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GEOMEGA at PDAC 2020

Read on for the transcript of our speech at PDAC 2020.

Hello, I am Kiril Mugerman with GEOMEGA RESOURCES. What is it that we are doing? We’re developing a rare earths refining hub in Quebec.

Please be aware of forward-looking statements.

What you see here at the bottom is neodymium oxide that we make, the neodymium metal that somebody else makes, and that metal then goes into this thing I have with me here, which is a big, very strong magnet. A magnet like this goes into electric motors, as an example, but many of them go into electric turbines. You heard the presentations of a couple of people before me describing so many different applications, from electric vehicles to wind turbines. This magnet I have here is specifically coming from a physics lab, where it was used for lots of different experiments. Most importantly, we can say that it’s entering every single market that’s out there.

Rare earths, the Gordon smelter, mining, and recycling — what’s the connection? The Gordon smelter started in 1927. Up to 1976, it was processing mining concentrate. Today it processes copper concentrates and recyclable materials. It is the world’s largest processor of electronic scrap containing copper and precious metals. Now we are looking at it from the opposite way — we want to start with recyclable materials, then expand into rare earths mining concentrates. Why? We’ll see that in a second.

Quebec as North America’s rare earth hub. ISR technology that we’ve developed can be used to establish Quebec as the clean and cost-efficient recycler of choice outside of China for NdFeB, neodymium iron boron magnets. Once we start processing those magnets, we generate cash and then we can expand into other secondary fields of rare earths and specialty metals. That’s more volume, more material, more cash. Then, we expand into rare earth mining concentrates. Everybody is asking — can we process mining concentrates? Yes, we can. Do we want to today? No, because it’s a totally different volume. The grades are not the same, the concentrations are not the same, and the amount of neodymium in there is not the same. This magnet here is running at 30% rare earths. Say 29% on average is neodymium, then 1% is dysprosium. 70% of it is iron. That’s much more advantageous for a small plant perspective than starting with a big facility to process rare earth concentrates. Finally, we will look at the processing of alternative rare earth feeds. That can be quite a few different things, it can be red muds, coal, tailings, ash. There are so many different people coming up with different ideas where there are rare earths. If they want to extract it, then we will be there to process it. That’s all in the future. Four steps: starting small with highest grade material and a small footprint going to large-scale and large volumes of small grade. What does it give us? Once we have an operational clean rare earths recycling refinery, then we can go and develop in the future rare earths mines. We have MONTVIEL and there are other projects in Quebec which are very well-identified now. We can attract downstream processing into the province and Canada. We can attract companies to make metal and magnets, which allows for more additional value to be generated here. In Quebec, the low energy and clean energy that we have is a huge major advantage for all those companies to set up because they are energy-intensive. Then, we are looking at the downstream manufacturers. Of course, more and more companies want to use those magnets to do applications.

Geomega’s approach — stage one was lab-scale development of the technology. We completed that in 2016, 2017, 2018. Then, the ISR process was scaled-up several times. That’s all complete. Those years 2016 to 2018 including the mini-pilot — those results came out in April of 2019. Stage two, you’re taking this towards an even bigger scale with a demonstration plant. Once the demonstration plant is running, and while we are developing it, we are constantly doing additional work on other rare earth feeds. Why? Because once I’m starting to operate, I want to start thinking about what is the next thing that I’m going to process. Then, we start operating that demonstration plant to the commercial plant. Then, the process starts again for the other feed material; so stage 2 and stage 3 keep repeating each other.

Gradual scale-up is the key. We’ve seen that issue where companies go too fast from a pilot-scale to a mine scale, too many difficulties, too many problems. For us, gradual scale-up reduces the technological risk of scaling-up new and innovative processes. The reduced CAPEX is a major advantage for us because I think our industry is not very healthy right now and raising hundreds of millions of dollars is not easy. Not only that, it comes with a lot of other issues. Starting from low volume but high grade, small CAPEX and small footprint is the best way to go. It allows us to establish cash flow, as well as credibility for the technology. Everybody’s asking me today — how do I know your technology works? I don’t know, I guess you have to trust me. But once I’m operational, you know that it’s working because it’s generating cash flow. That’s the biggest issue that we are seeing with the black box mentality. Lowering the risk when scaling up — that’s my main technological risk. Everybody knows that there is always a risk in scaling-up, but doing it in small steps is a big advantage.

The ISR technology has been scaled-up. This is the final iteration of the pilot plant. Proprietary technology, environmentally safe, small footprint, low CAPEX, as I said. Why environmentally safe? Because the recovery of my main reagents is +95%. I don’t have liquid effluent coming out of my plant. It’s very important because I’ll show you where I’m developing my plant. Then, iron oxide — 70% of this is magnet is iron. When they recycle those magnets in China, usually the iron goes together with their waste hydrochloric acid into the tailings facility. Basically, it’s a red mud issue. We don’t want to be dealing with red muds, especially where I am outside Montreal. We produce a high-purity iron oxide product, which we can sell or send to the recycling industry or metal scrap yards. That’s how we avoid having any solid or liquid effluent accumulating at the plant.

Here’s my demo plant main overview, 1.5 tons per day per eight hours — that’s what we start with. This thing is running at 30% of just four elements, NdPrDyTb, as I told you. Capital cost $2.6M dollars, operating cost of $3, target sales based on today’s pricing generates approximately $10 million dollars in sales, and the target profit margin is 20%. Once the plant is starting to operate and we see that everything is fine, then we start adding a second shift and a third shift. Basically in a 24-hour operation, we can run at 4.5 tonnes per day. You can multiply all your sales and profits times three.

