June 24th, 2021
The Commodities: Copper (& Au/ Mo), Rare Earth Metals, Helium, and Renewable Diesel.
With an economic recovery underway and some structural changes that effect supply/demand dynamics in certain markets I think it is prudent to have some commodity exposure. I am of the opinion that a period of strong economic growth is ahead (both in NA and globally) and am bullish in general on markets. These are the companies I like for commodity exposure.
Disclosure: I own a position in all four companies discussed in this post. From largest to smallest: DME, CMC, MP, FCX. Please note my risk tolerance may be much different from yours and to make note of the market capitalizations and revenues to evaluate the risks. I am not a financial advisor and do not hold myself as such.
FCX
- Freeport McMoRan Inc. NYSE: FCX
- Large copper miner with significant gold and molybdenum operations
- Market Cap: 54.49B USD
- 2020: Revenue 14.2B, Earnings 599M
- FCX has significant reserves, resources and future development opportunities within its portfolio of mining assets. FCX's preliminary estimated consolidated recoverable proven and probable reserves from its mines atDecember 31, 2020, include 113.2 billion pounds of copper, 28.9 million ounces of gold and 3.71 billion pounds of molybdenum, which were determined using metal price assumptions of $2.50 per pound for copper, $1,200 per ounce for gold and $10.00 per pound for molybdenum.
- Consolidated sales totaled 866 million pounds of copper, 293 thousand ounces of gold and 21 million pounds of molybdenum in fourth-quarter 2020, and 3.2 billion pounds of copper, 855 thousand ounces of gold and 80 million pounds of molybdenum for the year 2020. Consolidated sales for the year 2021 are expected to approximate 3.8 billion pounds of copper, 1.3 million ounces of gold and 85 million pounds of molybdenum
- Freeport-McMoRan Reports Fourth-Quarter And Year Ended 2020 Results. Reported 01/26/21
- Freeport-McMoRan Reports First-Quarter 2021 Results
- FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX is one of the world’s largest publicly traded copper producers.
- FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.
- By supplying responsibly produced copper, FCX is proud to be a positive contributor to the world well beyond its operational boundaries. Additional information about FCX is available on FCX's website at www.fcx.com
MP
- MP Materials Corp. NYSE: MP
- Largest rare earth materials producer in the Western Hemisphere
- Market Cap: 5.80B USD
- 2020: Revenue 134.31M, Earnings -21.82M
- The accelerating global transformation towards electrification and decarbonization is creating strong demand for critical rare earth materials. These trends present a bright outlook for the Company as it prepares to begin delivering separated rare earth oxides in 2022.
- Fourth Quarter 2020 Revenue Grew 100% Year-over-Year to $42.2 million. Fourth Quarter 2020 Net Income Increased 23.3x Year-over-Year to $24.1 million. Fourth Quarter 2020 Adjusted EBITDA Grew 297% Year-over-Year to $18.0 million. 2020 Full Year Production and Sales Volumes Increased Approximately 40% compared to 2019
- First Quarter 2021 Results: Revenue Grew 189% Year-over-Year to $60.0 million. Net Income Increased 737% Year-over-Year to $16.1 million. Adjusted EBITDA Grew 537% Year-over-Year to $33.0 million
- MP Materials Corp. (NYSE: MP) is the largest producer of rare earth materials in the Western Hemisphere. With over 300 employees, the Company owns and operates Mountain Pass, an iconic American industrial asset, which is the only rare earth mining and processing site of scale in the Western Hemisphere and currently produces approximately 15% of global rare earth content. Separated rare earth elements are critical inputs for the magnets that enable the mobility of electric vehicles, drones, defense systems, wind turbines, robotics and many other high-growth, advanced technologies. MP Materials’ integrated operations at Mountain Pass uniquely combine low production costs with best-in-class environmental standards, thereby restoring American leadership to a critical industry with a strong commitment to sustainability. More information is available at https://mpmaterials.com/
DME.V
- Desert Mountain Energy Corp. TSXV: DME. OTC: DMEHF. https://desertmountainenergy.com
- Helium exploration. Production and refining expected to begin Q4 2021
- Developing a +85,000 acre helium project in the Holbrook Basin, Northern Arizona. The Holbrook Basin has the highest helium (He) grades in the world. Historic production of helium gas – 9.23 Bcf – ranging from 8% to 10% He
- Market Cap: 288.16M CAD
- 2020 Revenue: 0
- Helium is irreplaceable in many high tech applications and there is a global shortage
- He prices are soaring, with a 135% increase in the price of crude helium over the past 12 months
- DME is building a solar farm to power its processing/refining facilities (~270 days of sun in Arizona).
- Along with helium (He), rare earth gases found include: neon (Ne), argon (Ar), krypton (Kr), xenon (Xe), and radon (Rn)
- Significant helium percentages in two wells in Arizona (they have only drilled 3)
- In the 10-1 well
- Flow rate of 24,214 MCFGPD (thousand cubic feet gas per day). The average gas analysis showed Helium 7.1321%, Nitrogen 77.0837%, CO2 4.0183% Methane 2.6512% and other assorted minor gases.
- In the 16-1 well
- Flow rate of 1,251.2 MCFGPD. The average gas analysis showed Helium 4.0904%, Nitrogen 90.2742%, CO2 0.0063%, Methane 3.5535% and other assorted minor gases.
- In the 10-1 well
- Low percentages of carbon based gases (CO2, CH4) means lower refining costs as the nitrogen gas can be vented during the refining process whereas carbon gasses cannot be vented or flared due to environmental regulations.
