Happy New Year!

It’s been a long time since I looked at a teaser ad from Global Resource Hunter over at Weiss Research, and it appears they’ve changed editors over the years — now heading it up is JR Crooks, who I don’t know much about (apparently his father is Jack Crooks, who I’ve seen mentioned a few times as a currency trader).

And, more to the point, a bunch of Gumshoe readers have asked me about the latest ad from JR Crooks, which is all about turning every dollar into $60 by riding a “soon to be legendary” wave as an innovation alters “every layer of society.”

So what’s he pitching? Well, we may not get a full answer for you today — the ad, which is selling Global Resource Hunter ($49) by pitching a “special report” called “The Pyramus Compound: Profiting From This $256.5 Billion Cash Grab,” is not all that detailed in hinting at the exact investments he’s recommending… but we can at least get you started, talk briefly about the “big picture” of the spiel, and name a few stocks that are likely in his report.

The ad starts this way, accompanied by a photo of a beaker 2/3 full of a black substance:

“Why the Pentagon, the Department of Energy, DARPA, and Boeing Are Racing to Harness This Fake Oil….

“The beaker of black goo you see on your screen right now is not petroleum.

“Yet it can produce fuel for the equivalent of $1 per gallon.

“Only it has no cartel controlling the price. It doesn’t require risky wildcatters and millions of wasted dollars to produce.

“And that’s just in liquid form …

“By processing it, this strange compound can be turned into a substance 14-times stronger than steel …

“A material firm enough to build airplanes and cars with …

“Along with becoming a carbon fiber nearly twice as strong as and more flexible than Kevlar.

“And that’s just the beginning of what it can do.”

And then he implies that there’s one company that will be at the center of this revolution (naturally, one presumes that this company will make you rich):

“It’s like going back in time to the beginning of the Industrial Revolution and getting in on the game-changing resources that would come to shape the modern age …

“Except this is a one-stop shop.

“Believe me when I say that with one fell swoop, you’re going to get access to an innovation that will quietly alter every layer of society.”

Really? So what is this substance? Some more hinting:

“The Pentagon is on schedule to invest over $7 billion in the technology behind it …

“Why the Department of Energy recently commissioned a $17 million study to examine it …

“Why Boeing has started adjusting their aircrafts to use it …

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“Even how Ford has made plans to start building cars out of it.”

The projects hinted at here are, if my inferences are correct, all over the map — these are general “alternative fuels” and “alternative energy” and “biofuels” kind of things. The Pentagon does have a multi-decade $7 billion alternative energy program, the Department of Energy has granted a total of $17 million to biofuel projects (mostly at Universities) over two funding rounds over the last few years, Boeing is trying to work with biofuels developers to create a more jet-friendly alternative fuel (partly because oil sands and fracking are hurting the quality of kerosene, apparently because some of the additives survive the refining process), and Ford has used cellulose fibers as additives to its plastics in at least one car model.

Those are important trends, and materials science and chemistry are pushing the boundaries and unlocking a lot of potential in new materials and new energy sources from biomass, but the advancements and developments have not been (and will not be) all created by or dominated by one company. Not even close. Much of it is still at the level of basic science, funded as research projects by chemical companies, timber companies, governments and universities, among others. There are a few publicly traded companies that are more focused on this than others, more than likely, and I suspect those are among the stocks being hinted at by Crooks… but let’s keep sifting and see what we get in the way of clues….

Crooks implies that this potential is like the early days of the oil business after Spindletop, before Standard Oil was broken up… and the days of the Carnegie revolution in steel…. or the huge potential in General Electric in its early days….

“I won’t tell you the firm I have my sights on will zoom 6,700% … or 15,000%, or even 96,000%.

“But it could be on the very same path, as my research is already showing.

“It’s about to magnetize profits to itself from a slew of industries in one of the most ambitious potential cash grabs I’ve ever seen.

“They’ve already received explicit endorsement from both the United States Department of Energy and the Canadian government …

“All because they’re pioneering this special super-substance I call …

“The Pyramus Compound”

That’s a reference to Augustin Pyramus de Candolle, a Swiss botanist who was the first to name and identify Lignin, which is a binder for cellulose and helps to stiffen and protect cell walls in woody plants and algae (that may not be a scientifically accurate definition). It’s often considered a waste product and is an alcohol (timber processors will often call it “black liquor”), so it’s also sometimes burned to help supply energy for pulp mills.

Here’s some more on this “Pyramus Compound” …

“… the name comes from the scientist who first described his discovery of this black goo 200 years ago.

