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Buzz on the Bullboards: Tax Loss Season: Let’s Talk Health & Mining

Stockhouse Editorial
16 Comments| November 11, 2021

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Tax-loss season is already on the minds of investors. This is the time of year when some feel compelled to dump their losers – and lock-in losses. It has been a hot topic on the Bullboards, with HEXO Corp. (TSX: HEXO, Forum) at the forefront, as the cannabis producer recently providing an update on its integration plan, following the acquisitions of Redecan, Zenabis Global, and 48North Cannabis.

HEXO will cease operations at three production sites to centralize product cultivation, manufacturing, and distribution at its core facilities.

“As part of the integration planning process, we completed a comprehensive evaluation of all HEXO facilities to review their capabilities, capacity, and efficiency, and made the decision to centralize operations at our core facilities.

This decision is key to achieving our immediate priority of integrating our recent acquisitions to drive growth and profitability through the commercialization of cannabis consumer packaged goods products. We are confident that our core sites, combined with strategic partnerships, will ensure a sufficient supply of high-quality cannabis to meet demand,” said Scott Cooper, the new President & CEO of HEXO.

“This was a very difficult decision, but it is a key component of our integration plan, and one that we believe best positions HEXO for continued growth. I would like to thank all of the employees at Kirkland Lake, Brantford and Stellarton for their efforts, dedication and professionalism in helping build HEXO,” he added.

The following facilities will be decommissioned:

  • Kirkland Lake, Ontario facility, which was acquired through the 48North acquisition, effective on January 31, 2022
  • Brantford, Ontario facility, which was acquired through the 48North acquisition, effective on January 31, 2022
  • Stellarton, Nova Scotia facility, which was acquired through the Zenabis acquisition, effective February 28, 2022

HEXO is working closely with employees to reduce the impact of the decommissioning of these facilities. This includes relocating employees who take on roles at one of HEXO’s core facilities and supporting those who are not able to relocate with their search for employment.

Approximately 155 employees are impacted by this decision. Merry Christmas!

Canopy Growth Corp. (TSX: WEED, Forum) announced its financial results for its fiscal Q2 2022 ended September 30th, 2021, this week. The company’s stock plunged 10% on Friday last week after the report of its results.

Canopy said its second quarter loss narrowed to $11.06 million (CAD), or 3 cents-a-share, from $32.06 million (CAD), or 9 cents-a-share in the year-ago period. Revenue fell to $145.6 million (CAD) from $150.8 million (CAD).

Meanwhile, two of Tilray Inc.’s (TSX: TLRY, Forum) leading brands, SweetWater Brewing Company and RIFF Cannabis, have collaborated for the exclusive US launch of SweetWater RIFF -- SweetWater’s first ready-to-drink cocktail and its inaugural entry into the spirits category. SweetWater RIFF brings a unique twist on the ready to drink vodka soda market in two offerings: SweetWater RIFF Citrus and SweetWater RIFF Strawberry Mule.

Xebec Adsorption Inc. (TSX-V: XBC, Forum) has acquired UECompression to establish North America’s leading Renewable Natural Gas and Hydrogen Manufacturing Facility.

Xebec is a global provider of clean energy solutions for renewable and low carbon gases used in energy, mobility, and industrial applications. The acquisition of UEC provides Xebec with a cost-effective and timely pathway towards expanding production capacity five-fold for standardized renewable gas systems while supporting UEC’s legacy business as the operation continues its energy transition.

The total consideration for the acquisition of the outstanding shares of UEC is of $9.9 million (CAD) and is subject to certain holdbacks and adjustments. On a standalone basis, UEC is expected to have revenues of approximately $43.3 million (CAD) for 2021.

With the introduction of containerized renewable natural gas and hydrogen systems and leveraging the Cleantech Service Network to support UEC’s and Xebec’s installed equipment base, Xebec expects to see significant growth for this operation over the coming years.

In addition, Xebec’s global manufacturing footprint is further optimized by bringing European gas generation products such as Hy.GEN to the US and focuses UEC’s facility on containerized and skid-mounted renewable energy systems.

Also, the acquisition increases the Cleantech Service Network coverage of Montana, Wyoming, Colorado, North & South Dakota and Nebraska to meet the increasing need for local service and support as the demand for standardized RNG and hydrogen systems accelerates. Xebec expects that with limited changes to operations it can use UEC’s excess capacity to produce approximately 150 to 190 containerized BGX Biostream biogas upgrading and Hy.GEN hydrogen units per year in North America.

The new capacity from UEC adds to recent capacity increases in Xebec’s Canadian manufacturing facility.

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Bombardier Inc. (TSX: BBD, Forum) announced 10 participants have graduated from the first cohort of apprentices enrolled in its comprehensive apprenticeship training program. The program was developed in association with Texas State Technical College (TSTC) in Red Oak, Texas. Graduates are offered full-time employment at Bombardier’s Red Oak facility as an aircraft assembler or aerostructures apprentice to work on the Global 7500 business jet’s advanced smooth flex wing. The two-year, nationally accredited apprenticeship program allows the Montréal-based transportation company to attract talented individuals from across the US to grow its labour force in Red Oak.

Bombardier launched the program in December 2019. It offers students the opportunity to enter the high-tech aerospace sector with no specific pre-requisites. It challenges them to present a winning attitude and develop mechanical dexterity and sound logic skills to pass an entry-level aptitude test. In turn, Bombardier and TSTC offer expert training in conjunction with TSTC’s facilities, allowing students to benefit at no cost from industry-tailored modules, experienced instructors, tools and equipment and financial support.

Since its inception, some 80-plus individuals are currently being trained in the program. Bombardier and TSTC plan to recruit more than 50 individuals into the program over the next two years.

