Matt Gordon CRUX Investor interviews Kiril Mugerman, Geomega Resources

Interview with Kiril Mugerman, President & CEO of Geomega Resources (TSX-V: GMA)

“We discuss company’s plans to recover #rareearths from magnets, with CEO Kiril Mugerman claiming they provide the most easily accessed and highest grade concentrate available. They have just completed a pilot plant so now the focus is on building a demonstration plant. We talk through the original plan to explore and develop their large Montviel deposit but after struggling to raise capital, they segued to #rareearths recovery.”

Geomega Resources: ‘leaders in rare earths recycling.’ Is recovering rare earths from magnets a niche in the rare earths space? Mugerman claims that magnets provide the most easily available and highest grade concentrate available. He wants to demonstrate to the world that his recycling model is viable.

Geomega Resources is based in Quebec and has just completed a pilot plant. Now, the focus is on building a demonstration plant. Geomega was originally an exploration and development company but segued to rare earths recycling after struggling to raise capital to develop their large Montviel Deposit. Mugerman is candid: unfavourable market conditions would have sunk Geomega Resources if he hadn’t pivoted, just as it has been the ruin of so many juniors before him.

The plan was to kick start with cash flow to capture the interest of investors, and Mugerman immediately latched onto this. He investigated a variety of possible ventures, but settled on magnet recycling as the most profitable.

Geomega Resources claims to have proprietary rare earths recycling technology that is more green than the currently most popular process. He claims his company used totally different reagents than the hydrochloric acid used in China. He doesn’t want to be involved in such pollution. 70% iron has to be dumped into tailings as a consequence of the hydrochloric leaching process. Geomega Resources’ proprietary process does not destroy the reagent, so the company is able to reuse 95% of it for further recycling. It has been designed in such a way that absolutely no tailings are created. Smart. Mugerman hopes the demonstration plant will show this process can be effective on a commercial scale. It will be running 8 hours a day and processing 1.5t magnet scrap per day.

Geomega Resources is fully financed “based on the model presented and developed in the last 6 months.” The demonstration plant is c. C$2.7M.

Geomega Resources has raised C$1.72M in debt, C$1.2M in equity, and c. C$1M in different grants. Mugerman does not have the figure sat in front of him right now, but claims he has enough for all G&A activities until the plant is built. The facility will be 14,000 square feet in total. The plant may eventually go to 24 hours per day. Geomega Resources has signed agreements with some partners, but nobody guarantees anything in the recycling industry. Several of Geomega’s partners have given positive indications, but it will be interesting to see how these develop once things are up and running. It doesn’t appear Mugerman is in control of the front end cost of the battery recycling process, because there will be other parties bidding for the material. Does he have access to individuals who can guarantee Geomega feedstock at a set price so he can control his margins? He claims he is always working on it. Will this be problematic to investors?

Geomega’s targets are $10M in sales at a 20% margin. This would provide a proof of concept ahead of Geomega’s step to full commercialisation.

In terms of a timeline for production, what is Mugerman looking at? There is no fixed date on when the first shovel goes in the ground at the demo plant, but the building is already built with a long-term lease, and he expects to get things started this year. He wants to deliver the construction as soon as possible and expects to be producing oxides by the end of this year if all things go well. As soon as possible, he’d like to triple the size of the plant to prove the commercial viability of Geomega’s proprietary process.

1:49 – Company Overview

2:37 – A Niche in the Rare Earths Space: Background History of the Company and a Macro Overview of the Space

15:24, 35:32 – Proprietary Greener Recycling Technology: Why Aren’t People Buying into it?

18:23 – Lab, Pilot and Now Demonstration Plant: Exploring Potential and Capabilities

21:35, 39:16, 48:57 – The Numbers: Cash Position, Revenue Generation, And Raising Money

25:19, 48:57 – Stages of Growth: Partners, Feed Stock and Generating Interest

30:47 – Contracts, Control and Competition: Realistic Possibilities for Geomega Resources

43:26 – 20, $2M Canadian % Profit: Understanding the Maths

45:05 – Timeline for Production

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