What a treat to share three ideas that occurred to me recently. They're rough. Read on for more.

A quick one first. News wire services -- are there new opportunities in that business with social media? Another one -- something about capitalizing the value of "security of supply" for rare earths production from GeoMegA Resources. And the third is about some design for a machine to help with channel sampling underground at old mines. 

>> Newswires with The Cloud? 

SEDAR is an important part of how news gets around in Howe Street. Is it the primary destination for news? Should it be? I don't know the legal rules, but laughed when I saw that had a SEDAR website has a phone number "For commercial users". Maybe there is room for another news wire?

A possible niche for new entrants may be on basic news items, 

"Continuous disclosure documents such as news releases, financial statements, notice of meeting date and annual reports do not require the securities regulatory authorities’ review and are immediately available via the SEDAR Data Distribution Service."

Imagine a news wire service that first published news to SEDAR, then tweeted a link to the files on the cloud. A PDF of the text, images, other types of digital content are cheap and easy to host on the cloud. And tweeting is free. 

Is there space for a news wire on Howe Street that just uses Twitter and Google Drive?

What requirements would they have towards other wires?

What would the economics look like?!

If your work flow was simply posting to SEDAR, posting to Google Drive, and then tweeting a link, then it could be automated extensively. Think of it as "mirroring" SEDAR on the cloud.  Is there a valuable service hidden somewhere in there? At the very least, the newswires often seem to have a hard time sharing images from news releases and the cloud might help them share digital media better.

>> Capitalizing the value of Security of Supply 

This is a specific one for GeoMega Resources, who recently announced CAPEX guidance of $1-2M CAD for their "Innord base case". They are talking about year 1 with $10M from $66/kg for 150t of their REE basket. It's premium stuff, as far as rare earths go. The NdPr is classic. The Dy and Tb is nice. There are buyers for any amount of production GMA can muster, but they need financing for the CAPEX build out. It's cheap, but it's still millions of dollars. 

So what?

Offer a deal publicly! Imagine, 

"Counterparty pays $5/kg up front to secure ROFR on all production from Innord base case."

"Within 18-20 months, GMA will provide 200,000kg of REE basket. Buyer gets fixed price, $50/USD."

Would someone pay $1 million for a ROFR on the first 200,000kg of REE from GMA? Think of it as 10% down today, rest due before delivery? They could get creative with this, depending what kind of counterparties they can find! What if the buyer of the ROFR could they subsequently sell it someone else? Sounds like some smart way to auction for essential rare earths.

Does this tie-in with buyers who may warehouse material? Buying a right for future production is somewhat like physically warehousing REE production. It's not physical storage of finished product, but if it's possible to resell some or all of the ROFR then it imitates an important feature of physical warehousing -- the ability to resell. Again, this gives potential for a unique speculative opportunity.

Imagine if Triple Flag Finance buys an option on GMA's REE production, holds it for 6 months, and then sells the option to some US military contractor? There could be someone out there who would pay a large premium for security of supply of rare earths. 

And if you think of it as a transferable offtake, then what's it worth?

 The Black-Scholes formula gives a $6.5 premium for an ATM call option with strike $50 for 2 years at 2% risk-free rate and 20% implied vol. That's if the underlying price is at $50, same as the strike. I mention that particular call option because it might it's quite far from the ROFR I mentioned before. 

The ROFR deal I said is deep in-the-money. The strike was $50 and current selling price $66. For that kind of call option, a $5 premium sounds cheap! How cheap? 

Black Scholes says $36 for a call with strike 50 and current price 66. Implied vol of 88%, 2% risk-free rate, and 2 years. See the calculations here, https://www.mystockoptions.com/black-scholes.cfm?ticker=&s=66&x=50&t=2&r=2%25&v=88&calculate=Calculate

A $36 premium is very large. The reason for that is it's deep in-the-money. A $50 strike with current price $66 is basically "fully long" from a financial perspective. From a physical commodity perspective, it's like an offtake deal. Selling a ROFR for $5/kg may sound too cheap compared with that $36 option premium, but it may be good business for GMA to leave something on the table. 

This simple analysis suggests a ROFR at $50/kg REE from GMA's first 2 years of production production is quite valuable. Could GMA sell a ROFR like that to help finance the CAPEX? Should they? 

With the potential for further upside in rare earths prices, this is a speculative opportunity.  It's also may be a good opportunity for cost-management, in the eyes of the right counterparty. Anyone who is planning to use hundreds of thousands of kilograms of REE in the USA today may come to the table with GMA here. Regardless what the Black Scholes model says, I wouldn't be mad at GMA if they sold the rights to their first 200,000kg of REE production for $1M today as that would be a big step towards the total CAPEX guidance of $1-2M. Note, all this is Canadian dollars.

>> Channel Sampling Machine

Hear Robert Carrington, Newrange Gold, and describe how they did the channel samples in the Merritt Decline, https://youtu.be/VClhBEep-_o?t=387

He describes a simple and effective way to sample underground mine workings. Identify particular features of interest and sample lines, then use a saw to cut two parallel lines in the rock a few inches apart. Come along with chisel after that and hammer out the rock between the two saw cuts. An electric saw, handheld chisel, and someone to hold the bucket works simply. 

 Imagine some kind of industrial machinery that did all of that at once? A couple saws, chisels, and vacuum might be worth considering.

 

It's unclear if this is realistic, but it's worth considering. This kind of a machine could prove it's worth for an exploration company that had thousands of meters of channel sampling to do along walls of old mines. It would be a heavy draw on electricity, but could reduce dust creation and make the whole work activity safer and quicker. 

 

Thanks for reading some of my random ideas here. Please contact me if you can help make them happen. Best wishes to all.