Mica Anyone?
Hello folks, this is my first post on SI and I'd like to start with a big thank you to all of you. I've followed every post on the BAY and FGX thread, this thread, as well as many others. There are a lot of good people here who are enjoyable and informative to read. I've never posted because I haven't had much to add that isn't already covered. There are a lot of voices here already (and more coming to follow the $$$ ), so I wont post too often just to make noise.
Two things prompted me to join SI. One to thank everyone, the other to present an opportunity which I'd like to run by the experts on this board. BTW, this is not hype -- I'm selfishly sharing this to see what I might be missing -- I'm also happy to share this because -- if people like what they see -- it's a way of saying thanks for all the profitable advice I've been getting from you.
Okay, cut to the chase.
Azco mining (AZC) has a proven mica resource in Arizona. They have no debt, and there is no CAPEX going forward. The production faciilty can produce 20 million pounds of mica per year. The revenue from the mica is all net because the the by-product coming out of the ground (93% of the material) is feldspar (used in tile roofs, and other applications) and feldspar sales alone cover the cost of production.
All mica is not the same, and the mica Azco has is considered the best in the world. The price of mica is based on its quality. Average quality wet ground mica sells for about .50 a pound. The price of Azco's mica is the unknown variable. They have developed mica-based pellets to be used in plastics. One customer (car bumper manufacturer) can easily consume their annual production. This mica-enhanced plastic is stronger and lighter than steel. Azco has also begun selling small amounts of mica to three cosmetic companies. The uses of mica are evolving. There was no premium for Azco's type of mica 20 years ago.
The company has enough cash to carry them into next year. Their burn rate is low.
The proven deposit represents 5% of the overall target. This 5% area (or 20 acres) represents a 20 years supply based on production of 20 million pounds a year. Production can be expanded, and doing so is not costly. (CAPEX for original processing plant is under $10 million.) The deposit is at surface.
Other caveats:
The FDA is testing Feldspar for use as an organic fertilizer.
Azco has a large, at surface deposit of Micaceous Iron Oxide. I won't go into detail here, but the potential with this appears exciting.
messages.yahoo.com
Azco owns 30% of Piedras Verdes in Sonora, Mexico
The largest shareholder of Azco is Christian Mustad, of the Mustad International Group. This Geneva-based industrial conglomerate specializes in manufacturing niche products on a global scale. mustadinternational.com
Back of napkin numbers:
20 million pounds per year at $1 per pound = $20 million year net revenue. Today's market cap = $28 million.
That's all the numbers I'll use. Production can be expanded. The deposit will out last our life span. Mica's applications are growing. Like wine, the higher quality gets much more per dollar than the jug wine, and Azco has the highest quality in the world.
The key, to me, is when will they get that first large plastics contract? With the resource under-valued (IMO), I don't mind waiting. : )
For more information FRB has a report on them. ranunciacion@webershandwick.com
Also, there is an interview with the CEO, Larry Olsen, at wallstreetreporter.com (registration necessary). This gives a good overview of Azco's history and current projects.
I would also like to add that Azco, to me, is a different kind of company since Mr. Olsen took the helm and several former executives departed. Larry Olsen found the deposit before Azco took ownership of it, and has stayed with it with since. He earns no salary (options only) and lent the company $800,000 last year to help tide it over a year of frustrating production issues. (Which he says are resolved.) I trust him.
Thanks for taking the time to read this. There is more to say, and more nuances, but I hope this gives a succinct overview of what may be an overlooked gem. I sure hope this is what I think it is! (Because I've taken a large position!)
Azco trades on the AMEX & TSE and their website is azco.com |
