Wow. Up to 96% recovery of gold from a mine-site waste dump (tailings pond)... This news is easily the most important of the past nine months. In April, 2013 when I bought shares at C$0.28, there was, supposedly, blue-sky potential in this segment, now called NanoMet. Back then the hope was that recoveries would average in the 60%-80% range. However, it seemed clear that even a 30%-40% recovery would be a home run.
Former management spoke about gold, silver, platinum, palladium....this press release pertains only to gold because the pond sampled only has gold in it. Some tailings ponds that the company is looking into contain silver, platinum, palladium or a combination of a few metals. Each pond has a case specific recovery profile.
Recoveries above 50% = possibly big economic returns, especially compared to the current Enterprise Value of ~80mm shares x C$.085/shr = C$6.8 million (minus C$1 million cash = C$5.8 million). I use USD to value Nanostruck as most metals are sold in USD. Therefore, the EV of Nanostruck is sitting at ~ USD$ 5.2 million. [NOTE: There's ~24 million options and warrants, therefore about 102 million fully-diluted shares.] However, the warrants and options are out of the money, ranging from C$0.15 - C$0.38.
Compare today's EV to that of last year when the stock briefly traded above C$0.50, for an EV of ~ USD$ 35 million. Assuming 90% recovery of 9.1 grams-per-metric tonne material, suggests that NanoMet could recover up to ~130k ounces of gold. The question of course is how long might it take and how much might it cost?
Still, 130k ounces @ $1,260/oz would be $164 million of project gross revenue. Assuming a 50% margin and a 50% earnings split with the tailings pond owner, that would be $41 million of earnings to NanoMet. Even if it were to take 20 years to extract, with a 10% discount factor this project alone would have a NPV of ~$18-$20 million. There's upside to future projects from 1) higher metals prices 2) a better earnings split with resource owners 3) a higher than 50% margin and 4) a lower discount factor.
Bottom line: I recommended this stock at 28c and supported it at higher levels, only to see meaningful newsflow slow and then completely STOP. Today's news release is truly exciting IF it means that we are back on track pursuing NanoMet and other important company initiatives. I sincerely hope that new management can follow through on this press release, i.e. sign NanoMet contracts and get into production to achieve initial NanoMet revenues this year.
Updates on several other company initiatives such as cartridges for toilet systems and units to treat landfill leachate should be released in coming weeks. At least I hope so!
