VALE probability, numbers **UPDATED** Calculations SUMMARY Hey guys updating w important calculation corrections and few other added points which is going to be build even STRONGER CASE!
While reading post by MazerRR (one of the best DD posters on this forum) I re-read Vale's Climate Chage initiative he posted:
https://www.vale.com/esg/en/Pages/ClimateChange.aspx and I realized few things but most importantly calculations of the reduction of GHG estimates:
The calculation corrections were mainly due to reading it as reduction of 9.5M tons of GHG when it should be reduction to 9.5M tons which is a far smaller number of 4.65M tons which increases the allocation figure very signficantly from $210.53USD/ton to $430USD/ton...which bodes even better for Pyrogenesis as we speculate it who Client A is(the strongest indication it is indeed Vale but regardless who it is...it is massive for PYR!)
1. VALE Iron Ore Producer / Salient Points:
-
$57Billion USD market cap .
-
Biggest iron ore pelletization international producer in the world
-
International producer with 19 plants[11 plants in Brazil (4 are currently suspended), 25% stake in 2 pellet plants in China, 2 plants in Oman, 4 plants through JV with BHP Biliton]
-
$2Billion USD earmarked/budgeted specifically to lower Vale's GHG emissions by 33 % in less than 9 years(2030)
-
Reduction target to 9.5Millions not of 9.5Million tons which is actually 4.65 Million tons of GHG emissions by 2030 (33% of 2017 levels 14.1Mt CO2 = 4.65 Mt CO2)
-
$2B/4.65Mt CO2= $210.53USD $430 USD price per ton of annual CO2 reduction [ SIDE NOTE: 10 years until the deadline of 2030, equates to ~$43 USD/ton (if you don’t include 2020), which is close to the $50 USD/ton Vale has adopted as an internal (Shadow) carbon price for economic feasibility studies for projects; their Shadow carbon price also happens to be within the range of the estimated carbon credit price by 2030 within the EU emissions trading system (37$ USD to 68$ USD].
2. Pyrogensis correlation & relevance / Salient Points:
-
Vale stated in their sustainability report(p97) to decarbonization of metallurgy and using electric processes to accomplish that...."One of t465he main curren programs of the company is PowerShift, which seeks to boost innovation and technologies for the effective reduction GHG emissions in operations...."
-
Pyrogenesis’ first NR for this client on April 30 stated that the client is an ‘international producer’ of iron-ore pellets with over 10 plants requiring plasma torches
- June 11, 2020 Pyrogenesis NR states the use of PYR's plasma torches could result in at CO2 reduction in excess of 350,000 tons per year per plant *THIS IS OF HUGE IMPORTANCE*
-
Vale's utilizing PYR's torches per plant:~350,000 tons/year x $210.53USD/plant $430 USD / ton of annual CO2 reduced = $73.7 $150.5 Million USD / Plant (taking into account 10 plants or ~500 torches this would be ~$1.5B USD note: it could be more than 10 plants, this is just used as an example)
- Economics effectiveness per torch:
$73.7M USD/50 torches per plant=$1.474M USD is $2M CDN $150.5M USD / 50 torches per plant=$3.01M USD/torch (this is an estimate at how much Vale would be willing to pay based on the $2B investment towards GHG reduction)
3. PYR market advantage/key pts:
- PYR is the ONLY game in town who is the only induration plasma torch application granted patent!
- On July 2, Pyrogenesis announced that the subsequent phases of the benefits of transitioning to plasma torches were extended by 6 weeks in order to incorporate the additional data into an ‘ideal plasma torch configuration’ for this client, with the ultimate goal being to eliminate GHG emissions from all their plants. “Barring any unforeseen events, we believe that it is entirely reasonable that initial torch equipment purchases will be placed in Q3 2020.”
- Only a few days later, July 6, Vale announced plans to offer notes due 2030 and July 7 there is the US $1.5B offering due 2030 fully subscribed by July 9,2020. 2030 note's due date is exact same as the Vale's 2030 33% GHG reduction. The timing of the offering and the dollar value heavily leans towards everything coming together...very strongly!
- As calculated above, $3.01M USD is an estimate of the amount Vale can budget for each PYR plasma torch, to fit within Vale’s $2B USD investment allocated to renewable energy & lower carbon solutions for a GHG reduction of 33% (to meet the 2030 emissions target & align with Science Based Target Initiative (SBTI) methodology & the Paris agreement).
4. Vale's mitigation/recovery of investment CAPEX:
-
Gov't grant $
-
Carbon credits (Brazil should have a carbon credit system within the next year/two & be able to trade credits internationally)
-
Potential OPEX savings by using cheap hydro vs fossil fuel (Also, Carbon pricing mechanisms may drive up the price of fossil fuels in the future, introducing additional risk to its use.)
-
Higher sales of iron pellets as they are produced cleanly (more attractive vs competitors’ product as their pellets reduce indirect emissions in iron ore production value chain & are potentially cheaper as they won’t need to price in carbon cost)
-
Avoiding fines/penalties
-
Access to credit facilities & debt issuances from financial institutions
-
Appeasing investors
-
Meeting internal emission reduction targets & complying with Paris agreement
Summary:
- In particular, the ability to sell iron pellets at a cheaper price would put pressure on the competition to follow suit and reduce CO2 emissions to remain competitive (this may explain the flurry of interest in Pyro’s torches – PYR also has a patent on plasma torches in Iron pelletizing induration furnaces)
- It’s therefore reasonable to conclude $3M USD
CDN NPV valuation per torch as Peter stated (he mentioned $3M per in NRs, but on Agoracom stated it is reasonable to assume this is in USD).
- 15 plants @ 350,000 tons/year reduction of GHG w PYR torches = 5.25Million tons/year of reduced GHG emissions . Compare that with Tesla 3.6Million tons over 3 years to day. Vale can almost double that inredible feat in the 1st year utilizing PYR's torches
Torch sale calculations Client A(Vale) best case scenario:
- Highest and best case with full swap out of all of Vale's 15 plants: 15 x 50 torches/plant = 750 torches. 750 torches x $3M/torch =$2.25B torch sale @67% margin = $1.5075B USD profit [ based on Sweden Rise contract of $1M w small profit cab deduce $3M would carry 67% profit margine spread at base min].
- Add 5% recurring revenue for maintance 20-30 years useful economic life of torches = $75M USD/year [very high profit margin as only one service center PYR]. I will let you guys use your own P/E ratios of 20,30 etc....
Client B , C and beyond...for now this is monterous huge!! This is only one division in 1 industry...PYR has other massive divisions that can and will morph into greatness you can be sure of that! TIP OF THE ICEBERG!!!!!!!!!!!!!!! - PYR CEO