To achieve climate neutrality through the transformation from fossil to renewable energy sources, gigantic quantities of a wide variety of raw materials will be needed in the coming years. Already today, the demand for copper, lithium, nickel or cobalt clearly exceeds the global supply. The result is scarcity and skyrocketing prices to new all-time highs.
Super-element currently still under the radar
However, a super-element that is also indispensable for the energy transition is currently still in the shadows: Boron. For the time being. According to a study by Crdit Suisse, the boron market could increase tenfold by 2050! One Canadian company is likely to profit particularly from this boom: Erin Ventures owns a pure boron project in Europe that, according to current studies, has one of the highest degrees of mineralisation in the world.
Facts & Figures
| ISIN | CA29570H2000 |
| Ticker symbol | EV (TSX Venture) |
| Closing price | 0.08 CAD (07/12/2022) |
| Number of shares | 153,870,699 |
| Market capitalisation | CAD 12.31 million |
| Industry | Mining, Junior explorer for Boron |
| Project | Piskanja (Serbia), 306 hectares, 100% shareholding with joint venture partner |
| Resource estimate | NI 43-101 (2022): 7.2mt measured, indicated, inferred (@34.6% B2O3) |
| PEA study | 2022, NPV: USD 524.9m, IRR: 78.7%, Mine life: 16 years |
| Bankable Feasibility | planned for 2023 |
| Start of production | planned for the end of 2025 |
| Catalysts/Triggers | Growth market, takeover candidate, strongly undervalued |
| Homepage | www.erinventures.com |
| CEO | Tim Daniels |
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Source: Erin Ventures Inc., TSX Venture Exchange, as at 12.07.2022
Colemanite calcium borate, source: Erin Ventures Inc.
Boron – universally applicable raw material for future technologies
The demand for industrial raw materials will grow exponentially in the coming years in view of climate change and the resulting upheavals. Cobalt, lithium, copper, nickel and rare earth metals are used in numerous devices that are essential for climate protection, such as wind turbines, solar panels or electric cars. The curr<ent conflict in Ukraine is also fuelling the trend away from oil and gas towards alternative energies.
Boron is one of the most versatile elements in the whole world! Everyone reading this text regularly uses hundreds of products that depend on boron. Examples are glass, ceramics, but also insulation material for houses or fiber optic cables, smartphones, computer screens or solar panels on the roof.
Tim Daniels, CEO Erin Ventures Inc.
One substance that has so far remained under the radar despite its elementary importance for the energy transition is boron, one of the most versatile elements in the universe. In addition to traditional applications such as special glass (borosilicate glass), glass fibres (insulating wool) or porcelain ceramics, the element with the symbol B and the atomic number 5 in the periodic table plays a key role in wind turbines, permanent magnets for electric motors, solar cells, energy storage systems or fuel cells. A single electric car alone contains around 50 kilograms of boron. The blades and generator of an offshore wind turbine use a total of around 6,375 kilograms of boron. Boron is also an important fertiliser and thus supports sustainable agriculture.
e-mobility 
solar power 
wind power 
fertilizer Boron has a wide variety of applications, image source: Pixabay
Demand could explode
In addition to the rapidly increasing demand for the super element due to climate change, the boron market could also explode due to the rapidly growing world population and the associated dramatic increase in demand for food. This requires ever greater quantities of artificial fertiliser, for which boron is an essential element. Around three kilogrammes of boron per hectare of agricultural land are needed to ensure the healthy development of crops.
As the major Swiss bank Crdit Suisse outlined in its study “Climate Transition Super Materials” at the end of last year, the demand for boron could be up to ten times higher than today’s level by 2050. The Swiss assume that more than 90 % of the demand will come from climate technologies. Currently, the market volume for boron is USD 5 billion per year. Due to the increasing scarcity, the European Commission included borates (salts and esters of boric acid) in the list of critical raw materials in 2014.
The current market is almost a duopoly
The strong increase in demand for boron is already matched by a limited supply. In fact, the boron market is currently a duopoly. Around 73% of the world’s known boron reserves are located in Turkey. Production, operation and marketing in Turkey are carried out by the state-owned company Eti Maden. According to Crdit Suisse, Eti Maden covered around 56% of global boron demand in 2019.
The second player is Rio Tinto, one of the world’s largest mining companies. Rio Tinto, with its production in the Mojave Desert in California, represents another 30% of global demand for refined borates and produces around 90% of the US supply.
In addition to the two big players, there are also some smaller producers, mainly in South America, who mostly extract low-quality boron as a by-product of lithium production. The fact that a few suppliers dominate the market makes the margins achieved all the more attractive.
