MHM originally listed on the stock market in 2007 at $0.20. At the time they were a resource exploration company with a number of potential targets in Tasmania. As you would know it was not long after until the first signs of the Global Financial Crisis hit and during the back end of 2008 and start of 2009 it was certainly a bleak environment for any company with small cash reserves and high costs (associated with exploration).
In January 2009 the company announced their intention to seek income producing opportunities in mining or the aluminium recycling industry. These discussions continued for a number of months and in September 2009 they announced that they had negotiated conditional pricing regarding an aluminium asset but were conducted discussions with several aluminium producers to secure additional volumes of waste material.
In October they outlined the potential of the project and the expectations for net income to reach $8 million in 2011. On October 19 there was a further announcement detailing the issue of 15 million shares at $0.20 to raise the $3 million required for the project. Additional details were also released and the market discovered the opportunity involved the recycling of salt slag.
“Salt slag is a waste stream that results from the recycling of aluminium, a by-product from recycling that has traditionally been placed in landfill. Due to regulatory changes made by the EPA this material can no longer be dumped which has presented an immense problem for the industry.”
On December 15 2009 further details regarding the acquisition were released. The transaction would include the following:
1. The purchase of Sim Metal Managements Aluminium Slat Slag Processing Facility in Moolap, Victoria.
2. A supply contract with Sims to treat Aluminium Salt Slag and Aluminium Dross (in the final stages of negotiation at the time).
3. The acquisition of exclusive global rights to proprietary Slat Slag processing technology.
4. First right of refusal to acquire two additional technologies including:
a. Non-Metallic Product (NMP) Processing Technology – A proprietary technology under development to process NMP that results from the primary Aluminium industry and salt slag and to convert this into aluminium metal.
b. Spent Pot Lining (SPL) Processing Technology – a proprietary technology under development to process SPL into valuable commodities.
On December 21 2009 a three year processing agreement was finalised with Aloca. The contract specified that $300 would be payable for every tonne of processed material with Aloca retaining ownership of the recovered metal and salt. The Aluminium Oxide was to remain the property of Alreco (a wholly owned subsidiary of MHM). Alreco would receive 60% of the EBIT profits from the Aloca processing contract and has first right of refusal to acquire 100% of the rights. A second part of the agreement involved access to Alcoa landfill which contained 160,000 tonnes of aluminium waste. Alreco would process the Aluminium slat slag recovered from the Alcoa landfill and sell the resulting products as an agent for a third party. Alreco will receive 60% of the EBIT for performing these services.
On the 5th of January 2010 the settlement date was confirmed as being 15 January 2010. Following the acquisition the plant would be upgraded with the new technology with no interruptions anticipate during the upgrade. An announcement later in January also flagged USA expansion plans. American currently produces around 1,000,000 tonnes of Slat Slag per announce (compared to 25,000 tonnes in Australia).
In addition to the aluminium recycling opportunity MHM Metals continued to progress its Silica project at Cape Sorell in Tasmania. As early as January 2009 they had flagged the potential of a take-off agreement. This would either involve the processing of the Silica at a yet to be development Smelter in Tasmania or the export of the Silica offshore. To date no agreement has been signed. It appears that whatever party was interested asked for MHM Metals to prove up the resource and confirm its purity before the agreement would progress any further. The market waits further updated on this proposal, although it does appear that they are getting closer to the level of detailed required by any potential partner.
Finally since the agreement to purchase the slat slag processing facility and associated technology was signed the company has progressed with the plant update and has released further details on their expansion plants. I will do another post in the near future covering the upgrade and future expansion plans for MHM Metals. The purpose of this post was to focus on the past, with the next to discuss the future potential of MHM and its technology.
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