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

by Travis Johnson, Stock Gumshoe | June 15, 2017 3:15 pm

What's being hinted at by The Morgan Report?

David Morgan[1] is one of the bigger silver[2] “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[3]’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[4] 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[5], which itself seems to have changed its name to Mineworx recently [6](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[7] 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 chemical agents.

My assumption, since I like to start out a bit skeptical, is that precious metals recycling from circuit boards is a very tight-margin business for the refiners — mostly because once you get up to the large quantities that these refiners need for their inputs, the cost of the materials is fairly high because they’re paying a network of e-recycling middlemen who have gathered those boards (folks like this cash for scrap company[8], which will pay you $4 for a laptop motherboard or $110 for a pound of Intel 486 chips, or this one [9]that buys motherboards for about $3.20 a pound and RAM for $8 a pound).

And there are refiners who will process your scrap for you, too, these folks[10] will take as little as 5,000 pounds of circuit boards, charge you $1.35 per pound to treat them and $350 for processing, and send you whatever gold, silver, platinum[11] etc. is extracted from the boards. That’s about two tonnes, so if you’re dealing with that small of a quantity it would cost you about $7,000, which would mean that you need to have a yield of a little more than 150 grams of gold per two tonnes of circuit boards just to break even (that’s about five ounces of gold, which would be worth about $7,000 at today’s prices)… depending on the boards you’re recycling there may be other precious metals, most likely silver, and some printed circuit boards have vastly higher gold content than others, though the studies I perused indicated that more than 80% of the value of any of this kind of recycling comes from the gold.

Is there an opportunity here? I suppose that any company with a meaningfully better or cleaner process can probably make inroads, but only if they’re able to scale up — and scaling up is expensive, particularly if you have to pay the same input costs. So presumably their most appealing end game would be in trying to sell their technology or their processing equipment (or hydrometallurgical solutions) to existing refiners who want to make their process cleaner. That sounds like something that would take a very long time, particularly for an industry like this with lots of relatively small entrenched players and facilities, but it’s probably not impossible.

And I would hesitate to assume that it will be substantially lower in cost than existing recycling systems — so any comparison to mining is a little silly, since any e-recycling company has that same advantage over a company that’s processing ore from the ground (the gold concentration is much higher in circuit boards than it is in even the highest-grade gold mines). So that’s interesting, and it’s a good argument for recycling electronics, but it’s not necessarily a meaningful argument for one e-recycling technology over another — for that, you’d need a real cost comparison between EnviroLeach’s system and a conventional furnace-based or chemical refiner.

EnviroLeach does provide a white paper about the performance of their refining system, which you can consult here for more detail[12] if you like. It’s interesting, and as a layman it’s a fairly compelling argument that this waste stream is going to steadily increase in size and that more recycling will be done, which might open the door for new methods and solutions, but it feels like you’re just looking at a little corner of the picture when you look at just this little startup and not at giant and established refiners like Boliden[13] or Sims Recycling[14].

So I find myself not all that excited about this one — it sounds like it might work, but in a search for more environmentally friendly e-waste recycling you’ll run across lots of other folks who also have solutions that sound like they might work, which makes this an area where I, as a completely uneducated guy on the science of e-refining or recycling, am not likely to have even an average understanding of the merits of any system, let alone any “edge” … and given the small size and the fact that they’re just beginning to build their first plant, I would assume that they’re going to have to raise a bunch more money along the way, which indicates that there’s no real rush unless you see a unique and urgent opportunity in this particular technology. As for me, well, I looked into this for a couple hours and have concluded that my time and brainpower, such as it is, is probably better spent elsewhere.

If you’re more informed about this industry and find this appealing (or see other risks or costs to be aware of), please let us know with a comment below… thanks!

P.S. If you’ve ever subscribed to The Morgan Report[15], please click here to review it for your fellow investors. Thank you!

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