According to statements by the management of Erin Ventures, it is known that Rio Tinto’s profit margin in California was already 34% in 2015, and that of Eti Maden in Turkey was even estimated at 44%. Since then, however, the price of boron has risen significantly and Eti Maden’s profits have exploded to around USD 500 million in almost two decades, which is almost a thirty-fold increase. This development had already begun before climate neutrality was a big issue. According to Rio Tinto, boron demand will also exceed supply in the medium term, despite new production facilities. Thus, the market is literally crying out for new projects.
Piskanja – The Project for Europe
At least since the beginning of the Ukraine conflict, the European Union has been interested in not becoming dependent on a single supplier to cover its raw material needs. However, as of today, boron imports to Europe come almost exclusively from Turkey. Therefore, there are strong efforts to minimise the risk in terms of security of supply and to develop, if possible, local alternatives.
Back in 2010, the Canadian company Erin Ventures received an exploration licence for the approximately 306-hectare Piskanja project in Serbia. This former coal mine is located in the tectonic belt of the Vardar zone, which stretches from northern Croatia to Turkey and is considered a lithium borate district. The world market leader Eti Maden is active in this belt on the Turkish side.
Location of the Piskanja project in the Vardar belt, Source: Erin Ventures Inc. , MMG Capital
Although the Piskanja project, about 17 km from the Kosovan border, is not yet in production, it is by far the most advanced of all current exploration projects. Moreover, the project offers some tangible advantages over competitors. For example, the Republic of Serbia is already on its way to EU accession. Moreover, the government has announced its goal of increasing the mining industry’s contribution to the gross domestic product from the current level of around 2% to 10%.
In addition, the infrastructure around Piskanja, which borders the town of Baljevac with its 3,000 inhabitants, is first-class. In addition to roads that are passable all year round, power lines and a mobile phone network, there is a railway line about 200m from the deposit that is connected to several seaports. The region is also a traditional mining area. Coal was mined here for centuries. A boron production site brings work back to the region and is gratefully accepted by the population. In addition, underground mining is not expected to have a massive impact on nature.
Location of the Piskanja project in an ancestral mining region, source: Erin Ventures Inc.
The management of Erin Ventures around CEO Tim Daniels expects production to start at the end of 2025. Already in July last year, Erin concluded a joint venture agreement with the Canadian company Temas Resources, according to which the joint venture partner can acquire a 50% stake in Piskanja, provided that the necessary development costs of EUR 10.5 million for the project are covered and 250,000 shares and warrants each are paid to Erin. With this agreement, Erin manages to keep the dilution of existing shareholders at a remarkably low level. Smaller equity rounds to strengthen working capital remain well within the realm of possibility. All in all, the mine is to be built with a share of around 75% debt capital.
The first preliminary economic assessment (PEA) in accordance with Canadian NI 43-101 guidelines was carried out back in 2014 and was now updated in June of the current year.
Updated PEA shows unique boron grades and high economics
The updated PEA showed the enormous potential of the project. According to the PEA, the mineral resources at Piskanja amount to 7.2 million tonnes with a grade of 34.6% B2 O3 (boron trioxide), which makes the project one of the highest-grade boron deposits in the world. In a peer group comparison, the two producers Rio Tinto with 24% and Eti Maden with 26% show significantly lower grades on average.
Results of the PEA
| NPV after taxes (10%) | USD 524.9 million |
| IRR after taxes | 78.7% |
| Initial investment costs (including 30% buffer for contingencies) | USD 79.9 million |
| P<eriod for Capex repayment from commissioning | <12 months |
| Mine life (Life-of-mine, LOM) | 16 years |
| Gross project income | USD 2.02 billion |
| Net cash flow of the project (after taxes) | USD 1.21 billion |
| Average annual gross income | USD 126.0 million |
| Average annual EBITDA | USD 91.3 million |
| Net operating margin | 72.4% |
| Profitability index after tax (NPV/initial investment) | 6.57x |
| Average annual production colemanite | 258,272 t |
| Average annual production of boric acid | 25,000 t |
| Average content (measured, displayed and derived) | 34.57% B2O3 |
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All values in U.S. dollars unless otherwise stated.
Assumed prices Colemanite (40% B2O3): 500 USD/t, Boric acid (technical grade): 700 USD/t | |
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Source: Erin Ventures Inc.