“I doubt he knew that his discovery would lead to potentially the biggest game-changer across numerous industries …

“And ultimately afford a single company the chance to ride a cash tsunami worth $256.5 BILLION….

“Unlike oil, The Pyramus Compound is abundant. It’s one of the most abundant resources on the planet….

“With The Pyramus Compound, we can produce fuel here, in the USA, for as little as $1 per gallon.

“Today, the international oil market is worth an unparalleled $550 billion.

“Just imagine this compound taking over even a portion of that market share … as I expect it to.

“Because not only is it cheaper than oil … able to produce the equivalent of a gallon of fuel for as little as a single dollar …

“Easier to acquire and produce in abundance …

“Not controlled by a hostile international cartel …

“But it can do much more than a barrel of crude.”

Since it’s really a stretch to tie all this stuff back to a single company, I guess the best way for us to look through it is by checking a couple of the sources Crooks cites to build our excitement level (and make it seem more real):

He says that Dr. Caidong Qin of Oxford University says it could “replace 15% of the world total consumption of diesel, gasoline, and jet fuels….”

I haven’t seen the original source of that quote, but it’s also cited here with the modifiers “on average, it could be assumed.” No indication of what the original source of that quote is, but it’s from 2009… Qin also has at least a couple patent applications for Lignin-derived fuels, though I haven’t seen much else attached to that name.

And then there’s another quote:

“I’m not alone in seeing the gravity of this substance. A leading body of architects put forth their findings after investigating how it could change the construction industry.

“As they wrote in The Journal of American Institute of Architects:

‘[the Pyramus Compound could] replace Petroleum-based chemicals.'”

That’s a quote from this article, about a University of Wisconsin research project.

And then Crooks follows that up directly with…

“The firm behind it … the firm I’ve been studying for months now …

“Is set to grab a piece of this massive pie. It has already received the green light from both the Department of Energy and the Canadian government in building applications.”

Huh? There is no one “firm behind it” … these are research projects and assessments from different academic researchers. None of this is from a company. But apparently there is a company pushing this Lignin fuel-and-feedstock agenda… Crooks says…

“They’re already pioneering the Pyramus Compound …

“Already leading the charge in production …

“And already have enough money in the bank to scale it like nobody else.”

Who?

There’s another quote from “aerospace insider Darrin Morgan” who is a director at Boeing and who, according to Crooks, says…

“It is a huge discovery. A game-changer.”

That’s a quote from this article about a biofuel/aquaculture installation in Abu Dhabi, Darrin Morgan is indeed spearheading alternative fuel work for Boeing. That’s not so much about Lignin as a fuel source as it is about finding salt-tolerant plants that are low in Lignin, which makes it easier to release their sugars for creating alcohol as a fuel (and grow them in the desert, using salt water). Sounds pretty cool, but not particularly closely related to this tease in any other way that I can identify — the project has two companies involved, Boeing and Honeywell, but certainly neither of them is being teased as a play on biofuels or lignin as an alternative energy source.

We’re also told about the potential for this “Pyramus Compound” as a replacement for kevlar and carbon fiber, stronger than everything except carbon nanotubes (which he says cost 100X more)… that’s a reference, it seems to me, to nanocrystalline cellulose, which is basically a nanomaterial created from cellulose/biomass (or if you prefer, “trees”). There’s a decent article about that here if you’re curious.

And Crooks goes on to tell us…

“And while there are no exact numbers for annual carbon fiber and Kevlar production … you can imagine the devastating effect The Pyramus Compound will have on them once it hits the mainstream.

“For a company with just a $2 billion market cap … the catapulting effect this could have on the stock is hard to estimate.”

Ah, so there’s a clue… a $2 billion market cap. Helps narrow it down, if we’re talking about just a single company.

So what is it we’re looking for? In Crooks’ words…

“The firm I think will lock down the biggest profits as The Pyramus Compound transforms the entire geo-political and economic landscape, much like oil and steel and the Internet did …”

Then Crooks sums it up this way:

“… the essential details are this: years ago, wood mills discovered a strange, black byproduct from processing wood pulp.

“They actually used this byproduct to power their mills cheaply!

“It was only later that scientists began to realize it was much more than just a substitute fuel …

“That inside this black ooze these mills were producing, there were elements stronger than steel …

“More flexible than plastic …

“Able to replace oil as a fuel …

“And dominate the aromatics market …

“And again, it comes from trees.

“We can literally grow it to meet demand.

