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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
®
Contents CSE | Quarterly Issue No. 2 - 2015 www.thecse.com Publisher Fusion Publishing Media Inc. #317 – 1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.888.925.0313 (Toll Free) www.FusionPublishingMedia.com info@FusionPublishingMedia.com Group Publisher Terry Tremaine Group Editor Connie Ekelund Production Manager Christie Smith Issue Editor James Black Free Digital Subscription Published by Fusion Publishing Media Inc. on behalf of Canadian Securities Exchange. To receive your complimentary subscription, please visit www.thecse.com and complete the contact form.
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CEO’s Message
Feature Story 7 Deer Horn Sees Huge Opportunity in Canada’s Natural and Organic Market Space by Peter Murray Company Profile 10 Eight Solutions Chooses “Big Data” as Focus for Next Growth Phase by Peter Murray 14
Data Deposit Box Tweaks Existing Strengths to Drive Growth Domestically, Overseas by Peter Murray
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Auxellence Health Brings New Approach to Personal Health Care With TULIP Online System by Peter Murray
19
Micromem Says Profit on Horizon as Multiple Products Move From R&D to Production by Alessandro Bruno
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Dundee Sustainable Technologies Looks to Set New Bar for Responsible Ore Processing by Peter Murray
www.thecse.com | @CSE_News Cover Photo: PIXSOUL MEDIA INC.
www.thecse.com | 5
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
CEO’s Message
I
t is my pleasure to welcome you to the second “CSE Quarterly” of 2015. As I tell people in my travels, the CSE is looking to return the stock exchange to its traditional central role in the capital formation process. We are doing this in two key ways: by administering a streamlined listings regulation model that focuses on a company’s disclosure record, and through the provision of liquid and accessible secondary market trading services. The feedback in the last year is extremely encouraging: our number of listed companies grew by 35% in 2014, and, for the first time, we listed more companies (as opposed to exchange traded funds, notes and structured products) than the other exchanges in Canada. Over the last year we enhanced retail investor access to our market with the provision of direct electronic trading services for the CSE from Scotia iTrade, BMO Investorline and TD Direct Investing. Effectively all discount brokerage operations in Canada are now connected to our market. We have also extended the reach of our listed companies into the US market, where coming regulatory changes in the US will facilitate the raising of capital from US investors for CSE listed companies. We are also working with vendors and dealers in Europe to improve access for EU and UK investors to our listed companies. By increasing the opportunities for our companies to raise capital with the goal of both reducing the cost of capital for the issuers and increasing the number of companies looking to join our markets from overseas. What this amounts to are compelling companies listed on the exchange such as those featured in this issue. We are excited to share the stories of CSE-listed companies that are using the exchange as a platform to secure growth capital and create value for their investors.
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Effectively all discount brokerage operations in Canada are now connected to our market.
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Sincerely,
Richard Carleton CEO The CSE - Canadian Securities Exchange
6 | www.thecse.com
feature story
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Deer Horn Sees Huge Opportunity in Canada’s Natural and Organic Market Space By Peter Murray
W
hen Tyrone Docherty and Lance Sutherland explain their plan to play a major role in Canada’s natural and organic food retailing industry, there is no big talk, no hyperbole — no “eating their own cooking,” if you will. The new business partners exude a quiet confidence that at once reflects acknowledgement of the competitive nature of their industry and the belief they have an extraordinarily strong team with advantages that rivals will struggle to match. Docherty is president and CEO of Deer Horn Capital (CSE:DHC), a public company whose sole focus not long ago was exploration for metals used to produce solar panels, particularly silver and the little known element tellurium. In fact, Deer Horn’s is the only project in Canada with a NI 43-101 tellurium resource, according to Docherty. Sutherland is a veteran manager of both conventional supermarkets and natural markets. In 2013 he was nominated for a Food Marketing Institute award as one of the top retail managers in all of North America. He believes the natural and organic markets segment is still being defined and has lots of room for a new player, particularly one with the right connections and a strategic plan to differentiate itself. www.thecse.com | 7
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
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Cash flow from Bodhi Natural Market will begin immediately upon the opening of the first store, with sales...in a range of $3-5 million per year.