The demo plant in Saint-Bruno. For those of you who don’t know where Saint-Bruno is, it is just 20 minutes outside of Montreal. Considering that it’s in Montreal, within the city, I can’t afford to have a tailings facility — I’ll never permit it. I need a clean plant that can operate within that environment. The location is very strategic for me because I have access to rail, I have access to port, and I have access to all infrastructure that I need.

Over the last 12 months since the mini-pilot plant was completed, we have completed an equity financing last year, an engineering feed study in Q4, plant site selection was in Q1, and now we’ve completed a debt financing package with the government for $1.7 million dollars. That debt is on extremely friendly terms. Now, we are about to kick off the engineering. We already secured HATCH as part of the partners to help develop this plant. Offtakes, commissioning, and more for this year. It is a very aggressive timeline and we’ll be providing more details as the months go by.

The concept of a circular economy is important. I still have another seven minutes so I have enough time to cover everything. Once we process the oxides, that goes to metal makers. The metal maker produces a bit of waste during their process and that goes back to us to process. The metal maker sends their metal to the magnet manufacturer. The magnet manufacturer produces waste during the cutting and polishing of the magnet, which produces more waste. That stream comes back to a recycler. Then, the magnet goes to the final product assembly, usage, and then waste disposal — the end of life product is growing from every single application — sorting, collection, and that’s when it comes back. We know that this loop exists today, but it mostly exists in China. If you ask most experts four years ago, then they would have told you rare earth recycling is 1%. Rare earths recycling is not 1%, it’s 30%. That information was not really available until last year because no-one wanted to talk about it, but China produces 30% of their neodymium and praesodymium from recycling. They have solid extraction plants, which are basically taking waste from factories and end-of-life big applications to recycle. Considering that various applications are mostly focused on magnets, we have to count that recycling.

We see today a very big percentage of rare earths recycling in China — why don’t we do it here? We know that in China they have the infrastructure already in place, that’s one reason why we don’t do it here. Two, they have solvent extraction plants. We don’t. Then, they have their recycling feeds. In China, there are literally solvent extraction plants that don’t touch a single gram of mining concentrates. All they do is just recycling feeds. Basically, you have a process that can be applied both to concentrates from mines and to the this by using the same hydrochloric acid from the same plant — we know that the environmental issues behind it. The disposal is low-cost in traditional tailings, but we cannot afford to do it here.

What is recycled? I’m showing you a couple of examples. The swarf in the second picture from the right is more than 50,000 tonnes per year. Look at collection programs — of course, China has many more of them. There are very few outside of China. But those collection programs are starting to kick in more and more. Every single company that we talk to in this industry, they’re either looking hard to collect or if they do collect then they’re looking for where to send it! You’ve got more than 15,000 tonnes per year available of various volumes of end-of-life applications and some of them are going up. Some of them are going down. It depends. For example, hard drives is kind of going down because everybody’s switching to SSDs but, at the same time, we’ve got data centers that are increasing and using are more hard drives.

GEOMEGA’s solution is very easy. We recycle at low cost. Obviously, we cannot get into the technical details of this process. We cover the environmental aspect by making sure that everything is recuperated internally within the process. The low CAPEX justifies the economics. Then, we can basically guarantee that we start operation, generating cash flow, and then we move on to the next stage, which is going to a second plant or a bigger plant. Really, the problem is not a low rare earth oxide price. Today, the problem is the fact that nobody is doing it outside of China. Once you have the first plant, then you suddenly have more and more collection, more and more recycling. Companies are calling us right now and saying, “We noticed you are going to be recycling rare earth magnets, can we sell you some?” That’s what they do. The recycling industry collects things that they can sell. We’ll buy, we’ll process, and we will produce oxide. We are basically creating a sustainable supply of rare earth oxides outside of Asia.

Here’s an example of a partnership that we have with Rocklink to collect magnets in Europe. They are collecting from 70 partners, approximately, and that generates approximately 16 tonnes per year. That is an example of how you can collect more and more magnets. If nobody tells them to collect it, then it all goes in scrap.

What else? We see more and more suppliers joining our partnerships. We have companies like Jobmasters from here from Canada just outside of Toronto recently joining us in this initiative to collect more and more magnets. They represent hundreds of clients — each one of those clients wants to collect rare earth magnets. Everybody’s striving towards zero waste policy. Zero waste policy — they want to return whatever they don’t use or scrap back to the manufacturer. That manufacturer or distributor wants to send it back to a recycling plant and that’s where we come in.

The permanent magnet market — it was 160 thousand tonnes in 2018. Today, it’s closer towards two hundred thousand tonnes. That market is growing. Every single magnet that has to be made produces 15-30% waste by weight. That’s a lot of magnet to be recycled. We are starting with the first plant of approximately $10M ten million dollars in sales and growing to full capacity within the plant, then probably looking to add a second plant as soon as possible close to magnet manufacturers. Most of them are in Asia, but you’re seeing more and more interest of some of those manufacturers to come to Europe and North America. That magnet sector today is generating $1.2 billion dollars annually. It’s expected to grow to $1.8 billion dollars. That’s a lot of money and it’s a sector that we want to take a big chunk out of. We think we can generate a lot of revenues and that’s why we think it’s a very good opportunity to invest in GEOMEGA today.

In summary, we have already established a good chunk of the supply of magnet waste material for our plant and we are working on more. We have a deal in place with trading houses to sell the product, so we can sell our oxide as well. Low capex, low opex, small footprint gives us opportunity to demonstrate our clean process. Then, we are heading towards production. Share structure — we know what happened last week. Since then, I think gives a great opportunity for investors to get in and involved with us right now as we are going to be a company in cash flowing operation very soon. Thank you very much.

Thanks to the PDAC!

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