“And there are scientists, right now, using developments in DNA sequencing to engineer even more potent trees for processing …

“For stronger material …

“More fuel …

“Maybe you can grasp the implications here. We’re talking about a complete and thorough reshuffling of the commodity markets with this Compound sitting at the dead center.”

Then we get to the final pitch for his report, which he implies will focus on the one leading company but also cover six others:

“In this report, I’m including more than just the pioneer behind this ‘tree’ fluid that could replace oil, steel, Kevlar, and most aromatics …

“I’m also including six companies that are set to blaze across the market with similarly revolutionary technologies.”

So who are we dealing with today?

Final clues…

“So I want you to get instant access to your Pyramus Compound report right away

“You can flip to page 13 and see the exact ticker symbols.

“You can go to page 14 and see a deep financial breakdown of the company.

“On page 20 you’ll see a list of other companies I recommend and the special circumstances around them (including a $2 stock that could easily shoot up 1,000% or more in the next 12 months).”

So I’m going to go out on a bit of a limb and guess that “ticker symbols” means the key stock is traded on more than one major exchange… so we get a company involved with Lignin production/extraction, traded on more than one exchange, with a $2 billion market cap. The Thinkolator’s best guess on that — and given the level of clueyness we’re dealing with here, it has to be a guess — is that we’re being teased about a Canadian forest products company called Domtar (UFS in both Toronto and NY).

Domtar is a pulp and paper company, mostly selling stuff like the absorbent material for adult diapers and reams of paper for your copy machine, but they are also working on lignin separation and operate the first commercial plant that uses the Lignoboost technology owned by Metso (which is also publicly traded on their home exchange in Finland and at MXCYY OTC in the US, though much of their customer base is in the mining business so their current situation isn’t entirely rosy — only 8% of their business is in pulp and paper processing, most is in mining and aggregates).

Domtar’s stock has been pretty flat over the past five years, and pays a decent yield (4%+), with low growth expected over the next few years (which is actually an improvement over the past five years, when earnings have dropped slowly). The stock is close to the low end of its range over the last few years, it hasn’t often drifted much below $35 and is at about $36 today — presumably it’s the dividend keeping that “floor” under the stock, but I don’t know much about their history.

There are lots of pulp, cellulose and paper companies in the world. Most of them produce and use “Black liquor” to some extent, and many are involved in producing more advanced cellulose products. I have no idea where Domtar stands on the continuum of innovation — whether they’re at the bleeding edge or are an old fuddy duddy — but they do at least say all the right things about cash management and investment in new technologies and more efficiency and advanced materials. The income statement does not inspire lust, but not all your investments have to be lust-worthy — sometimes a fairly steady 4% dividend payer with some relatively minor potential for growth is not a bad thing. Domtar is not going to dominate the Lignin business or be the next Carnegie Steel or Standard Oil or General Electric, I suspect, and I’ll be shocked if the stock rises 1,000% in my lifetime, let alone 96,000%, but well, that doesn’t mean it’s a bad investment.

So that’s our best guess about this Lignin stock — I hate to start off a new year with a non-definitive answer so I’ll toss out a second guess… are two guesses better than one 100% certain answer?

For the other somewhat hinted-at stock, I’d guess that he might be talking up Solazyme (SZYM) as the “$2 stock that could shoot up 1,000%,” since SZYM is a beaten-down biofuel company that currently focuses on specialty algae oils. I doubt that will shoot up 1,000%, of course, such things don’t happen very often, but you never know what enthusiasm or stories might do to a stock — SZYM has been teased and touted a few times over the years, and it would take almost a 1,000% gain to get it back to where it was in 2011 shortly after it went public.

And, in case you haven’t followed the logic, cratering oil prices will likely continue to be terrible for most “alternative” companies — low oil prices make the production of specialty polymers and chemicals from Lignin or cellulose less exciting, since the competing (and dominant) feedstock, petroleum, is getting cheaper and low petroleum prices deter investment in alternative plants or processes… and that’s to say nothing of the big potential biofuels market that’s teased — with oil and gas both super-cheap now, biofuels will likely be even more dependent on subsidies to achieve any kind of meaningful scale. That’s what has troubled Solazyme, and turned them from a potential biofuel company into a food additive and cosmetics ingredient company over the last few years, but I guess you never know when the tide might turn or the story might change.

If you have other lignin or biomass ideas to discuss, or have some opinion about Domtar, Metso or Solazyme, by all means, throw ’em on the pile with a comment below…