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“There has never been another time in history when the consumer was as educated as he or she is today,” says Sutherland. “Consumers are more educated about what they eat, more educated about pricing, more educated about everything. And for us, that translates into big opportunity.” The “us” in this case is Bodhi Natural Market, a new brand in the natural and organic market space owned 100% by Deer Horn. With a profit sharing agreement finalized early this year, Sutherland quickly went to work, signing a lease on the “perfect” facility for the company’s first store in February and initiating construction. The grand opening for this first location, in Maple Ridge, British Columbia, is scheduled for late May or early June.
Lance Sutherland
8 | www.thecse.com
Ty Docherty, CEO
“We are the anchor tenant in a mall with lots of parking, and one of the biggest fitness clubs in the city is right across the street,” Sutherland explains. “We only just started work on the store and already we are receiving inquiries from local shoppers and businesses. We don’t want to get too excited, but the early indications are really good.” Deer Horn did not specifically start out looking to go into natural and organic markets, but the environment for small-cap stocks dictated there were better ways to create value for shareholders than mining exploration. Painful as it was (Docherty is Deer Horn’s largest shareholder), the company conducted a 10-to-1 share consolidation in May 2014 and started the search for cashflowing businesses. Paradoxically perhaps, these businesses will enable Deer Horn to maintain the mining project until it can be sold or spun off into a separate company. “We’d already had our eyes open for opportunities in the lifestyle sector and in September of last year were introduced to Lance, who was looking to open up his own markets with an organic focus,” Docherty says. “We soon concluded that this would be a good fit for everyone involved and in January 2015 we announced Deer Horn’s intention to enter the natural markets space.”
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Cash flow from Bodhi Natural Market will begin immediately upon the opening of the first store, with sales modeled under various scenarios in a range of $3-5 million per year. Given that subsequent stores would be twice or more the size of the initial location, revenue suggested by the company’s internal sales model grows quickly. There will always be demand for groceries, for the obvious reason that people have to eat. The other guarantee in the industry, though, is that there will always be fierce competition…make that extremely fierce competition. Margins on the conventional grocery side are notoriously slim, and major chains have buying power of which smaller operations can only dream. Docherty and Sutherland have a few competitive advantages they will discuss, and some they won’t. But both agree that the quality of the team behind the stores is the best thing they have going. “There is a saying that if you have a proven track record, it didn’t happen by accident,” says Sutherland. “The members of our team have been successful with multiple ventures in the past, and now we have the chance to steer a company the way we believe an ideal business in this industry should be run. The best customer service, top quality, unique product offerings and a welcoming atmosphere are basics to us, but you’d be surprised how often they get overlooked. At Bodhi, that will never happen.” The store has committed to selling produce “by the each” rather than by weight so customers know exactly how much the contents of their basket will sum to at the cashier, which takes out guesswork. Bodhi has also promised to carry only natural and organic products, which means customers can be confident that anything they buy at Bodhi Natural Market has been vetted and contributes to their health. For the uninitiated, strolling through a decent sized natural market can be a bit of an eye-opener.
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Shelves are packed with healthy alternatives to the products most people normally buy, featuring everything from meat and soft drinks to potato chips and pastries. “Our stores won’t just be a bit of produce and some specialty items,” Sutherland explains. “These are full grocery stores with pretty much everything you need to stock your kitchen. You won’t find Coke or Doritos, but you will find alternatives with all natural ingredients, and you’ll like our pricing too.” The potential for success with a good idea is dramatically influenced by timing – are you too early, too late, or entering just in time to ride the big wave? The Deer Horn team feels now is the perfect time to establish a new brand in the natural and organic markets space. The acknowledgement of benefits from eating all natural and organic is high and growing, and the selection of healthy products is far greater than it was several years ago. And then there is the state of the market in Canada. “Nobody really has dominant market share in Canada’s natural and organic market segment,” says Docherty. “Chains such as Whole Foods and Trader Joe’s address this well in the United States, but up here, what we have is very fragmented.” Sutherland adds: “There are some significant gaps in the shopping experience for Canadians who want easy access to healthy food. Bodhi Natural Market will be the company that comes in and fills those gaps. I don’t want to overstate things, but we have really big plans for this brand.” Having closed three financings since December for gross proceeds of $1,195,300, capital for the flagship store’s grand opening is more than covered, according to Docherty. Future stores could be financed through equity, debt or a combination of the two. n
Nobody really has dominant market share in Canada’s natural and organic market segment.
