Interview with Erin Ventures
Interview Erin Ventures: "Many megatrends involve boron, but the market is still in its infancy"
time to read: 10 minutes | The interview was conducted by Nico Popp on June 29th, 2022 in Victoria (CAN).
CEO | Erin Ventures
645 Fort Street, Suite 203, BC V8W 1G2 Victoria (CAN)
Table of contents:
Boron as a multi-talent
news|financial: "Boron is an element that is relatively unknown among investors but is in many things. Please explain to us everywhere boron plays a role!"
"[...] Boron is one of the most versatile elements in the whole world! Everyone reading this text regularly uses hundreds of products that depend on boron. [...]" Tim Daniels, CEO, Erin Ventures
Boron is one of the most versatile elements in the whole world! Everyone reading this text regularly uses hundreds of products that depend on boron. Examples are glass and ceramics, insulation material for houses, fiber optic cables, mobile phone and computer screens and solar panels on the roofs. Boron also plays an important role in electromobility and fuel cells. Leading edge batteries for electric cars contain almost as much boron as lithium. Large wind turbines contain over six tonnes of boron. In the nuclear industry, boron is used as radiation protection. Boron is thus benefiting decisively from the trend toward decarbonization. Our modern life would be inconceivable without boron. In addition, boron has unique properties and is difficult to replace. Boron is amongst the most important and ubiquitous of minerals in terms of usage, at the same time, least present in the minds of consumers or investors.
Boron is unique
news|financial: "Tell us more about the uniqueness of boron!"
In very many areas, boron cannot be replaced. One such example is artificial fertilizers, which are taking on an increasingly important role right now with the looming food crisis, as existing fields need to yield more. Boron is an essential micronutrient. Many fields around the world are undersaturated with boron. As the world's population grows and demand for food increases, so does the demand for boron. This is a use that will shape demand for the element in the long term. Around three kilograms of boron are needed per hectare of agricultural land. Use of Boron in agriculture can also help with Climate objectives as it can increase productivity in food supply.
The boron market as an oligopoly
news|financial: "What about the supply side - is it true that supply is primarily divided among two players?"
"[...] These two companies have formed an oligopoly with smaller suppliers and have been skimming off attractive margins for years - the two companies mentioned above alone control around 75% of global supply. [...]" Tim Daniels, CEO, Erin Ventures
That is right! In California, Rio Tinto mines boron. In Turkey, the state-owned Eti Maden ensures that the European market is served. These two companies have formed an oligopoly with smaller suppliers and have been skimming off attractive margins for years - the two companies mentioned above alone control around 75% of global supply. Apart from these two players, the supply is minimal and also fragmented. We recently published an updated preliminary feasibility assessment (PEA) showing extremely robust key economic data. But let me return to your question: According to market research by Credit Suisse, the existing supply of boron is too tight based on expectation that the market demand for boron may grow tenfold to USD 50 billion per year by 2050. Many investors are unaware of this potential because the existing players in the market are not very interested in publicizing the market conditions. But when we talk about our project, European boron consumers in particular listen to us carefully. They are all significantly dependent on the producer in Turkey and have been wishing for alternative sources of supply in European region. There are only two companies worth mentioning on the supply side and, at the same time, hundreds of large customers on the demand side. Erin can help address this imbalance!
Boron is highly profitable
news|financial: "Before we get to your Piskanja project in Serbia, one more question about the current players in the market: how profitable are the existing boron projects estimated to be? Are there any figures to get closer to reality?"
"[...] The profit made by Eti Maden has risen from USD 17 million to almost USD 500 million in just a decade. [...]" Tim Daniels, CEO, Erin Ventures
Of course, Rio Tinto and Eti Maden do not like to show their cards. That is why the information is thin. But we know Rio Tinto's profit margin in California was 34% in 2015 and estimated at 44% in Turkey. Since then, boron has become much more expensive. The profit made by Eti Maden has risen from USD 17 million to almost USD 500 million in just a decade. This development started even before climate neutrality was a big issue. Combining both pieces of information, one can only assume that the boron business is very profitable today and in the future.
The Piskanja Boron project is internationally competitive
news|financial: "You have a boron project in Serbia, Piskanja. Tell us more about the project's location, its potential size, and the quality of the boron found in your deposit!"
"[...] he boron grade at our Piskanja project is among the highest internationally, offering 34% B2O3 (boron trioxide). Rio Tinto and Eti Maden offer grades of 24 to 26% B2O3 on their projects. [...]" Tim Daniels, CEO, Erin Ventures
First of all, it is important for the evaluation of our project that Piskanja is located in the middle of a mining area where raw materials have been mined continuously for the past 100 years. Both the local authorities and the population, which benefit economically from raw material projects and are suitably qualified, are very open to the mining industry. The infrastructure is also in excellent condition. We have roads that are passable all year round, we have power lines, and even a rail line 200 meters away that leads directly to several seaports. In addition, there is a cellular network and all the other amenities of civilization that cannot be taken for granted in other mining regions. Our project stands out with a mine life of nearly twenty years and further exploration potential beyond that. The boron grade at our Piskanja project is among the highest internationally, offering 34% B2O3 (boron trioxide). Rio Tinto and Eti Maden offer grades of 24 to 26% B2O3 on their projects. And we have another ace up our sleeve compared to the competition: Boron from Turkey contains arsenic, which is toxic and increasingly critically viewed by customers. Our boron, on the other hand, is clean. We see this as an additional competitive advantage; after all, environmental protection and sustainability are increasingly important along the value chain.
