and another 47.85 million shares in escrow for 18 months.  Total shares therefore amount to 130.80 million to which must be added 19.5 million share options, of which 18.5 million are currently in the money.  Fully diluted the market capitalisation is A$65.6 million at the share price on 19 October of A$0.44.  When deducting the A$5.4 million cash raised from exercising the options and the cash balance of A$8.5 million in October, the Enterprise Value on a diluted basis is A$51.7 million, or US$37 million.

The following sections will show that this valuation is very low for what the company has already proven by drilling and the prospects for additional discoveries.

3. Review of the Mineral Prospects

3.1    Background

The information, wording and illustrations presented in this section are derived from:

  • A prospectus dated 27 April 2018.
  • Press releases with drill results dated 12 June, 22 June, 16 July, 17 July, 29 August, 28 September and 19 October 2018.
  • A press release dated 22 June 2018 with drill results.

The Adriatic key asset is the Vares Polymetallic Project, comprising the Veovaca and Rupice deposits, which is situated in Bosnia and Herzegovina.  The projects were acquired from Balkan Mining Pty Ltd in 2017 while Adriatic was a private company.  The project is located near the town of Vareš, which was a historic mining and industrial centre with infrastructure including sealed roads, grid (coal / hydro) power, heavy duty rail and blast furnaces.  Figure 3.1_1 extracted from the prospectus shows a map putting the two deposits into a regional context.

The above map also identifies the mineral rights areas secured by Adriatic, which cover the two deposits proper, and the numerous other targets, their names identified in green.  The concessions acquired through the acquisition of a bankrupt entity are of very limited size: 83 hectares (“ha”) at Rupice and 191 ha at Veovaca.

Geologically the deposits are situated in a block of ground that has been thrust on top of much younger rocks.  Polymetallic mineralisation is predominately hosted in the matrix of a polymictic breccia of banded shale, siltstone or sandstone clasts, both overlain and underlain by a succession of sandstone, siltstone, shale or limestone.  The mineralisation seems to be semi-comfortable with the lithology. 

The technical report postulates that the mineral field is of the Besshi-style type, which implies that the metals are of sedimentary exhalative origin.  Figure 3.1_3 from the Adriatic Metals prospectus shows schematically the setting for Besshi-type deposits.

Getting a handle on what specific type of deposits Adriatic is dealing with has implications for regional prospecting.  For example, Besshi-type deposits form in clusters along stratigraphic horizons and can be restricted in aerial extent.  This means that there could be many more Rupice and Veovaca type deposits at the same stratigraphic level in the project area.

3.2    The Rupice Deposit

The Rupice deposit is known from exploration activities, which commenced in 1952 and continued intermittently until 1990, initially focusing on barite (= the mineral with chemical formula BaSO4) mineralisation and later on the polymetallic mineralisation.  The change is understandable in the light of very high BaSO4 grades at shallow levels with low base metal values, but with deeper drilling encountering much higher base metal and precious metal values.  Mineralisation at Rupice, and Jurasevac-Brestic almost one kilometre to the southeast, have induced polarisation (“IP”) geophysical anomalies associated with them (see Figure 3.2_1, extracted from the prospectus).

Interpretation of drill results Rupice concluded that the mineralisation appears to be dominantly strata-bound and hosted within brecciated sediments in a shoot dipping approximately 50 degrees to the east.  Whereas the prospectus still suggested the shoot to plunge to the northeast, in later press releases the interpretation of the plunge direction was changed to north (see Figure 3.2_2)

The red traces show the direction of the dip and the arrows the direction of the plunge, which is due north.

Whereas drill results from June 2018 onwards have successfully tracked the plunge over considerable vertical extent all the way up to the northern concession border, successive cross section interpretations show a considerable reduction in the dimensions perpendicular to the plunge direction. As one example, figure 3.2_3 illustrates the progressive reduction in interpreted horizontal dimension of the high-grade shoot oblique to the plunge as extracted from the various press releases.

The development over time of the cross sections would have been cause for concern about the continuity of the mineralisation, but on the other hand consistent intersections along plunge of the deposit, where it is developed widest, give much comfort.  Figure 3.2_4 shows the geological interpretation along the interpreted plunge of the high-grade shoot, extracted from the October press release.

According to this interpretation the shoot plunges at 60 degrees from surface for approx. 150 m after which it abruptly levels off to 30 degrees and shows a considerable increase in dimension vertically.

This illustration also clearly shows the dramatically improving base and precious metals grades with depth whereas the BaSO4 grade remains high, but with a declining trend.

According to the 22 June news release, mineralisation in holes BR-2-18 and BR-3-18 is very visible and consists of galena (PbS), sphalerite (ZnS), chalcopyrite (CuFeS2) and barite.  There is no mention of tetrahedrite ({Cu,Fe}12Sb4S13), which according to the prospectus is present in minor quantities.  As tetrahedrite is a copper mineral containing some antimony, appreciable quantities of the mineral could result in penalties imposed by off-takers of the copper concentrate.