“I am thrilled to celebrate the successful graduation of the women and men in the BAAP program who will now transition forward in new careers at Bombardier, helping to ramp up the development of Bombardier’s Global 7500 program. The accomplishments of these talented individuals aptly underscore the importance of fueling the aerospace pipeline in our Red Oak facility, bringing world-class training opportunities, and cementing Bombardier as a key pillar of the community. It’s a wonderful way for Bombardier to celebrate National Apprenticeship Week in the US,” said Bombardier Executive Vice President, Operations and Operational Excellence Paul Sislian.

PyroGenesis Canada Inc. (TSX-V.PYR, Forum) has provided a glimpse into its financial results for its Q3 2021 ended September 30, 2021. Based on financial information to date, and subject to any closing adjustments, the company expects Q3 revenue to be at least $8 million (CAD).

This results in total revenue for the nine months ended September 30, 2021, of at least $22 million (CAD), compared to $8.1 million (CAD, Q3 2020) and $11 million (nine months ended September 30, 2020).

It also expects to report positive net income and positive earnings per share for the quarter.

Actual 2020 Actual 2021 Guidance 2021
Q1 $736,000 $6.3M
Q2 $2.1M $8.3M
Q3 $8.1M TBD > $8M
Nine months ended September 30 $11M TBD > $22M
Year end $17.78M TBD

P. Peter Pascali, CEO and Chair of PyroGenesis, stated,

“It is difficult for a company like ours to provide an early indication/guidance given the methodology relating to the accounting for our revenue; namely percentage of completion accounting. As one might expect, delays associated with supply chain issues complicate further this process. Nevertheless, we are happy to be providing the first glimpse of our third-quarter financial results.

We are proud to give guidance that essentially reflects record nine-month revenue and positive net income for the quarter. We also expect to post a backlog of signed contracts that will be very close to, if not at, a historically high level.”

New Found Gold (TSX-V: NFG, Forum) provided an update on fieldwork and reporting of drill results from its Queensway Project located on the Trans-Canada Highway 15km west of Gander, Newfoundland, this week. NFG reported that it is proceeding immediately with assaying of drill whole-core samples from the project utilizing the Chrysos PhotonAssay method at Intertek’s facilities in Perth, Western Australia. Novo Resources Corp. (TSX: NVO, Forum) a significant shareholder of New Found currently utilizes Intertek’s Chrysos PhotonAssay facilities for production and exploration samples from their Western Australian gold mining and exploration projects and is facilitating priority access for New Found to the Intertek facilities under Novo's arrangement with Intertek.

Nevada Copper Corp. (TSX: NCU, Forum) provided a further update on positive October operational performance at the company’s underground mine at its Pumpkin Hollow Project in Nevada. NCU found that stoping rates continue to accelerate, with four stopes mined in H2 2021, including the most recent stope with an estimated grade of over 2% Cu. Mining of the higher-grade Sugar Cube zone is planned to begin next month. This will be the first stope mined in the East North area which is expected to have significantly larger stope sizes.

The lateral development beyond the completed first dike crossing is progressing at targeted rates. The geotechnical information learned from this crossing has been implemented on the second dike heading, which is now advancing well. This and the first heading will provide access to additional stopes adding to the Company’s growing stope inventory in H1 2022.

The surface ventilation fans are scheduled to arrive in late Q4 of this year and are expected to be commissioned on time in line with the requirements of the mine plan as Underground Mine development progresses towards completion of the ramp up.

First Cobalt Corp. (TSX-V: FCC, Forum) is expanding to provide battery-grade nickel and cobalt, recycled battery materials and precursor material to the North American supply chain. The new business model would result in the creation of the only battery materials park on the continent, providing North American automakers with direct access to a secure domestic source of low carbon raw materials.

In other news, First Cobalt Corp. has announced that it will change its name to Electra Battery Materials Corporation. The name change, which remains subject to shareholder approval, better reflects the strategic positioning and more clearly communicates the company’s long-term value proposition for customers, investors and other stakeholders.

Trent Mell, President & CEO of First Cobalt Corp. commented on the company’s initiatives.

“Globalization has created an electric vehicle supply chain that is too long, too costly and increasingly unreliable,” said Trent. “Our automaker clients have a strong interest in greater localization of the upstream supply chain to achieve greater reliability, security of long-term supply, and a lower carbon footprint. With the continent’s rich mineral endowment, the rationale for supplying battery materials through Asia into a growing US EV market is not sustainable. Electra will act as a bridge between North American electric vehicles and a North American source of primary and recycled material, providing a low carbon solution for zero-emission vehicles.

“We see serious strains in the automotive supply chain, and we are still in the early innings of EV adoption. Beneath the surface are several other factors that are of concern, including carbon emissions associated with the current supply chain, resource nationalism, geopolitics and a race to secure raw material to power the vehicles of tomorrow.”

Electra is building North America’s only fully integrated, localized and environmentally sustainable battery materials park. Leveraging the company’s own mining assets and business partners, the Electra Battery Materials Park will host cobalt and nickel sulfate production plants, a large-scale lithium-ion battery recycling facility, and battery precursor materials production.

We end another Buzz on the Bullboards with our Investor Pulse Poll, this time a look at 2021’s tax loss season. What weighs on your mind more heavily, temporary losses, unrealized gains, or something else? Let us know your thoughts by clicking the poll image below.

(Click image to cast your vote.)

Here is a look at last week’s survey, which shows an interesting three-pronged split in opinion.

For previous editions of Buzz on the Bullboards: click here.

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FULL DISCLOSURE: PyroGenesis Canada Inc. and First Cobalt Corp. are clients of Stockhouse Publishing.

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