Q&A with IBC Advanced Alloys Corp. (TSX: V.IB, Stock Forum) President, CEO, and Director, Anthony Dutton.
Let’s begin with the company’s recent financing. You initially announced a $1.5 million PP but withi
n 48 hours you closed on $2.7 million. There’s obviously a lot of expectation around IBC’s future. How are you going to use the funds to accelerate growth?
It’s no secret that the last two years have been tough on the small cap and micro-cap companies like IBC.
Notwithstanding, IBC is in the enviable, and some would say unique, position of having a revenue generating business with clear potential for significant growth in profitable niche markets.
Nonetheless, we’ve been operating under challenging circumstances and have focused hard on costs, margins, efficiencies and other ways to improve our business. We put certain capex items on hold, deferred salaries for senior management and directors and cut other expenditures to extend our runway to focus on profitability.
IBC’s Copper Alloys Division is leaner and running more efficiently with better margins. We are expecting additional efficiencies as we get smarter about internal processes and external supply chain management, both of which can contribute to improved yields and better margins. We have also identified several opportunities for value-add manufacturing where we can include certain semi-finished product offerings in our product mix.
On the Engineered Materials side, we are focused on landing contracts as we work towards positive cash flow. Improved financial performance at Engineered Materials will have a significant and very positive impact on the company as a whole.
As you may know, we have funded development to support our aerospace initiative with Lockheed Martin Corp. (NYSE: LMT, Stock Forum) from our balance sheet. This has been a very significant investment on our part. EMC generates revenues but not enough to cover its costs.
Our recent financing will allow EMC to fast track further key aerospace qualification work and to focus on commercial acceptance and achieving profitability. We will also allocate some of the funding for marketing and to raise the profile of EMC and Beralcast®, our proprietary casting technology, as well as for ongoing business development programs.
2014 began on a very positive note allowing us to finance our growth at a 50% premium to our last offering and is a strong indication of investor support. We were pleased by the demand and the need to upsize the offering and also how quickly we were able to close the financing.
Can you tell us about IBC’s “tooling” contract with Lockheed Martin and what could it mean for the company?
The hard tool is part of the final stage in the evaluation process and we are working with Lockheed Martin to test and prove Beralcast® for use in their F-35 Lightning II fighter aircraft. We have already made a number of prototype parts for Lockheed but, as is standard in the aerospace industry, we now need to make a “first article” from a hard tool.
This is a production-ready tool and the first article will be used to determine that material properties and dimensions are consistent with the prototypes and conform to the required specifications. Once this has been established, we will be able to discuss production opportunities with Lockheed; our focus in to secure a purchase order.
Should you be successful in securing a purchase order, does this open the door to a bigger future with Lockheed and perhaps others?
We are already working with other aerospace companies and I fully expect that an order from Lockheed Martin, if it occurs (and I say “if” because there are no guarantees of anything at this point) would be a very good endorsement for Beralcast®. That endorsement would certainly, one hopes, open the door to future opportunities with not only Lockheed Martin, but the aerospace industry in general.
Current and future aerospace projects are fanatical about weight savings and with Beralcast® we offer very high modulus with very low weight with significant cost savings in volume production over the closest competitor. The aerospace industry has been using beryllium aluminum parts for some time for precisely the reasons mentioned above, but now with Beralcast®, we can offer the same performance but with considerable improvements in lead time and cost savings.
You’ve also signed an MOU with Nu-Cast. Can you tell us about that company and how you can complement each other?
Nu-Cast is an interesting company located quite close to our Engineered Materials plant in Wilmington. Nu-Cast have been around for around 30 years and are private company and therefore are not required to disclose financial information. They run a sizable operation with approximately 60 employees manufacturing specialized aluminum castings for the aerospace industry.
Their customer base is a who’s who of aerospace and includes every top tier global aerospace company. They have a number of complementary aspects for IBC including elements of the casting production process, well-established sales and marketing relationships, longstanding and key distribution and supply networks. We are currently in ongoing discussions to explore a variety of possible joint strategies in the beryllium aluminum casting business and at this point are unable to disclose anything further, other than to say we are excited by the possibilities.
What about Nuclear Fuels; where is that at?
An interesting element that these days gets overlooked is that IBC sponsors research focusing on the structure and composition of beryllium oxide enhanced nuclear fuel as well as new protective cladding technologies, primarily silicon carbide, to improve fuel performance including longer life, more stability and better thermal conductivity. IBC sponsors R&D at Purdue University, Texas A&M University, and has partnered with Global Nuclear Fuels to conduct multi-oxide fuel testing. IBC is also partnered with Ceramic Tubular Products, LLC and Massachusetts Institute of Technology (“MIT”) to develop and analyze a silicon carbide-based ceramic composite cladding which will complement the BeO nuclear fuel.
At this point I would defer to IBC’s Vice President of Nuclear Fuel, Jim Malone who is quoted as follows in IBC’s most recent news release: “We are very encouraged with these new results and their safety and economic implications for IBC’s BeO nuclear fuel project.
Today’s nuclear industry is examining a variety of new technologies focused on the development of more economically efficient and accident tolerant nuclear fuels. We believe that IBC’s BeO enhanced fuel has further demonstrated its commercial potential and we look forward to sharing these new and exciting results with our potential industry partners and to jointly taking the research to the next step.”
What does the next 6 months look like for IBC?
For the remainder of the year I see our focus being to continue improving margins and yields, expanding machining and finishing capacity, introducing new alloys and expanding our distributor network (more business). On the Engineered Materials side, we’d like to add de-waxing and machining capacities and continue to pursue and hopefully secure long term aerospace R&D agreements, development contracts and of course purchase orders.
Disclosure: IBC Advanced Alloys is a Stockhouse client.