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Originally published on Proactiveinvestors.com on March 17, 2015.
www.thecse.com | 9
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Eight Solutions Chooses “Big Data” as Focus for Next Growth Phase By Peter Murray
H
aving conquered the market for 2D to 3D conversion and monetized that achievement through a partnership arrangement with Prime Focus, Eight Solutions (CSE:ES) has set its sights on shaping a new technology category, and the pot of gold at the end of this rainbow could be many times larger. Business Intelligence, which boils down to efficiently managing data in order to make faster and more effective decisions, is a need that has been around for a long time.
10 | www.thecse.com
“
...the amount of data to be managed in our modern age is vast...
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
But given the data collection capabilities facilitated by the Internet and the digitization of seemingly every business task one can think of, the amount of data to be managed in our modern age is vast…as is the potential to derive value from it if analyzed properly. Many organizations turn to conventional spreadsheets CEO Rory Armes to handle this task, but Eight Solutions is among a handful of technology companies approaching the challenge from a different angle by delivering real-time information in a modern, visually dynamic format so that decision-makers can absorb what they need with a mere glance at their computer. The product to lead this charge is Cumul8, the main focus of CEO Rory Armes and his Eight Solutions team for the next 18-24 months. But in weighing Eight’s chances for success, understanding how the company arrived at this point is as important as knowing where it intends to go.
Building a Business in 3D
Leveraging a background as Senior Vice President and head of game development in key global markets at digital games company Electronic Arts, Armes established the predecessor to Eight Solutions, Gener8, in 2011 to tackle the market for converting movie scenes shot with standard twodimensional film into three-dimensional versions. It wasn’t long before the company had a roster of clients that it retains to this day, names such as Sony Pictures, Warner Brothers and Twentieth Century Fox. Things went well from a business development perspective and earnings were good, but the movie business is finite — Hollywood only makes so many movies each year. To move to the next level a strategic partnership was necessary, and after a false start with a Chinese group Gener8 settled on India-based Prime Focus as its perfect fit.
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Under the licensing deal, Eight Solutions will receive one to three million dollars in revenue each year...
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Under the licensing deal, Eight Solutions will receive one million to three million dollars in revenue each year, with Prime handling product marketing and covering most costs associated with the format conversion work. The artists and software engineers who work on the conversion side remain at the Eight Solutions headquarters, but paying for them and marketing the service is now up to Prime. Freed of those responsibilities, Armes has his mind set on Business Intelligence, and a new brand reflecting the change.
Eight Solutions is born
With the 3D operations set to move from being the main focus to just one of several strong businesses under the organization’s umbrella, it was time to revisit brand identity. “We became Eight Solutions because the Gener8 brand is synonymous with 3D solutions in Hollywood, and it had to stay that way,” explains Armes. “Under Eight Solutions we have Gener8, Cumul8 and Reelhouse,” the last name referring to an online service for distributing films by independent producers. The company announced the new name and brand in February of this year. The game plan going forward is to replicate the Gener8 experience, or in other words to create software and business components to support software developed in-house, and then monetize the product as quickly as possible. Cumul8 provides products for two distinct levels of an organization: the executive suite and the operations manager. The concept ultimately holds that everyone should have the tools to become a data scientist. “That is where the world of big data is going,” says Armes. www.thecse.com | 11
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
“How do you take all this information you are collecting in your company and allow workers to create their own visualization of that data so that it makes sense to them. Get them off the phone and out of the spreadsheet.” The product for the executive level is known as an enterprise product. “Live dashboarding” is the term Armes prefers. The operations level is classified as SaaS (Software as a Service), or “coordinator” level according to the in-house lingo. And here is where Armes takes us back to the future. The SaaS product actually was developed years ago to help Gener8 and its clients solve project management bottlenecks, taking complex processes with long timelines and multiple contributors and maximizing efficiency to save time and money. “We have unbolted that and are able to not only push it into much broader use in digital media, which we are starting get the clients for, but also it can go wide to anyone who is running an asset system. It is written for film but can be tailored to support any industry.”
