Read on for the full transcript of Kiril Mugerman's speech at PDAC 2019 regarding Geomega (TSXV:GMA). 

We haven't heard many rare earth element companies today, but if you were here 8 years ago then this entire session was only for rare earth elements. At the time, I was sitting here as a mining analyst listening to mining companies presenting projects and how we can develop them. Then, I had the chance to join one of those companies and have actually been running them now for five years. My focus, as you can see here, is rare earth element recycling for the permanent magnet industry. I'll quickly go over a couple of main objective of the relevant industry.

GeoMega is now divided into two branches. We have the Montviel, which is a large rare earth project in Canada, and we have Innord, which is our innovation arm that's developing the recycling technology we're looking at now.

This will include forward-looking statements, of course.

Why invest in rare earth elements? We all know why we want to invest in cobalt, but rare earth elements have four elements which are all going into magnets. Magnets go into electric motors, electrical motors go into wind power or any other energy renewable energy generation, and they go into electric vehicles. Any places where we'll have a battery, we need an efficient motor to drive our car. If you want a good, efficient motor then we want a motor based on permanent magnets. Those permanent magnets are made with four elements: Neodymium, Praseodymium, Terbium, and Dysprosium. Globally, those 4 are only 30% of global demand but in the rare earth element sector they represent 80% of the market value. Do we actually want to mine 15 elements or do we want to mine four elements that represent the majority of the demand by value?

With China controlling more than 85% of the market, we chose a slightly different approach. It's important because the demand is growing with wind power, electric vehicles, and the expected supply shortfall means we are expecting rare earth prices to increase. Mostly for those 4 elements. What's the bottleneck in the industry? It's the refining capacity. All the juniors we've seen pass through PDAC over the years are always trying to produce a concentrate. That concentrate will go to China. If you make a concentrate that is going to China, then you're not helping the problem. The idea we always wanted to pursue was bringing new production or new capacity of rare earth elements outside of China. If you don't have solvent extraction then you can't really solve the problem. As a result, the magnet consumers are more than 85 percent in China and Japan.

How do we address that? How do you enter the rare earth market? We need to focus on the high price and high demand rare earth elements. Back in the day, you heard light rare earths, heavy rare earths, mixed rare earths, or critical rare earths -- I'm introducing here a slightly different term. In the mining industry, we always have to be in the industry of making money. We want to focus on the highest price and the highest demand material, which in this case is neodymium, praseodymium, dysprosium, and terbium. These are the HHREE.

Now, the target is the European and North American market. If you are going to put a mine into production that's going to produce 4,000 tonnes of those four elements then consider that the entire market today is less than five thousand tonnes. You are going to squeeze-out the existing supplier, which is China. That is not a very good thing. You need to do a small-scale mining operation, which is very hard because we know that in mines we need economy of scale. Most of the mines that are going to present a story for how they want to go into production will be producing too much material and will have no choice but to sell into China. That's not what we want to do. The big points, as well, is large capex. We don't want to be starting a mine for which we will have to raise hundreds of millions of dollars or even a billion dollars. The focus on small volume with high-grade feed, 500 to 1,000 tonnes per year, with 38% HHREE can give us up to 300 tons per year of those four elements. You can place three hundred tonnes into a market of five thousand tonnes quite nicely. You need clean technology, which we have developed over the last six years, for a high-margin operation. And that's where we are focusing today on the magnet recycling.

Over the last six years, we've been slowly developing a clean technology for our separation. It's organic-solvent-free, which is the main thing that we want to avoid. We don't want to be dealing with solvent extraction. It's a sustainable and competitive alternative to solvent extraction.

How did that shape up over the last five years? Our cost per one unit of one liter was five million dollars, which is not economic. Over the last five years, we brought it down towards $500 per liter. With this $500 per liter, it's now starting to look like you can really do significant development. At the bottom, I'm showing a few curves but basically saying the purity has been increasing, recovery has been increasing, residence time has been decreasing -- those are all important parameters if you want to demonstrate that you can actually put a plant into production and be economical. At the same time, we've been increasing the separation factor, which is our main comparison to a solvent extraction. We want to be more efficient than solvent extraction.

