Corporate Profile November 1997
NEROX
Energy Corporation
INVESTMENT SUMMARY
NEROX ENERGY, INC. (OTC BB:NROX) is an emerging growth, fully integrated energy company with interests in oil & natural gas, coal, and power plant development. The company's current primary focus is targeted on the development and marketing of the largest accessible high grade bituminous coal reserves in Alaska. The company's Jonesville Coal Mine is strategically located, offering ready access to both Pacific Rim and domestic markets.
Additional interests in oil & gas production and development activities in the prolific Cook Inlet oil province of Alaska, gives investors an additional bonus in equity participation of both proven and developmental hydrocarbon reserves.
Earnings and cash flow are projected to exceed a 30% annual growth rate over the next three years. This rate is supported by a long term coal contract with a major foreign commodities exporter and local contracts. Sale opportunities at full operating capacity (approximately 700,000 tons per year) are already close to exceeding production capabilities over the next three years.
Additional contracts are currently being pursued with the Department of Defense as well as with state utility operators. Rapid growing interest for supply contracts is buttressed by the long reserve life of the mine, in conjunction with superior product quality that is unsurpassed in the state. Overall, the mine has a preferential price advantage over the state operators and East Coast exporters.
Nerox Energy Corporation's stock is a powerful play on high demand coal resources. Unlike investments in other coal mining equities, Nerox's fundamentals reveal eye-popping value on a per share basis both in terms of earnings and cash flow growth.
CORPORATE HISTORY
Nerox Energy Corporation (formerly Gemini Capital Corporation) was incorporated in the state of Nevada on September 26, 1985. On January 28, 1994 the company's name was changed to Nerox Energy Corporation. The company's primary activities throughout the past two years have been directed towards the development and marketing of oil and natural gas reserves. The company currently holds production interests in 17 wells, spanning five states including Louisiana and Alaska.
In order to provide continued shareholder value, the company acquired (through its 81% owned subsidiary, Nerox Power Systems, Inc.) A 100% interest in the Evens-Jones Coal Mine from Placer Dome, USA, Ltd. on January 4, 1996 for $1,000,000. Nerox Power Systems' employees have over 90 years combined experience in coal mine operations including: engineering, marketing, and power plant developing disciplines.
Additionally, in 1994 the company acquired a 5% gross working interests in the West McArthur River Unit #1. Located at Trading Bay in the Cook Inlet, Alaska, this prolific oil province has estimated recoverable reserves in excess of 50 million barrels of oil. Participation in one well (WMRF #1A) thus far has yielded gross production between 2200 and 2500 barrels of oil per day (110-125 bopd net to NROX). Continued participation in a new development wells in this lease area is anticipated to materially contributed to cash flow and earnings.
JONESVILLE COAL MINE
The Jonesville Coal Mine (formally operated as the Evans-Jones Coal Mine) acquired by the company in January of 1996, is the largest high grade coal mine in Alaska.
Sporadically operated throughout the 60's, the mine was developed to produce only 50,000 tons of coal per year (tpy). Future Productive capacity is estimated at over 700,000 tons per year.
Certified reserve analysis studies by both the United States Geological Survey and independent consultants value the reserves at between 37,000,000 to 42,000,000 metric tons of recoverable, high grade bituminous class "B" coal. With no competition in sight, the mine represents the only permitable, large scale coal development project in the state.
The company, through its engineering subsidiary, Nerox Power systems, Inc., has developed a mine plan commencing in July, 1996, that will produce between 125,000 - 130,000 tons of coal this year. Continued Development plans reflect projected production levels of 300,000 typ in 1998 and between 450,000 - 500,000 tpy in 1999. Given this very feasible schedule, the reserve life index at a productivity is over 50 years.
At a conservative sales valuation rate of $40.00 per ton F.O.B. (current export price is $41.25 per ton) and a net of $7.00 per ton, the potential production value to shareholders over the next three years is estimated at $3.55 per share by management.
CONTACTS & MARKETS
Old King Coal has not been a merry old soul!
Over the past ten years, lower 48 domestic producers have been faced with a saturated market, minimal energy demand growth, and stiff margins on exports of primarily due to high transportation costs. Earnings per share growth rates (a rare event) of coal equities have only been accomplished by higher productivity rate and lower costs (wages).
Nerox Energy Corporation is the best positioned coal company of the 90's.
Under a long term contract with Glendore Ltd. (a major Pacific Rim commodities broker) which was signed in October, of 1995 the company has secured sales of up to 500,000 tpy under a very favorable five year take-or-pay nomination based arrangement.
Nerox's coal has an extraordinary price advantage over the Australian and Appalachian producers who engage in export to the high growth Pacific Rim markets. The close proximity of the mine to both rail and seaport terminals presents a major benefit to shareholders by lowering transportation costs and increasing availability locally.
With Alaska's captive market interest running at a feverish pace, sales expansion to this consumer base will also be quite lucrative for the company. Contracts are already in place with Sara Coal Company. Continuing contract negotiations with the Department of Defense (seeking fulfillment of a 330,000tpy coal order for five years) looks very favorable. This is due to the fact that Nerox's coal meets or exceeds all government specifications and is more price competitive on a heat unit basis than competing bids.
INVESTMENT HIGHLIGHTS
Explosive equity appreciation will be fueled by:
* Rapid development of coal reserves in 1997 - 2000 reflecting substantial cash flow per share
(estimated at $3.55 per share by management)
* NASDAQ listing by year end 1998.
* Earnings growth projections of 30% annually over the next three years unprecedented in industry
* Superior product in high growth markets advantageous pricing
* The company's story is not well known, and is selling at a deep discount
* A genuine diamond in the rough |