12 | www.thecse.com
Among clever aspects of the Cumul8 approach is the recognition that most potential users utilize mobile devices to stay connected and grew up with social networks. “There is a whole chat system built in so you never have to e-mail anything out. The advantage is that we very quickly can go from a project running 200 people to it running 1,000 people. Cumul8 is built to manage thousands of users and very complex problems.” “Complex” is a good word to describe aircraft manufacturing, so it should come as no surprise that the first client for Cumul8 was Ace Clearwater Enterprises, a U.S. company supplying key components for engines that Honeywell manufactures for Boeing aircraft. “Honeywell wants to look all the time at what its suppliers are doing and how they are doing it,” says Armes. The Cumul8 team worked with Ace to modernize how it communicates with a client that uses its parts along with those of other suppliers. “Both Ace and Honeywell see instantly what is happening with that part,” Armes continues. “It has really fast-tracked their efficiency.”
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Although Cumul8 is relatively new to the industry, albeit with a product battle-tested by its own team, Armes is not worried about some of the bigger names already in the space. “When we look at our competitors, they might have been in for a couple more years, but in the technology world that isn’t necessarily an advantage. Sometimes it’s a disadvantage because you are stuck in an old way of doing things,” he explains. “We don’t make it look like it’s a spreadsheet or data presented in a rough form. Ours feels rich with gaming features.” The Eight Solutions business model reflects current thinking as well. “The big thing for software now is you don’t buy software anymore, you rent software,” says Armes, highlighting Microsoft and Adobe as two software titans that have switched successfully to this revenue approach. Cumul8 is doing the same thing, providing its product by “seat” to capture recurring revenue while keeping upfront outlays for new clients reasonable.
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Our goal is to get 10 clients over the next 5 months...
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“Our goal is to get 10 clients over the next five months to drive the executive side of the business. And on the coordinator level, currently we are running 200 seats, we should be at 500 by summer, and the goal is to be at 1,000 before the end of the year.” While the corporate re-balancing, if you will, seems sensible, how it comes across to shareholders is vitally important, and so far the feedback has been positive. “I think the biggest feedback we have is that people are excited that we are not in services but that we are focused on technology. They don’t believe there is massive growth in companies that are purely servicebased,” says Armes. “We went out and monetized one of our products — we did what we set out to do. Our seasoned investors are saying ‘Good, you proved that out.’
“Nobody is going to believe you just because you just say you are going to do something. We actually did monetize a service, so now they are excited to see us do the same thing with Cumul8.”
Blazing a path for Canadian tech
Sitting across from Armes and listening to his vision, it is difficult not to think about the technology companies one often reads about receiving multi-billion dollar valuations for what sometimes seem little more than early concepts. While not saying that he has this figured out, Armes has some valuable insight to offer from the front lines. “Hey, this sounds really good, but I don’t really know tech, so I am going to wait until somebody who knows it comes in and then I’ll come in,” mimics Armes in explaining why it can be so difficult for technology companies to attract capital from Canadian sources. But Eight Solutions is one of a growing number of companies that actually have raised significant amounts of money in Canada, delivered a return on investment, and thereby helped establish a path for domestic tech entrepreneurs of the future. “My goal is that the Canadian tech market continues to grow and that we get validators — people in the investment community who become experts in the sector and understand what they are looking at. I think that’s what everyone is waiting for.” n Originally published on Proactiveinvestors.com on April 23, 2015.
