Based on an LOI with Galaxy Magnesium, an annual revenue of up to $100 million per year is projected!
West High Yield Resources (TSXV: WHY; FRA: W0H) is a unique company among the thousands of junior resource companies on the Canadian stock exchange – and in more than one way. Which resource company can claim that 94% of its defined resources consist of valuable products?
For comparison: An average copper mine with a standard copper content of 0.5% must discard 99.5% of the mined material unused, as only 5 kg of copper is contained in one ton of ore (1,000 kg). With WHY Resources’ Record Ridge project in British Columbia, the ratio is exactly the opposite! 1,000 kg of raw ore contains approx. 430 kg of magnesium oxide (MgO), 420 kg of silicon dioxide, 90 kg of iron oxide and 2-3 kg of nickel – in total, about 940 kg of valuable products with magnesium and silicon dioxide as the main products.
Deposits Theoretically Sufficient for More Than 200 Years
At the originally planned production of up to 200,000 tons per year, the project would have a theoretical lifespan of over 200 years. Even then, only a fraction of the 7.5 square kilometer rock formation, which mainly consists of the same material, would be mined. WHY therefore doesn’t need to worry about the size of its resource.
The planned open-pit operation is simple and resembles a quarry. The material is mechanically crushed on site, no chemical processing is required on site, so no waste is produced. The First Nations are involved as contractors in the project development and mine operation and will benefit from it. Moreover, the project is only five kilometers from the US border.
And the distance to the two ports of Vancouver and Seattle is 400 km each. From there, the potential buyer Galaxy Magnesium, a private US company, wants to ship the raw ore to the location where it will be refined into various end products. Based on a formal Letter of Intent, WHY Resources expects to receive $500 per ton of raw ore delivered. This would correspond to an annual revenue of $100 million. The planned EBIT is expected to be $72 million in the first year of production, rising to $92 million thereafter. This is offset by investment costs of only about $25 million, of which $10 million is earmarked for the road. Amortization would thus be possible in less than a year.
Doesn’t this sound almost too good to be true? If WHY Resources is so promising, why isn’t the company better known? Why is the company’s market capitalization $25 million CAD? There are several reasons for this. First of all, the saying “Magnesium is probably the most important mineral you’ve never thought about” probably applies. Who knows that modern steel production is unthinkable without magnesium oxide? Who knows the many other uses, such as magnesium-based metal alloys used for lightweight construction of (military) vehicles? At 30 million tons per year, the market is very manageable and firmly in Chinese hands. 90% of the world’s commercially mined magnesium comes from China. How can a Western mining company compete with that? The answer lies in the special geological nature of the resource, which gives WHY a unique advantage.
WHY Resources’ Record Ridge Project Avoids CO₂ Emissions and Is Suitable for Recyclable Chemistry
The most common source for MgO production in China and worldwide is magnesite (MgCO₃). The main method for producing MgO, in turn, is the calcination of magnesite, which involves heating it to high temperatures to decompose into MgO and CO₂. Magnesite contains about 24% Mg and about 40% MgO by weight, and the remaining 60% of the ore consists of CO₂ and other impurities. Thus, when processing magnesite to produce MgO, 60% of the material becomes waste. More precisely: The CO₂ makes up about 52% of the mass of MgCO₃ (since MgCO₃ has a molar mass of 84 g/mol, of which 44 g/mol is CO₂). All of this CO₂ is released as gas during calcination! The remaining 8% consists of other impurities that do not contribute to MgO production.
The resource of WHY Resources’ Record Ridge project, however, is not based on carbon, but on silica. Therefore, the processing of the materials is suitable for the use of recyclable chemistry in the form of chloride leaching, which has been continuously developed over the past ten years. This is the true competitive advantage of WHY Resources and the reason why the project can actually compete with Chinese offerings. The WHY material not only allows for higher value creation (94% versus 40%) but also a much smaller ecological footprint with better ESG characteristics and ultimately much lower operating costs.
Approval Process Nears Completion After More Than 10 Years
However, there is an even more important reason why WHY Resources has not been able to reap many accolades on the stock market so far. The approval process for the above-described ‘quarry’ has dragged on for more than a decade. This is hard to imagine, but speaks volumes about the priorities of Western countries (including Canada). NIMBY politics is always convenient as long as no one minds the dependence on China. However, due to geopolitical developments, a rethinking is currently taking place. The plans for the road are already underway.
If the approval is granted in time, construction could begin as early as August this year! The responsible contractor has already indicated that all 200,000 tons could be mined and stored before winter sets in if needed. The buyer, who understandably can only give final commitment for an off-take after approval, has repeatedly emphasized in discussions with WHY management that they remain very interested in the ore supply despite the delays.
Summary: West High Yield’s advanced Record Ridge project in British Columbia, Canada, is a true sleeper. The management has preserved the project over the years against all odds and quietly developed it to production readiness. The crucial turning point for the company will be proper approval by the authorities. If WHY subsequently succeeds in concluding a final off-take agreement, financing the project should no longer be an insurmountable hurdle. While $25 million is not pocket change, it’s also not a large amount considering the return on investment. Moreover, many different forms of financing are conceivable, including hybrid models with long-term loans and equity. If everything moves quickly, WHY Resources could still catch the window for production start this year – and if all this comes together after 18 years of latency and despite the niche commodity MgO, it could practically become a stock market star overnight and make a significant long-term contribution to reshoring. After all, all mined raw materials are on the list of strategically important resources. In the long term, WHY Resources has the vision to build its own chemical plant in North America, but that’s still future music. For now, we focus on the upcoming approval and the subsequent off-take contract. We will closely follow the company’s development from now on.