Study convinces with economic facts
news|financial: "You recently published an economic study (PEA) for your project. Previously, the market was only aware of data from 2014. What has changed?"
Our figures are extremely robust and show us how to move our project forward. Over recent years, we have been exploring the framework of our project, which we already knew, through infill drilling. It has given us more certainty about what the project actually offers. Consequently, there are also more resources in the measured and indicated categories. Our project's after-tax net present value is USD 525 million at 10% discount rate, and our after-tax internal rate of return (IRR) is 78.7%, indicating robust imputed numbers. Our capital expenditures, including a very generous contingency of 30% due to the current inflationary environment, are only USD 79.9 million. The latter figure shows that we have calculated very conservatively and that the figures still offer scope for positive surprises. Typically, the contingency for comparable projects is between 10% and 20%. The All-in Cash Costs for our colemanite is USD 155/t, and the production cost is USD 76/t, compared to the market price which is currently around USD 500/t, achieving a net profit margin of 69%.
With boron, it all comes down to the details
news|financial: "Boron is unearthed in different forms. Could you give us an overview and outline which boron your project offers?"
Each boron project is unique. But there are two primary types of Boron. One is calcium boron and the other is sodium boron. Calcium Boron (Colemanite) is very versatile and is used in almost all areas. Sodium Boron is primarily limited to applications where boron is not used to hardening materials, such as in the glass industry. Sodium negates this important property. Sodium boron is found primarily in North and South America. On our Piskanja project, we have the versatile calcium boron – Turkey is the only other supplier of calcium boron but their has Arsenic.
How the market reacts
news|financial: "Returning to the recently published study on the economic feasibility of your project, what is the feedback from the investment community on the new data?"
"[...] Given that you have to look at the details of the PEA in the mirror of our market capitalization, which is still in the single digits, opportunities clearly dominate at Erin Ventures. [...]" Tim Daniels, CEO, Erin Ventures
Our announcement has been very well received by investors. The figures alone are very robust. At the same time, when we explain how we arrived at these numbers and how cautiously we have calculated, it further brightens the mood. Given that you have to look at the details of the PEA in the mirror of our market capitalization, which is still in the single digits, opportunities clearly dominate at Erin Ventures. Even outside the boron market, it is rare to find projects that combine such compelling fundamentals with a low market cap. In addition, the boron market is very exciting for many reasons. I have already elaborated on the details.
Future plans and strategic partnership
news|financial: "What sets Erin Ventures apart, and what are your plans for the future?"
"[...] Erin Ventures is an attractive company, as demonstrated by the fact that we have succeeded in attracting a joint venture partner who will provide us with Euro 10.5 million and who is well connected in both North America and Europe. [...]" Tim Daniels, CEO, Erin Ventures
We are an investment story with no key ingredient missing! We offer robust numbers, a high-grade project in a secure legal framework with good infrastructure, and we operate in a market that has been under investors' radar for years. Boron is essential for future technology. It benefits from efforts towards sustainability and the energy transition, and as an ingredient in fertilizers, it is related to the growth of the world's population. In addition, two suppliers have previously shared 75% of the market. We offer higher levels of B2O3 and a more attractive ESG profile than these two top dogs. Another argument in favor of Erin Ventures is that boron consumers can buy into the market with us by strategically acquiring shares. Such an opportunity does not exist with our largest competitors.
All of this should create an environment where the Erin Ventures investment story builds momentum. The conditions are in place for this to happen. We will be working hard in the coming months to support this development, which includes, for example, renaming our company so that investors can see directly in which market they are investing. In a later step, we are aiming for a feasibility study and completing the multi-stage permitting process in order to go into production at the end of 2025 which will ramp up to 250,000 tonnes per year. Added to this is the exploration potential, which continues to exist.
Erin Ventures is an attractive company, as demonstrated by the fact that we have succeeded in attracting a joint venture partner who will provide us with Euro 10.5 million and who is well connected in both North America and Europe. Furthermore, we plan to enter into additional partnerships around the further steps to production, where the focus will be to dilute the shareholdings of our shareholders as little as possible. We want to finance about 75% of the investments in our mine through bank loans and, thanks to further partnerships, keep the equity share as low as possible. However, smaller financing rounds are not excluded in order to ensure adequate working capital until production starts. The confidence of our joint venture partner reduces our financing risk and strengthens us in the current market environment. That should also signal to investors that Erin Ventures is in a promising position.
news|financial: "Thank you very much for talking to us."