www.thecse.com | 13
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Data Deposit Box Tweaks Existing Strengths to Drive Growth Domestically, Overseas By Peter Murray
D
ata Deposit Box’s (CSE:DDB) solid financial results and rapidly expanding global customer base are testament to the fact that it identified an edge early on and has come to offer services that put it a few important steps ahead of its rivals. And a recent shift in marketing strategy promises to set the company even further apart going forward. The basic service offered by Data Deposit Box is backup and recovery of digital files. Be it because of a disaster preparedness plan mandated by a regulatory agency or in reaction to losing critical files after a security breach, more and more organizations are turning to professional back-up services so that no matter what happens, their files are safe. For a small or medium-size business, the typical client for Data Deposit Box, backing up files sounds like something you could do by yourself at relatively little cost. Talking to the company’s President and Chief Operating Officer, Troy Cheeseman, though, you soon conclude that paying a reasonable fee and getting experts to handle this task is a far better idea. In a world where every month seems to bring word of another high-profile organization having sensitive data stolen, security jumps out as one reason to work with pros. Data Deposit Box protects client files from the moment they are created, and the standards to which it does this are class-leading. “In the industry right now, 256 bit encryption and 128 bit encryption are touted as a feature set by some of our competitors, but we use 448 bit encryption,” explains Cheeseman. “We encrypt while the data is on the device, we encrypt while it is in transit, and we encrypt while it is in our data centers.” 14 | www.thecse.com
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
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256 and 128 bit are touted by competitors, but we use 448 bit encryption.
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Stronger encryption standards seem like an obvious benefit for companies in the space to offer, but without the proprietary technology Data Deposit Box owns, it’s not that easy. “The reason a lot of groups don’t do this and rather use 256 bit encryption and only encrypt transmission is that it slows their product down too much,” Cheeseman continues. “We encrypt on the client’s device and we can do this because we own two patents allowing us to leverage the technology. Some of our competitors simply don’t have the means.” Better technology also equates to the potential for global reach. The Data Deposit Box system runs in 50 countries and is available in 39 languages. And whereas almost any region you consider worldwide will have a half dozen local companies providing data back-up service, Cheeseman claims there are only four or five companies with the capability to replicate what Data Deposit Box does on a global scale. “I find we are better able to match our services and reach across different regions,” he says in describing the Data Deposit Box advantage. “When you are playing in different regions you have to understand all the in-country rules and data regulations because they are different.” Cheeseman offers the example of rules for keeping data after someone signs up for trial service but decides not to stay on as a customer. In Canada, the company can delete that data after 30 days. But for a trial user in Japan they would have to keep it for 60 days, and for one from Luxembourg the regulations say 63. This is but one simple example of understanding nuances of foreign markets, and fortunately for Data Deposit Box the flexibility to adjust to varying standards is inherent in its system. This will become increasingly important over time, as the company sees most of its growth coming from outside North America in the years ahead.
“Right now, most of our business comes out of the United States, and a percentage of that is using our facility because they want their data stored outside of their country,” says Cheeseman, estimating that 80% of the Toronto-based company’s North American sales originate south of the border. “We have a facility in Canada and we also have Canadian clients who use it because they don’t want their data to leave the country. “Our international business is 10-15% at the moment, but we are seeing a lot of growth there and through our enabler strategy we forecast that the bulk of our growth will come internationally.” The “enabler” strategy relieves a lot of the marketing pressure from management by allowing third parties to incorporate Data Deposit Box services in the broader service packages they sell in their respective markets. These third parties are typically what are known as managed service providers (MSPs), which deliver computer networking equipment, applications and various related services to their clients. “We work with MSP’s who are looking to incorporate a backup and recovery service for their customers,” says Cheeseman. “This allows us to focus just on key partnerships without needing a direct business model that sees us go after small businesses ourselves. We can leverage their reseller channel base and reach all of their clients with our products.” The company achieved a very different sort of sales breakthrough in summer 2014 when it was chosen to be featured on an Original Equipment Manufacturer basis by a major computer manufacturer. “We now are the consumer cloud provider for one of the world’s largest laptop and server manufacturers,” Cheeseman says. “It is branded as their product and service but it is our product in the background providing the service and they have outsourced that to us.” Financial results for the year ended 2014 showed revenue of just over $5 million, with Adjusted EBITDA coming in at $886,000. The gross margin expanded to 50%, from 44% the previous year. It is a solid foundation upon which to base future growth, and management sees the MSP relationships and more product innovation as the keys to improving the numbers. “Shorter and longer term we are really focused on top line revenue growth,” explains Cheeseman. “Our enabler strategy is our long term view and this represents change, as the company used to have www.thecse.com | 15