- Estimates of the costs to extract the helium vary. The lowest I have seen is $65/MCF. HeliumOne has stated refining costs of $20/MCF. Total production costs are likely in the $100/MCF range.
- Refined helium prices range from $1100USD/MCF to $3500USD/MCF! On the low end ($1100) its 99.5% He and at the high end its 99.9995% He.
- There is going to be a lack of supply of helium once the US Bureau of Land Management holds their last auction of their helium reserves in September (this reserve was established in 1925).
- DME is currently drilling a fourth well with plans to drill 3 wells this summer (wells 4, 5, and 6 for the company).
- Construction of the fully funded processing/refining facility to begin this summer. Production expected to begin in Q4 2021.
- A large advantage for DME is their proximity to their customers. The company had planned on purchasing a fleet of vehicles to deliver their helium, but have reached an agreement with their customers to have them come pick it up. This saves the company $7 million in vehicle costs and they will not suffer the loss during transport. Driving from Arizona to Texas in the middle of summer would account for an ~18% loss
- The company has no debt, is fully funded through 2021, and has no plans for future dilution. Currently there are 70M shares outstanding with another ~10M shares in warrants and options outstanding.
- Desert Mountain Energy Corp. (TSX.V – DME) is a forward-looking resource company actively engaged in the exploration and development of Helium and Rare Earth Gas properties in the U.S. Southwest, with its executive offices in Vancouver, Canada. Currently, the company holds +85,000 acres land in Arizona, the world’s best address for Helium.
CMC.V
- Cielo Waste Solutions Corp. TSXV: CMC. OTC: CWSFF https://www.cielows.com
- Cielo has developed a proven and patented technology in conjunction with a related party, which will produce a high cetane, ultralow sulfur renewable diesel, kerosene and naphtha fuels. Feedstock for the facility is the world’s most available and inexpensive feedstock of household, commercial and construction/demolition garbage, including feedstocks of Municipal Solid Waste (“MSW”) and cellulosic materials such as wet organics (compost), all plastics, paper, tires, cardboard, sawdust and wood.
- Market Cap: 431.33M CAD
- 2020 Revenue: 0
- Commercial production expected to begin at the Aldersyde, AB facility next month.
- Begins trading on the TSX Venture exchange today (previously traded on the CSE)
- Many governments require diesel to have a certain % of renewable or clean fuel blended into it.
- In Canada the federal requirement is ~2% and but each province has their own policy (see Q5 in link).
- USA: The Renewable Fuel Standard is a federal program that requires transportation fuel sold in the country to contain 36 billion gallons of renewable fuel blended into gasoline or diesel by 2022.
- European Union: fuel suppliers are required to reduce carbon-intensity by 6% for transportation fuels supplied to the EU. This requirement is integrated with the EU’s Renewable Energy Directive. Both policies require Member States to enforce targets.
- https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard/about.html
- Cielo facilities can transform most household and industrial waste that currently goes to landfill into valuable diesel fuel. Our facilities operate with virtually no emissions and we can help greatly reduce methane emissions from landfills, as well as reduce reliance on imported biofuels made from agricultural products.
- Cielo’s process is referred to as Thermal Catalytic Depolymerization (TCD). Waste materials are liquified in the reactor with green power and blended with our proprietary catalyst. The catalyst causes an instant reaction and forms a distillate which is then distilled further into renewable transportation diesel, kerosene (jet/marine fuel) and naphtha.
- One Page Overview: https://www.cielows.com/wp-content/uploads/2021/06/One-pager-June-24-2021.pdf
- Scalable Modular Model. Cielo has developed a simple modular “plant” manufacturing system. Each “plant” can produce 4,000 liters per hour or 32 million liters per annum. This format allows for multiple “plants” to be built based on feedstock supply at each facility site. This also allows Cielo to build in more remote locations and eliminate many transportation issues/costs.
- Economics. Each “plant” costs approximately $50 million to build. Pay back on the capital investment is approximately $28 million annually based on EBITDA.
- Facility Buildout. In addition to the pilot/test facility in Aldersyde, Cielo also plans to complete one corporate facility and one JV facility by end of year 2023. With all three plants operating at full capacity Cielo expects to see revenues of approx. $125 million in 2023, with expected EBIDTA of approximately $70 million.
- Additional Facility Builds. Cielo expects to build at least 1-2 corporate facilities over the next 24 months in addition to another 1-2 JV facilities. With 5-7 facilities in operation Cielo expects to realize in excess of $350M in revenue and almost $200 million in profits.
- Cielo will, with its planned 40 locations in the next 5-7 years, divert annually approximately 3.9M tonnes of waste, creating approximately 1.3 B liters of renewable fuel making us one of the fastest growing ESG companies in the world.
- Cielo’s renewable diesel costs $0.56-0.61/litre to produce and sells for $1.67 in Alberta. That is a gross margin of 63.4%. This cost is expected to decline with scale.
- Cielo's 1st commercial facility is now operating and producing high grade renewable fuels in Aldersyde, Alberta
- Canadian Pacific Railway (NYSE: CP) supplying scrap railroad ties for 4,000 lph green facility for Medicine Hat.
- Mountainview Eco Products supply wood waste and preparing alternative feedstocks for the Aldersyde Facility.
Submitted June 24, 2021 at 08:51AM by AwesomeMathUse https://ift.tt/3gUcPcw
