If you have a pulse and an email address, odds are pretty good that you’ve seen the ad from Angel Investing for their “game-changing mine” discovery in Canada as they tease and tease and tease to get new subscribers for Alternative Energy Speculator … and frankly, the pulse is optional.
I wrote about this pick of theirs back when they were “pre-teasing” it, before they were even asking for subscribers or getting into many details, but now that the campaign has shown some real staying power the questions are again piling up … so it’s time for another look to make sure we picked the right company the first time around, and see if we can learn anything new.
If you haven’t seen the ad “presentation” yet, here’s how it starts:
“Limitless Wealth from the ‘Tar Sands’ of Rare Earths and Precious Metals
“It’s a 1.4 billion ton mother lode big enough to supply the world for 100 years — and it’s laying right on the ground!
“One tiny explorer has what it takes to finally unleash it…”
Even if you’re pretty jaded and cynical about these pitches, that catches your eye … right? 100 years of rare earths? Wait, it gets better:
“What I’m talking about is $5.3 billion (or more) worth of the hottest rare earths and precious metals — much of it lying right on the earth’s surface. You can even hold them in your hand. I did.
“All told, it’s more than 612 million pounds of metal wealth spread over 700,000 acres — enough to supply the entire world for the next 100 years.
“And the thing is… these numbers come from just one of six different mining parcels up here, all owned by one small company.
“The truth is, nobody yet knows exactly how many metals are really here… how much they’re all worth… or for how many centuries they can supply the world.
“But one thing is certain: The tiny explorer that holds all of these metals under its thumb — and has the breakthrough technology to extract them — stands to make a fortune so massive, it would make any king envious….
“Right now, the total value of all of this explorer’s metals exceeds its market cap by over 74,379%.”
So what is this? Yes, it’s still the same company — this is a pitch for the company that’s aiming to commercialize production of metals from the black shale of Alberta, which, I suppose, is sort of like the “tar sands” oil production projects nearby. But it’s a limited “sort of” — the closest analogue to this project, as is teased by the ad, is the Talvivaara project in Finland.
So yes, it’s still DNI Metals (DNI in Canada, DMNKF on the pink sheets) — and yes, the stock has benefited greatly from the attentions of the Angel Investing folks ever since this teaser campaign started back in mid-November, the stock is now around 55 cents and the company has a market cap of around $35 million. Absolutely teensy still, yes, but quite a bit bigger than the $7 million market cap they had last summer before they got any investor attention for this black shale project (the shares were trading for 22 cents right before the ad campaign began last Fall).
And be very careful, as always — volume is very light, and the company is very small, if you’re the kind of buckaroo who likes to trade these bouncy ones do keep in mind that your trading will help to move the price, and if the Alternative Energy Speculator folks ever stop re-teasing this one or re-promoting it, or advise a sell (or anything else negative happens), the stock could easily fall 50% in a day. There’s no logic for valuing a company like this very specifically, I can’t tell you whether it should be worth $5 million or $500 million.
It’s worth noting that yes, this is a huge polymetallic deposit, and yes, it’s a very small company compared to the potential value of those metals, but it’s going to be a long, long, long time before they get anywhere near producing anything — and the stock could do any number of things in the interim, including disappear, perhaps, if it takes long enough or metals prices get low.
They make several comparisons to Talvivaara in the ad, but they gloss over the massive undertaking that mining operation entailed — they show a chart implying that the “start up” of production at Talvivaara (which trades at TALV in London) led to a 500% gain over their first two years after they kicked into production, which looks very pretty, but if you remember what things were like in 2009 it’s not that surprising. TALV was trading in the 300-400 pence range before the financial crisis, and had begun its first production in 2008, but in 2009 the shares cratered (along with many other junior miners) down to about 100 pence, then spent two years spiking up to 600 pence in January 2011. Now, however, they’re back down to around 350. Right where the stock was when they were just about to produce their first metals in mid-2008. So it would have been possible to get that 500% return if you were both nimble and prescient, but not particularly likely — it was also very possible to lose money trading TALV over those first two years of production leading up to commercial production in 2010 and to the current level of output today, it has not been a straight shot.
But more importantly, it’s worth noting that the bio-leaching they do at Talvivaara and that DNI Metals plans to do at the black shales in Alberta is a specific, ore-unique, and long process not only to develop and commercialize but to actually use … we may be familiar with heap leaching of gold ore using cyanide to extract the metal, and that’s quite commonplace and fairly standardized, but this kind of bio-leaching is more akin to composting. You crush the ore, place it on massive pads, and pour active bacteria of a specific type over the top, who then chew up the stuff and somehow let the pad leach off the concentrates of the dozen or so commercially viable metals that are present in the ore. T
The process alone takes a couple years to work on a large scale, it appears (the “composting” isn’t that fast), and developing the specific formula and procedure will take, I can only assume, far longer. They have proven the basic chemical/biological extraction process using small samples in the lab, it does work and the labwork indicates pretty good recoveries ranging from 30-80% of the various metals, and they’re continuing to explore the resource — including a focus on the potential rare earths they can extract from the ore and overburden in their last press release.
My guess is that they’re at least two years away from beginning a commercial-scale test of the metallurgy and extraction that would more closely simulate real production scale on par with Talvivaara, but that’s a guess — I haven’t seen any timeline information from the company. On the plus side, there is a proven analogue in Talvivaara, even though I’m sure the process and bacteria and procedures will have to be different for a different ore and location, and there is enough of a massive store of metals in that black shale, albeit in very, very minute concentrations, that the promise of a 100+ year mine life will keep folks working at it even if the bloom comes off the rose for a year or two (if commodity prices fall, they have a big setback in development, etc.)
Talvivaara had a pretty quick start-up following their bankable feasibility study’s release in the Spring of 2007 (first metals produced a year and a half later, commercial production in 2010), but miners had also actively studied that property and the potential of bioleaching there since the 1980s — I’ve seen no mention from DNI Metals about how many years it might be before they reach that “bankable” phase. And it also appears to me that the Talvivaara ore is of much higher concentration — looking at the presentation from DNI Metals, they state that Talvivaara is working from grades of about 0.23%, or five pounds per ton of nickel (their primary target), while DNI Metals is seeing grades of 0.24 pounds/ton for nickel and comparably minor grades of most other metals. That strikes me as a big difference, though it’s also a resource that’s physically huge and probably has larger overall tonnage potential than Talvivaara, given the fact that this initial estimating is being done on just a small slice of their potential land area.
You can check out DNI Metals and their projects in their latest updated investor presentation from January, if you’re so inclined.
So yes, still DNI Metals. Still tiny. Still important to consider that the potential payback is going to come only after hundreds of millions of dollars and years of development, but this is the one that the Alternative Energy Speculator folks are calling a “game-changer” in Canadian mining. Whether it’s a great pick for your portfolio is, of course, your call.
P.S. This same ad also teases a few of the other “special report” ideas that the Alternative Energy Speculator folks have teased over the years — one is the “nighttime solar” pitch that I wrote about almost exactly a year ago when they first started teasing it, all about batteries and the demand for energy storage. Though they’re now saying that “Amazingly, you can still get it for under $1.50,” I should note that the price is now almost exactly a dollar, and a year ago, when we first uncovered the teaser, you could “get it” for about three dollars. That original writeup from January 2011 is here if you’re interested.