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
a very direct model. It creates a little longer lead time in bringing on clients, but once you establish those relationships you open up channels that are much larger than your direct channel. “On the product side we want to continue to evolve so that we can service the MSPs even better. We have some key features coming in 16 | www.thecse.com
the next three to nine months that will further differentiate us from the competition and allow us to continue to penetrate the managed service provider and enterprise channels.” Data Deposit Box debuted on the Canadian Securities Exchange on March 30, 2015. n Originally published on Proactiveinvestors.com on May 6, 2015
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Auxellence Health Brings New Approach to Personal Health Care With TULIP Online System By Peter Murray
A
uxellence Health Corporation (CSE:AID) started the way many companies do after someone asked how the world might change if a new way of doing things were possible. What if people could get the health benefits of exercising — such as weight loss, lower blood pressure and other positive outcomes – without the effort? After all, technology is about reducing effort and increasing benefits so why not find a way to reduce the work and cost of dieting and exercising in one’s quest for better health? This is the premise of a new system from Auxellence. The user-friendly technology enables people to emulate physical exercise, bringing a whole new meaning to “virtual reality” in health care. The system draws on established science and medical practices that enhance organ vitality in serious surgical interventions and makes it available to the general public. TULIP is a thoroughly modern autonomous system operating online via the user’s computing device. The Internet enables the cloud-based system to interface with the user and adapt its operation to the body’s characteristics. This real-life personalization of care includes automatic optimization of session scheduling, so that tasks are performed when they are most likely to be beneficial. www.thecse.com | 17
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
“It is important to fine tune the solution to the problem, especially when the problem changes like the weather, so to speak,” said Sydney Au, chairman of Auxellence. “It is easier to push downhill than uphill and our system seeks to identify the right times in the day, when one’s body is most responsive.” TULIP is currently available for sale in Canada and Europe, the company’s initial target markets. “There are at least one million people in Canada who could benefit from our system — and the statistics point to obesity rising steadily. As a Canadian company, we want to start at home and then look to Europe, which is currently the largest market for us — and less crowded than the Unites States,” says Au. Fittingly, perhaps, the hardware and software behind the treatment are a Canadian story. The entire research, development, and production work was and is being carried out in Canada, right down to the electronics. Sales of a pioneer edition of TULIP were recently initiated directly to the consumer, for both personal and professional use, with approximately 50 units placed so far. TULIP is offered on a subscription basis for $100 per month, which includes the device. The user feedback so far would seem to justify the company’s plan to place 1,000 units within the next six months, and take the number somewhere between 5,000 and 10,000 in 2016. The company is counting on word of mouth from existing users, social media and some paid online presence to get the word out. Studies conducted jointly with universities are expected to enable the company to steadily improve product usability and increase market acceptability. Au is far from being critical of the existing gamut of dieting theories and weight loss plans on the market but points again to rising obesity rates as an indication that while the industry does indeed help some people, it is not helping enough of them. “We want to do better — much better, because we can do so, given today’s science and technology,” he explains. “Our ultimate goal is to create a new class of treatments, using intelligent rather than chemical agents, to stimulate rather than force the body into normalizing its natural functions.” n Originally published on Proactiveinvestors.com on May 12, 2015.
18 | www.thecse.com
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Micromem Says Profit on Horizon as Multiple Products Move From R&D to Production by Alessandro Bruno
“S
ensors are the eyes, ears and nose of modern technology” says Joseph Fuda, President and CEO of Micromem Technologies (CSE:MRM) (OTCQX: MMTIF). And the information they collect enables systems of all types to react to, and oftentimes predict, developments in ways that enhance safety and productivity in a virtually endless list of industries, from automobiles and oil and gas, to nanotechnology and aviation. Anyone who owns a car should be thankful of the sensors in their vehicle that make them safer and save money. In many late models, a sensor in the engine, for example, measures oil viscosity and will send an electronic signal that triggers a light on a dashboard display when it is time for an oil change. Fuda says that apart from the sensors themselves, the “key delivery” for Micromem’s customers is “reduction of risk.” And in our increasingly fastpaced, interconnected world risk mitigation is certainly welcome. Some of the sensors made by Micromem connect components of our everyday infrastructure to data monitoring systems via the Internet. Infrastructure is a good example of the importance and complexity of applications on which Micromem works and explains why all of its sensors are tailored to the customer. “The company does not make off-theshelf products,” says Fuda.