In addition, the main mineral identified is the calcium borate colemanite. The PEA assumes an annual production of around 260,000 tonnes per year of saleable colemanite and 25,000 tonnes per year of boric acid. These substances are much more universally applicable than the sodium borohydride produced by Rio Tinto mainly in North America, which cannot be used for hardening. Eti Maden also mainly produces colemanite in Turkey, but it has a decisive disadvantage: the colemanite produced in Turkey contains a high proportion of toxic arsenic, which has to be extracted at great expense before further processing and leads to high additional costs.
According to the PEA, the Piskanja project has a net present value (NPV) after tax of USD 524.9 million, with a discount rate of 10%. The internal rate of return (IRR) shows an extremely high return and amounts to 78.7% after tax (comparable projects: max. 30% to 40%).
Drill cores from test drilling for the Piskanja project, source: Erin Ventures Inc.
The initial capital costs for the 16-year mine life are estimated at only USD 79.9 million, including a 30% contingency (usually this contingency is between 10% and 20% for comparable projects). The all-in sustaining costs (AISC) for the colemanite are thus USD 155 per tonne. Transferred to current market prices, which are currently at least USD 500 per tonne, this results in a fantastic net margin of 69%. Since the PEA assumes a mixed calculation with the more expensive boric acid, the margin on project level is even higher at 72.4%.
Analysts give the thumbs up
The analyst firm MMG Capital recently carried out a sum-of-the-parts valuation of Piskanja and thus also of Erin Ventures on the basis of the updated PEA. Following the entry of Temas Resources, half of Piskanja’s NPV is attributable to Erin Ventures, corresponding to USD 262 million or CAD 338 million. To account for country and project risk, the analyst in charge, Nick Hatch, has decided to discount this value by a further 50%. This discount was deliberately chosen so high to take into account the lack of new mine developments in Serbia recently, which could be seen as an indicator of administrative problems. In addition, it reflected the challenges Rio Tinto recently faced at its Serbian lithium boron project Jadar, which led to the withdrawal of the mining licence.
It is important to stress, however, that Piskanja and Jadar differ in key respects. While Jadar is a gigantic lithium-boron project that is likely to cause an undeniably large and also sustainable environmental impact through open-pit mining on an area of 626 hectares of prime farmland and pasture, the Piskanja project is a former coal mine. Here, boron is mined underground, and the impact on the environment is likely to be minimal. In addition, the local population, where unemployment is currently high, is very open to the project. Thus, no major headwind from the ranks of environmentalists is to be expected.
MMG Capital’s further valuation of Erin Ventures also included Erin’s 50% share of the cost of capital less Temas’ additional contribution of EUR 10.5 million, added net cash and deducted operating and exploration costs for the last three years. This leaves a value for Erin of CAD 122.3 million. or CAD 0.79 per share, which would be a tenfold increase relative to the current share price of CAD 0.08. The value of a mining licence for an area of just under 21km² in the Jarandol Basin west of Piskanja was not taken into account here and should be seen as a possible upside.
Investment Highlights
| Only listed pure play boron explorer |
| Boron is a scarce mineral with increasing demand and use |
| High profitability of the project (IRR: 78.7%, net margin: 72.4%) |
| Massive undervaluation (target price MMG Capital: CAD 0.79) |
| Strong financing partner with Temas Resources |
| No comparable projects in Europe yet |
| With over 34% boron trioxide (B2O3) one of the highest mineralization grades in the world |
| Versatile calcium borate available on the project |
| First-class infrastructure and open-minded administration |
| Attractive takeover target |
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Source: Erin Ventures Inc., MMG Capital
Ambitious goals, high potential
Following the highly successful economic assessment results, management plans to conduct a Bankable Feasibility Study in the first quarter of 2023 and complete a multi-stage permitting process to start production at 250,000 tonnes p.a. by the end of 2025. The design of the mining and processing facilities and the preparation of an environmental impact study are also scheduled for the end of next year.
In order to make Erin Ventures visible on the stock exchange as a pure boron project, the management is planning a name change.
Overall, an investment in Erin Ventures offers a very attractive risk-reward ratio due to the updated PEA and the favourable framework conditions. The element boron is one of the most important raw materials for both climate change and the agricultural industry. Thus, policy makers are likely to support projects in Europe, such as Erin Ventures’ Piskanja project in Serbia, in order to minimise dependencies on corporations outside the continent.
The analysts at MMG Capital see a tenbagger candidate at the current level in a long-term growth market. In addition, the promising project could be taken over by a larger mining group even before production if the feasibility stage continues to develop positively.
If you have any questions about our brief analysis or would like more information, please contact us at:
erin-ventures@analyst-research.com
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