IBC Advanced Alloys Corp. TSX-V:IB OTCQX:IAALF ********************************
Alloy - noun: a metal made by combining two or more metallic elements, esp. to give greater strength or resistance to corrosion. How often do you see a headline that contains the name of a small publicly listed Canadian company and a $44 billion global security and aerospace company? The question is rhetorical and the answer being; not often.
It was approximately two weeks ago that IBC announced that its “Engineered Materials” subsidiary was “in the final stages of a materials and production qualification process with Lockheed Martin’s F-35 Electro-optical Targeting System team.”
IBC is working directly with Lockheed Martin's F-35 engineering, design and quality teams to develop components for its F-35 Lightning II aircraft. More specifically, Lockheed Martin is looking to utilize IBC’s proprietary beryllium aluminum alloys – Beralcast® - as a component in the aircraft’s targeting system. For those who are not familiar with beryllium, it is considered a rare metal and is 2/3’s the weight of aluminum and six times harder than steel.
Click here to view Wikipedia. It’s also well worth the five minutes to watch the video on the new F-35, which is jammed with new technologies and advantages, including its “long range electro-optical targeting” feature.
https://www.f35.com/about/capabilities We note that while the situation looks extremely positive, IBC has not yet secured a formal purchase order.
Should IBC be successful and win the contract for this component, would more business be potentially in the wings with Lockheed or other large military and aerospace manufacturers, which are interested in IBC’s beryllium alloys? These are the questions that people are obviously starting to ask themselves based on the dramatic increases in trading volume over the past couple of weeks.
There is no doubt that the news about IBC and Lockheed has the kind of “sizzle” that the market loves to embrace, but there is much more to the company and is in fact what first attracted The Howard Group to look hard at the Vancouver based organization.
We first reviewed IBC in the summer of 2012 and subsequently invested in a private placement in early 2013 through the Insight Limited Partnership II, which is associated with The Howard Group. By way of disclosure, 1.3 million shares and 750 thousand warrants are held between Insight LP II, The Howard Group and its principals. It’s also our intention to continue open market purchases.
What attracted us is there is a “meat and potatoes” side of the business. Its copper alloys division, which is the focus of three of IBC’s four manufacturing facilities in the United States, accounted for the bulk of the almost $21 million in revenues generated in Fiscal 2013 (June 30). This was down from just over $25 million in Fiscal 2012, the reasons for which will be covered in later commentaries, but suffice to say the devastation of Hurricane Sandy took one of IBC’s significant New Jersey based customers off-line for some time.
The point is that IBC has an existing business which is slightly cash flow positive but not enough to support investment in growth of the entire corporation. As such, driving results in the “Engineered Materials” area is critical to business growth and profitability. Contract wins with the “names” of U.S. industrial and technology leaders would also bring immeasurable credibility and most certainly put IBC on the radar screens of large companies that are also focused on advanced materials.
With the introduction to the new relationship between The Howard Group and IBC, we are very much looking forward to working with management to take its business story to new audiences within the investment, institutional and investing communities. We feel it is an extremely interesting opportunity that balances risk and reward. Hopefully, 2014 will not only see growth in IBC’s base business but solid business developments with its advanced alloy initiatives that will result in a significant valuation increase.
It’s currently trading in the range of $0.15/share and has a market cap of approximately $10 million.
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info@howardgroupinc.com.
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IBC Advanced Alloys Corp.
TSX-V: IB, OTCQX: IAALF
Shares Outstanding: 62.2 million
Shares Fully Diluted: 85.6 million
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