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The company does not make off-theshelf products.
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Other industries that Micromem’s wholly owned subsidiary Micromem Applied Sensor Technologies (MAST) has created or is working on products for include healthcare/biomedical, natural resource exploration, information technology, manufacturing, and the government sector. The current fiscal year is an important one for Micromem as the company is ready to move from the research and development phase to production. It expects to be profitable soon, thanks in part to clients such as Saudi Aramco, Chevron and General Motors. When considering some of the specific applications for the company’s products, it is important to understand that Micromem does not repair systems or physical structures but rather makes them smarter, thus heading off problems before they get to the point at which repairs are required. www.thecse.com | 19
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
“Smarter infrastructure is the future,” explains Fuda. “People are used to being able to use their handheld devices. Old businesses like oil and gas or utilities need to be brought up to date, and as their infrastructure ages it needs to be revamped. Making it ‘smart’ means that end users can interact with their infrastructure through Micromem technology ahead of a problem.” Chevron surely had this dynamic in mind when it signed a $9.2 million contract with Micromem to develop a sensor that monitors the integrity of cement casing in oil wells. Warnings that come well in advance of a potential breach could prevent disasters in offshore and onshore wells. In October 2014, Micromem delivered its first prototype, a particle tracer, to Saudi Aramco. The technology could be applied to over one million oil and gas wells, says Fuda. In another interesting application, Micromem built a wireless device, similar to an oil pan plug, for General Motors and Flextronics. Fuda explains that existing sensors for oil use basic software that tallies mileage over time rather than actual wear. Micromem’s system is more intelligent, measuring the condition of oil in real time and alerting the driver to specific issues. A corresponding patent, one of six awarded to Micromem, allows the company to extend the technology beyond oil to contaminants in virtually any fluid. In the electrical utilities sector, instead of merely reacting to a problem at one of thousands of transformers across a grid, Micromem sensors work in unison to offer a pre-emptive rather than reactive tool. Engineers can anticipate problems by looking at trends and performance profiles to determine where malfunctions have a significant chance of occurring. If a transformer is going to fail, a Micromem sensor can detect this ahead of time, potentially preventing problems such as the transformer explosion that caused power to go out for three days in a large section of downtown Boston. One hugely promising product is a microfluidic cell front-end device no bigger than a deck of playing cards. Incorporating this in Micromem’s patented sensor platform enables detection of wear materials in lubricating fluids — similar to the unit developed for General Motors. The product will be adapted for Micromem clients for use in wind turbines, marine vessels and construction equipment, to name just a few applications. 20 | www.thecse.com
Fuda says the market for Micromem’s technology has no limits and points out that development costs are fully absorbed by its customers, who pay up front. “Investing in Micromem now is investing in its growth,” says Fuda. “The company has a product base, a customer base, and a distribution network through its customers. There will be a time when everything around you, whether it is a transformer, your car, a pipeline or cement will have Micromem involved.” n
Originally published on Proactiveinvestors.com on May 7, 2015
company profile
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
Dundee Sustainable Technologies Looks to Set New Bar for Responsible Ore Processing by Peter Murray
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n the near future, Chile will become home to Latin America’s first plant using a new method from Dundee Sustainable Technologies (CNSX:DST) that employs sodium chloride to facilitate the extraction of gold. DST has two technologies, one does away with the use of cyanide, the other turns the arsenic that might be present in the ore into an inert glass. To say it has the potential to set a new standard in responsible processing is almost an understatement. Dundee’s approach is based on chlorination, utilizing hydrochloric or elemental halogens such as chlorine and bromine. A closed loop of liquids and gases is one of its technological cornerstones and leaves only insoluble and inert materials at the end of the process.
Chlorination works well at atmospheric pressure and low temperatures, which means it is not only cleaner but also more energy efficient than existing extraction processes, not to mention cheaper.