Table 3.2_1 summarises the drill results for this deeper, higher-grade portion of the shoot with the holes listed in the order from shallower to deeper down plunge.

Hole BR76-89 was drilled before Adriatic’s involvement and was not assayed for copper and precious metals.  The holes are over a plunge distance of 200 m, define the deposit over a vertical height of 55 m (see Figure 3.2_4) and in cross section at least 40 m wide (see Figure 3.2_3).  This amounts to a volume of at least 0.44 million cubic metres. 

With the high specific gravity of 4.5 for barite and at a content of BaSO4 in the middle forties an average density of at least 3.6 can be expected, especially considering the density contribution of the sulphide minerals.  The defined deeper portion of the shoot would therefore contain at least 1.58 million tonnes.

3.3    The Veovaca Deposit

Similar to Rupice, Veovaca is a sediment-hosted deposit with mineralisation present in a brecciated zone within a folded sediment package.  This sediment package and the breccia zone appear to be steeply dipping to the northwest and plunging to the northeast.

Figure 3.3_1 shows a geological map of the immediate surroundings of the deposit and indicating interpreted potential down plunge, extracted from the prospectus.

According to the technical report in the prospectus 19 holes at the Orti prospect over an area of 500 m x 150 m indicated potential for resources there grading 1.2%-1.4% Pb, 1.7%-2.1% Zn and 21%-26% BaSO4.

Figure 3.3_2, also extracted from the prospectus, shows a longitudinal section along trace X-X’ on Figure 3.3_1 to illustrate the deposit outline and potential at depth and down plunge.

On the longitudinal section are also indicated due diligence boreholes drilled by Adriatic in 2017.  Table 3.3_1 summarises the results of these holes over a strike length of 100 m listed in sequence from west to east.  The deeper holes further east, with spotty intersections, have been ignored. 

The results are attractive for an open pittable deposit with low strip ratio, but the holes were clearly sited along a favourable drill fence in the centre of the deposit as the grades for many of the other 11 holes are clearly lower.  This is also evident from the average grades of a resource estimation carried out by CSA Global in February 2018 based on 48 historical drill holes and the 16 drill holes drilled in 2017 by Adriatic, some of which twinned historical holes.

According to CSA Global, the combined drillhole density of approximately 30 m x 30 m closing in places to 20 m x 20 m, provided sufficient data points to model the polymetallic (lead, zinc, silver, gold and barite) lenses over a strike length of approximately 550 m, and the silver and gold over 250 m of the 550 m strike. 

Mineral Resources were reported using cut-off grade of 0.5% ZnEq, and separately for the deposit area where gold and silver assays were taken and used, and outside of the area where there are no assays for gold and silver (see Figure 3.3_3, extracted from the prospectus, for relative location of the two resources).

Table 3.3_2 gives the resources reported as of Indicated category confidence level, ignoring 2.6 million tonnes Inferred resources, because these have grades that will unlikely be economical.  The cut-off grade of 0.5% ZnEq is probably too low given the low net payability of zinc, which is usually between 50% and 60%, which converts the 0.5% threshold to approx. US$15/t. 

4. Economic Potential

4.1    Introduction

The projects are still at a very early stage and no economical value can be “calculated”, but at best estimated using broad-brush assumptions.  This section will apply such to the estimated deposit sizes to give an indication what can safely be assumed as established to place the current Enterprise Value in perspective and the sensitivity of the deposit values to success in extending their dimensions.

The assumptions have been purposefully kept conservative.  For example, according to the technical report all elements at Veovaca had a historical recovery of 90%.  Given the low grades for Pb and Zn and the absence of numbers presented (elsewhere in the prospectus it is mentioned that there are no historical production statistics), much lower recoveries have been assumed.  The net gold payability reflects the relatively low gold grade, which can be expected for the Cu-concentrate.

The spot price for BaSO4 is not generally available and reference was made to press release of Mountain Boy Minerals Ltd dated 18 April 2018, which states “barite is currently selling from US$120 to US$180 per ton depending on the location”.  It should be noted that low grade barite concentrate that is used as an additive to oil drilling mud has certain maximum criteria for mercury (i.e. 1 ppm), cadmium (3 ppm) and lead (1,000 ppm) content.  Given the association of the barite with lead mineralisation, it still has to be proven that lead minerals can be sufficiently separated to yield a marketable product.  However, the Veovaca mine has reportedly sold BaSO4 when in operation.

4.2    The Potential of the Rupice Deposit

The approach to gauge the potential of the Rupice Deposit is to calculate the at-mine value of the material that has until now been delineated.  Table 4.2_1 gives the derivation of this.

The calculation above indicates that the value of the deeper higher-grade portion of Rupice is US$332/t, assuming that the barite can be concentrated to a marketable product.  Zinc, silver and lead are the products of most economical interest, accounting for more than 62% of the total value.

