EnviroLeach's Novel Brew

Last month EnviroLeach Technologies (EVLLF:  OTC/BB, ETI:  CSE) won one of four semi-finalist spots in a contest aimed at finding technologies disruptive to the mining sector.  Sponsored by Goldcorp (GG:  NYSE) and accounting firm KPMG, the #DisruptMining 2018 challenge attracted over one hundred entrants.  Another of the four semi-finalists won the top prize of CAD$1 million, but EnviroLeach still got a chance showcase its environment-friendly method for recovering gold.

EnviroLeach’s hydrometallurgial process can be applied a variety of materials where gold is resident, from electronic waste to ores and concentrates taken directly from mine sites.  The hydrometallurgical process is not so different from conventional gold recovery methods involving vats of lixiviant, a liquid bath that leaches or liberates the target metal. 

The company has developed a novel brew to put in the vat.  Instead of toxic cyanide that has been the favorite in the gold mining sector, the company uses five non-toxic ingredients that are approved by the Federal Drug Administration.  Investors will have to take management’s world for it, as the five ingredients remain unnamed while EnviroLeach waits for patent protection.

What may be more attractive from a business standpoint than low-toxicity, is low cost.  The overall process requires none of the steps or alterations that rack up large operating expenses.  The process does not require high temperatures or pressure that must be energized and then dissipated. There is no need for process circuits for monitoring gas emission and no detoxification systems.  There are no tailings that require expensive disposal systems.  Most importantly, the solution can be regenerated and used over, saving money on raw materials requirements.

With a strong business case, it seems logical that EnviroLeach can make a strong pitch for its process with potential partners and customers.  In August 2017, the company struck a partnership with Jabil, Inc. (JBL:  NYSE), one of the world’s largest semiconductor producers.  Jabil will use EnviroLeach’s proprietary process at a manufacturing facility in Tennessee to recovery metals from circuit boards and electronic waste.  The partnership begins with a five-ton capacity pilot plant in Vancouver, BC that is aimed at perfecting the process for Jabil’s unique waste stream.  Jabil is not just looking for gold in all that e-waste.  The partnership also encompasses development of recovery methods for lithium and rare earths metals.

Financial terms of the deal with Jabil have not been detailed publicly.  The revenue stream would be a seminal event for EnviroLeach, which has yet to record sales.  The most financial report filed with Canada’s SEDAR, the company reported CN$2.5 million in operating expenses in the first nine months of 2017.  Of course, some of those expenses did not involve cash payments.  During the same nine month period the company used CN$1.6 million in cash to support operations.  Notably EnviroLeach received CN$1.75 million as a cash advance from new customer Jabil.  The cash advance was reported among financing cash flows, but could be considered an operating cash flow given it is related to work for Jabil’s account.  Furthermore, Jabil has made no investment in EnviroLeach’s common stock nor is there a note that requires repayment.  With our adjustment operation cash flow in the first nine months of 2017, would have been net CN$129,548.

Even through EnviroLeach may have covered operating expenses for some months, the company still needs capital.  In the same nine months, another CN$2.1 million was used to invest in equipment and technology.   The company raised $CN$2.9 million through the sale of common stock.  Since then another CN$10.5 million was raised through the sale of 6.7 million shares in a brokered private placement of common stock and warrants.

It is a nice cash kitty to help EnviroLeach deliver on promises to Jabil.  Hopefully, the company’s leadership will have the sense to use the Jabil success as seed for additional market opportunities.

With technology validated by a customer, EnviroLeach has reached an inflection point in its development.  It is a company worth consideration or in the least a prominent place on a watch list for capital in search of environmentally friendly investments.    

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.