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THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
“Our method has the distinction of operating in a closed circuit, which means there are no tailings to worry about,” explains the company’s president and CEO, John W. Mercer. “The process generates an inert and uncontaminated material and it is quite fast, with a recovery cycle of just two hours. This leads to lower costs.” The project in Chile has the backing of the federal government. The facility will have a processing capacity of 200 metric tons of concentrate per day, which equates to 6,000 metric tons of ore. In addition, it will involve the creation of approximately 100 jobs. Dundee’s technology was developed by Dr. Jean-Marc Lalancette, the company’s Chairman Emeritus, who has over 40 patents to his credit related to mineral chemistry and environmental solutions. Unlike traditional leaching methods, it does not require the use of the highly toxic agents cyanide or mercury. The technology also uses significantly less water than other methods, which in Latin American jurisdictions with water shortages could be a tremendous drawing card. Use of sodium chloride takes cyanide completely out of the equation, while DST’s vitrification process turns arsenic into glass. “You could make a necklace out of it,” notes Mercer. Another highlight is that while the arsenic sequestration process will initially focus on gold, the process also works for copper, a key driver of the mining industry for Chile.
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...every country that produces gold could be an important market for the technology owing to increasing pressure for mining companies to observe environmentally and socially sustainable practices.
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Mercer adds that the technology is also ideal for some small projects where conventional extraction methods prove uneconomic. In recent years, Mexico, Argentina and the United States have joined the ranks of jurisdictions where the use of cyanide is either restricted or banned outright. Environmental Impact Assessments now play a huge role in mine development and in our age of information they involve closer scrutiny than ever before. Thanks to Dundee’s technology, Chile will stand out as an international leader in sustainable and environmentally responsible mining.
THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
DST is also planning to set up operations in Argentina’s San Juan Province. Argentina’s provinces enjoy autonomy on numerous economic and industrial matters, which gives them some leeway to offset national policies that have discouraged investment in the country. Mercer says that one way to understand the local environment is to liken the functioning of states in Argentina to those in the United States or Canada, where states and provinces have their own regulations and their own ministers. In working on the project, Mercer has had the opportunity to speak directly with San Juan’s governor, mining minister and other local officials. In late 2014, San Juan launched the Environmental Management and Control Capacity Building project. Among others, it involved the Ministry of Mining San Juan, the San Juan Quality Agency, the United Nations Environment Programme and the United Nations Development Programme. The Environmental Management and Control Capacity Building project will monitor multiple mining projects in the Andes Mountains. The goal will be to determine compliance with best practices in the contexts of existing provincial legislation and mining standards in Canada and the United States. Establishing facilities in Chile and Argentina is a major development for Dundee but hardly represents overnight success. The company has honed its technology not only in the lab but also at a pilot plant in Thetford Mines, Quebec. The government of Quebec chipped in $700,000 in 2011-2012 to make the plant a reality, with the Canadian government following suit in 2013-2015 with $5 million. Over the last 10 years, Dundee has studied over 200 different gold deposits, looking at both oxide and sulfide ores, in the lab and at its pilot plant. In all test cases, the extraction yield topped 90%. Given all the environmental and cost advantages of the technology, Mercer cautions that if there is a downside to the company’s method it is that Dundee might have a problem handling demand. The technology should open doors for many companies having difficulty obtaining production permits because it will help mines meet environmental regulations in many countries.
Beyond Chile and Argentina, Mercer suggests that every country that produces gold could be an important market for the technology owing to increasing pressure for mining companies there to observe environmentally and socially sustainable practices. Chile has attracted billions of dollars in mining investment thanks to high quality mineral resources and well established political and economic institutions. But Chile has also been enforcing stricter environmental standards of late, establishing new entities devoted to sustainability. Existing mines stand to benefit from Dundee’s technology, and by the sounds of it new ones would be foolish not to at least consider it. Proof of concept is often the hardest thing to do for a small company, and once past that hurdle a good idea can be difficult to hold back. Dundee Sustainable Technologies has its leading foot planted on the ground. The race ahead should be interesting indeed. n
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