David Morgan’s “Forget Silver! Buy This Instead!!” Pitch for an Electronics Recycler

What's being hinted at by The Morgan Report?

By Travis Johnson, Stock Gumshoe, June 15, 2017

David Morgan is one of the bigger silver “bulls” out there most of the time, so his “Forget silver” headline was clearly designed to get attention… and it worked pretty well, with several readers writing in to your friendly neighborhood Gumshoe with questions about this spiel.

So… let’s get you some answers!

The ad is for the Morgan Report’s premium membership, which will run you $497/year, though it sounds like he first recommended the stock and perhaps a private placement in the company to his Master Mind members, who pay $997/year. Here’s what he notes about it in this latest pitch, which I first saw on Monday:

“… you have a VERY unique opportunity right now to invest in something so significant that is could change the mining industry forever!

“Here are the details…

“While conducting a two-year study, I discovered a microcap stock in the technology space. I investigated this company at great length, so I’m not exaggerating when I say it has the potential to completely transform your net worth.

“I bought shares in this company and recommended it first to our Master Mind members, and some were able to participate in the financing along with some of the best known names in the entire industry, unfortunately it was oversubscribed and some were not able to buy what they wanted. The Master Mind members were given the entire presentation very early by the present CEO so they were quite familiar with the risks and potential.”

We’re told that this stock only began trading in the US a week or so ago, on June 2, and that they have developed a “chemical solution” to help with extracting precious metals from electronic waste (circuit boards, old phones, etc.)

And, in the hook for some folks, that the operation is “far more profitable than the richest gold mines in the world by a factor of ten or more.”

Morgan then goes on to note that he thinks someone else will probably start promoting this story soon, driving the shares up, so gosh, you better hurry! Here’s what he notes at the close:

“Or you can wait until one the major newsletter marketing companies or several of them become acquainted with this company through our hard work and effort. Then does a massive email campaign, claims to be the first to discover this technology and moves the stock up significantly. This technology is so significant that the “others” will not be able to avoid telling the story and it is almost certain we will be completely left out of sales letter, but at that point our profits will only be growing….”

So what’s he talking about?

Thinkolator sez (and several reader who wrote in agree) that this is EnviroLeach Technologies (ETI on the CNSX, EVLLF OTC in the US), a company that was spun out of Iberian Minerals, which itself seems to have changed its name to Mineworx recently (MWX.V, MWXRF). Both Mineworx and EnviroLeach are focused on environmentally friendly and scalable material processing, with the headline opportunities being e-recycling and smaller-scale mining operations (though they claim opportunities in a vastly larger realm of projects).

There are currently 51 million shares outstanding, according to EnviroLeach’s website, so at the current price in US trading of 51 cents that’s a market cap of $26 million… the pricing on the Canadian Securities Exchange, which is a tiny exchange that’s sometimes used by teensy weensy startups that aren’t ready for the Venture exchange, is not quite in line with the US OTC trading, in Canada the market cap is about C$29 million, which is more like $21.8 million in the US.

The company’s primary asset seems to be this intellectual property, their recipe for chemical mixtures that they use in leaching out precious metals from shredded e-waste (circuit boards, etc). It sounds impressive, this is the description they use for the company:

“EnviroLeach Technologies Inc. has developed a unique, cost-effective and environmentally friendly alternative to cyanide for the hydrometallurgical extraction of precious metals for the mining and E-waste sectors. The patent-pending EnviroLeach process is safe, eco-friendly, and provides comparable leach kinetics to high intensity cyanide on most ores, concentrates and tailings. “

The latest news, from last week, is that the company has started construction on a 10 tonne/day e-waste processing plant in partnership with Mineworx… and they say that the initial capacity (2,500 tonnes/day of printed circuit board assemblies) will make it “the largest and most environmentally friendly chemistra-based e-waste processing facility in North America”.

I have no idea what the economics of the plants or the technology might be, which is often what slows me down when looking at these kinds of companies that are trying to develop a new process or recycling system when there already exists a large infrastructure for the competing systems. I don’t understand how they make money, mostly because we don’t really know what their input costs are or how much gold and silver they’re going to produce… and, of course, if you don’t understand how a company is going to make money, you might question the wisdom of investing money in that company.

Can we guess at the financials? I suppose, but it requires quite a bit of guessing. If we assume that there’s something like 200-300 grams of gold per tonne of printed circuit boards, which seems to be an average range for a lot of articles and discussion boards I’ve skimmed through, then that means they might be able to generate 20,000 ounces of gold a day from their 2,5000 tonnes of input. Often older electronic components have more gold because gold prices were lower decades ago and technology was less advanced for minimizing gold requirements, which might indicate diminishing yields in the future — though cell phones apparently also have a high recycling value as well.

It’s hard to take any such averages seriously because the wide variety of different kinds of chips and circuit boards from different kinds of products will have wildly different gold (or silver) content, but you have to start somewhere.

If you’re creating 20,000 ounces of gold a day, that’s potential revenue of $26 million… so that’s obviously exciting for a little $25 million market cap company… but, again, we have no idea what the company will have to pay for this scrap material, which is widely recycled and widely understood as valuable in these quantities.

In skimming around different recycling discussion boards and exchanges I found offers to sell “high grade circuit board scrap” in the US at $4/pound, for example, so if that’s your input cost then those 2,500 tonnes of recyclable material would cost you about $22 million. So that’s a hefty input cost for $26 million of output, and that doesn’t include the cost of labor or pretreating those circuit boards if necessary, or transporting them, or the capital costs of building the equipment (or maintaining it). And I have no idea what the cost might be of the “food grade additives” they’re using instead of cyanide or other ch