Even without barite the calculated value amounts to US$283/t. 

Based on the minimum amount of 1.58 million tonnes in the deeper, higher-grade portion of the shoot, as derived at the end of Section 3.2, prospective at-mine revenue is US$525 million with barite as a saleable product and US$448 million without.  This revenue would be earned at a very high cash operating profit margin, because the deposit would lend itself for bulk underground mining and total cost per tonne treated would probably be lower than US$100/t – US$125/t, with the higher number accounting for very complex metallurgical processing.  If applicable the cash margin would therefore be US$290 million (without barite sales) and US$370 million (with barite sales).

The above values are for the dimensions 200 m plunge direction, 40 m width and 55 m height.  It is unlikely that further drilling will affect the height much, but width and especially plunge length can be extended from additional drill results.  Each 50 m additional plunge extent would increase the cash margin by US$90 million (incl. barite sales), of US$70 million (without barite sales).

In conclusion, only little exploration success from what is currently known will have a dramatic impact on the value of Rupice.

4.3    The Potential of the Veovaca Deposit

The approach to gauge the potential of the Veovaca Deposit is similar to that for the Rupice Deposit.  Table 4.3_1 gives the derivation of this.

To also arrive at a more realistic value for the Indicated Resources that were reported without precious metal grades the average silver grade was estimated based on the relative lead grades, as the silver is most probably included in the mineral galena (PbS).  The gold grades has been ignored as it may well be associated with pyrite (FeS2) and therefore of no value.

The table shows that the at-mine value per tonne of Veovaca resources is US$56 assuming that barite concentrates can be sold.  It would be only US$38/t without barite as a marketable product.  For an open pit operation a value of US$56/t is attractive.  Unfortunately no information is available about the prospective strip ratio associated with the resources.  As long as the strip ratio is below 4.3 the cash operating profit margin will be 50% or more, assuming mining cost of US$3/t, processing cost of US$15/t and G&A cost of US$5/t treated.

Given the illustrations in Section 3.2.3 it seems highly likely that the strip ratio is moderate.  Therefore, assuming barite can be concentrated to a marketable product, the at-mine revenue of the Indicated Resources at current prices would be approx. US$260 million and generate operating cash of US$130 million. 

Should it not be possible to sell barite the Veovaca deposit has no to little value.

5. Upsides and Risks

5.1    Upsides

In addition to adding to the delineated Rupice and Veovaca deposits there are a number of other upsides, being:

– Proving up the high-grade Rupice shoot down plunge after obtaining expansion of the concession, which has been approved by the municipal authority and the Ministry of Mining, subject to a public review process, which is expected completed in November 2018. Figure 5.1_1, extracted from the October 2018 corporate presentation, shows the proposed new concession area.

–  The above assumptions have erred on the conservative and ignored any value for the shallower portion of the Rupice deposit which has very high BaSO4 grades and grades for Pb and Zn in percentages and material precious metal credits.

– The numerous other targets, shown in Figure 3.1_2, along the same stratigraphic horizon as Rupice and Veovaca and with historical exploration results showing Pb-Zn mineralisation.  In particular Bresic-Jurasevic at close proximity to Rupice is of interest with Adriatic having sampled dumps there, assaying high base metal and precious metal values.

– Given the substantial BaSO4 content and grades Adriatic may well explore a processing route to concentrate the mineral to a high grade (i.e. +98%) instead to a product for drilling grade barite which must have a density above 4.1 (therefore >78% BaSO4), and selling at prices that are a multiple of the product price assumed in the above estimations.

5.2    Risks

The main risk associated to the value of Adriatic are:

– The lack of information on the metallurgical performance of the mineralisation.  Whereas polymetallic deposit can be of very high grade such as indicated at Rupice, they are usually also metallurgically complex with relatively low recoveries and deleterious elements that find their way in concentrates resulting in penalties.  One of the obvious metallurgical risks is inability to keep mercury, cadmium and lead contents in barite concentrate below maximum thresholds for marketing purposes.

– The high-grade plunge may well be off-set by a major fault just north of the current concession border.

– Any application for adjacent areas and other new mineral rights is complex, requires involvement of many stakeholders and is uncertain to be granted.   Mineral rights are regulated at all legislative levels, at national government level and the level of 10 Cantons composing Bosnia Herzegovina.  The project area falls in the Zenica-Doboj Canton.

This ends the full analysis of Adriatic Metals by Kees Dekker. If you have an interest in contacting Kees Dekker, this is possible through using the contact form on my website www.criticalinvestor.eu. Stay tuned for more analysis by Kees coming soon.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and currently has a long position in Adriatic Metals. Kees Dekker is also not a registered investment advisor, and currently has a long position in Adriatic Metals as well. All facts are to be checked by the reader. For more information go to the websites of the mentioned companies and read the available company information and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.  


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