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IBC Advanced Alloys: high tech rare earth minerals play

Beryllium is a “high technology metal” that is very lightweight, strong and can withstand corrosion, high temperatures and extreme stress.
IBC Advanced Alloys: high tech rare earth minerals play

IBC Advanced Alloys (TSX-V:IB) based in Vancouver, Canada,  is an integrated manufacturer and distributor of beryllium alloys and related products, has production facilities in Pennsylvania, Missouri and Indiana, and exploration prospects for beryllium in Utah, Colorado and Brazil.

The company was formed in 2007 to tackle the beryllium market from three angles: control of mineral leases that could be developed into mines, consolidation of the highly fragmented beryllium alloys industry and research & development of new applications for beryllium to increase market demand for the mineral.

IBC currently has just under 245 million fully diluted shares for a market capitalization of C$35.5 million. In 2009, the company recorded revenues of CAD$11.6 million and is anticipating CAD$15 million for calendar 2010, for an increase of 28%.  At the same time, the company has been advancing its exploration ground in Utah and announcing a number of R&D milestones. In other words, IBC has done exactly what it set out to do.

Beryllium is a “high technology metal” that is very lightweight, strong and can withstand corrosion, high temperatures and extreme stress; it is typically used in the form of an alloy in nuclear, medical, automotive, telecom and defense industries. Russia and the United States are the primary sources of beryllium.

Brush Wellman (NYSE: BW) supplies 60% of world output from its Spor Mountain Mine in Utah, and much of the balance comes via the Ulba Metallurgical Plant in Kazakhstan, which processes ore from Russia. IB has signed an agreement with Kazatomprom to obtain beryllium and other alloys from Ulba. There is no spot market for beryllium, but it currently sells for around US$500 per kilogram and feeds into a worldwide market with downstream processing that is estimated at $2 billion and has an annual growth rate of 5% per year.

IB owns Beralcast, which is a specialty manufacturing business that owns proprietary technology for casting beryllium aluminum alloy, and is used in a wide variety of aerospace and advanced technology applications. The company also produces molds and tooling equipment from various alloys in a broad range of shapes, sizes and custom designs for clients in 40 countries that includes the U.S. military. Target markets include next generation transportation, electric cars, aircraft, oil and gas and transportation, requiring advanced materials and high performance alloys.

These manufacturing operations have generated positive EBITDA for several consecutive quarters, and current cash resources stand at $6.7 million offering ample working capital. IB is also currently developing a number of opportunities that could substantially increase sales revenues, and a new application for beryllium oxide within the nuclear power industry that has fired up its exploration efforts to develop its own beryllium resource.   

In addition to manufacturing, the company has established several R&D programs that have the potential to become major revenue sources in the future. A nuclear fuel development partnership is currently in place with Perdue and Texas A&M Universities, which will provide IB with an exclusive license on intellectual property for commercial applications. Provisional patents have just been filed on an enhanced nuclear fuel made up of uranium oxide and beryllium oxide. 

This type of fuel demonstrates significant cost savings and greater operating efficiencies over conventional nuclear fuels, enhances safety and reduces fission gas release allowing higher fuel burn up and less stored energy in the fuel pins. Higher thermal conductivity nuclear fuel is gaining respect from the nuclear power industry and regulators, and the acceptance of this type of fuel would provide access to a nuclear fuel market, which is expected to grow from $25 billion to $35 billion by 2020. An agreement has also been signed with Hydrogen Link to explore opportunities in solid state hydrogen storage cells utilizing beryllium, especially for small scale applications such as laptops and other portable devices, where capacity is critical.

On the exploration side of the business, IBC currently owns three beryllium exploration projects, and has just completed a Fugro Airborne Survey over their Juab County Project, known as the North and South Claim Blocks, which abut the world’s largest beryllium mine at Spor Mountain. These claim blocks cover a caldera that may have been the source of beryllium for the area, as well as extensions of geological features that carry beryllium at the adjoining mine. The recently completed survey will allow plotting of high grade targets for additional reconnaissance, sampling and drilling.  Additional properties cover a historic beryllium mine known as Boomer at Lake George, Colorado and a major pegmatite province carrying beryllium in Minas Gerais State, Brazil.

Brush Wellman is the world’s largest miner and processor of beryllium, with additional investments in the production of alloys and finished products.  Capitalized at $581.6 million, Wellman recorded annualized revenues of $1.03 billion.

Canadian based Neo Material Technologies (TSX: NEM) is a leading global producer of specialty materials and rare metals, and is capitalized at C$632 million. NEM has operations in 10 countries, and produced annualized revenues of $187.5 million.

Both of these companies serve as models for the future development of IB and are indicative of the growth potential of IB if it executes its business plan successfully.

Peer group review clearly point out to an low valuation for this growing, multi-faceted company. News flow from resource drilling, new contracts and development of multiple R&D efforts have the potential to spark a wider following in the market.

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IBC Advanced Alloys Corp Timeline

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