Now, the feed material. What is it that we're going to be putting into this recycling plant? We are focusing on the magnet-based feed, which is the main product of rare-earth magnets. The grade is more than 30% for those four elements. Nobody puts lanthanum or cerium or low-grade rare earths into a magnet. You have two sources: one is primary magnet and alloy manufacturers who produce residues; another is the end of life market, like windmills that are being disassembled and electric cars. Every single electric motor will have those magnets. We've already secured an LOI with Rocklink out of Germany for anywhere between 100 and 200 tons per year. They are a German-based specialists in production of waste and end-of-life recycling. Also, a US-based manufacturer with same thing -- we've got some material coming out of there. We are partners now in a collaboration with Comet Traitements out of University of Liege in Europe to be part of a pilot to recycle electric vehicles. Right now, it's a million cars -- next year it's more -- and the next year is more and more. Every year, we have more electric vehicles sold and after eight years, we'll start seeing those vehicles reaching the scrapyards. That's where we'll see even more magnets available.

Is there more feed? Absolutely. Every year, we make 160 thousand tons of new magnets. It's an $11 billion dollar industry. There is 24 to 48 thousand tonnes of waste every year, most of it is in China but some outside. For wind power, 3 megawatts takes 2 tonnes of magnet on average. If you look at the annual production capacity of wind, we produce 50,000 megawatts. That's up to 33,000 tonnes of neodymium-iron-boron magnets. In 2017, we've been de-commissioning facilities that were built 15-20 years ago. Last year, we decommissioned more than 400 tonnes of magnets. That's a 25% increase over the year before that. Every year, we are building more wind turbines. At the same time, we now have the backlog coming from the decommissioned items that are being recycled. The electric vehicles, as an example, have 3 kilograms of magnet in the main motors. With 2018 sales of 2 million EV, that's 6,000 tonnes of magnet. The average lifetime is 8-10 years. Let's just start counting to see when the two million cars that went on the road last year will start getting recycled and recovered?

Primarily, today, it's all done in China. We are the first ones -- the first company in North America to efficiently recycle rare earth metals.

Production from recycling is great. We are targeting 500 tons per year of processing capacity. That yields 150 tons of end-product in the form of NdPr and the oxides, but the growth potential is the mine. We all know that, in the future, we want to put more material into production once the demand is there. Right now, as I mentioned it's 5,000 tonnes per year in Europe and North America. Once the demand in North American and Europe is 10-15-20,000 tonnes then you can start adding your mining capacity. But you don't want to be stuck with a bottleneck, which is really the refining capacity -- it's only in China now. Our technology is now going to be used in recycling can, in the future, be applied to our mine. In the future, we can put the money into production because the demand will be there.

The rare earth industrial cycle is very simple. You always have to refine the final product, sell it into the metal manufacturer who makes it softer and sells it to the magnet manufacturer. Everything goes to the end user, who gets recycled at the end. Today, unfortunately, outside of China nobody really recycles those magnets. At every single manufacturing stage, you have waste and all of that is going to be coming back to GeoMega as well. We will be processing all that material, centralizing everything in North America, producing more rare earth oxides and feeding them into the demand in Europe and North America.

Innovative technologies, alternative sources, de-risking through production cash flow, and recycling -- mining is not the only answer! We can increase the mining activity in the future, but we don't start from mining in such a specialty industry. I'll skip the management since I'm running out of time, but it's a very small team focused on developing something in-house.

Why invest in GeoMega? Direct exposure to earth production North America, that's what you want. Recycling is a growing market -- there's more interest in that earlier today with one the company earlier today that is in recycling and cleaning. Potential near-term cash flow -- you want to be exposed to cash flow because you want to avoid dilution and developing a high margin operation.

Upcoming milestones -- you'll see results soon on further testing for validation, additional supply agreements to secure more feed, and off-take agreements for the NdPr material that we'll be producing, scale-up to the next stage to allow for much larger cash flow, and high-purity testing of three-nine and four-nine and five-nine end-product.

Thank you very much. Any questions?

Q: Are there any significant barriers to entry for other firms?

Supply, which is what we've been trying to address with the supply agreements. We are trying to secure all the supply so it can go through us. The technology is another barrier to entry. We developed this technology over 5-6 years. We know that universities are doing research but we've been looking at the operating costs of those technologies and they are very far from being competitive. We know the cost in China and that's what you need to compete with, that's where we are different.

Q: How much money has your company raised? 

Well, that's a bit harder to answer. GeoMega was originally focusing only on the exploration side for the Montviel project. For the years during the 2011-2012 period of rare earth elements demand, I believe the company spent around $20 million dollars if not more on the exploration side. Right now, for the last four or five years I believe we put around $3-4 million into the technology development.

Q: What's the burn rate?

It is approximately less than twenty thousand dollars per month. The company is basically targeting scale-up as soon as possible to start producing the cash flow. Thank you.

Visit the GeoMega website here, https://ressourcesgeomega.ca/management/