CoTec Provides Market Update

0:07 Hello everyone and welcome to Code Tech's live event hosted by 6. Today I'm joined with the President and CEO, Julian Traeger. Julian, thank you for taking the time out of your schedule to update us on the recent news that was posted yesterday. For people in attendance, if you do have questions, this is an interactive session, so please feel free to submit your questions in the chat box in the bottom right corner of your screen.

0:31 So Julian, as I said yesterday, Kotek released the initial mineral resource and preliminary economic assessment for the Lactamine Iron Tailings project. Perhaps we can kick this off by first reminding people of this project, your thoughts on the news yesterday and how this asset is aligned with Kotex overall vision. Well, first of all, Carl, thanks for having me back on the program. It's always a delight to be here. Yeah, we're pretty excited at Kotex with this announcement yesterday because it's the first in a way external corroboration of the enormous value we believe we are creating for our shareholders. This is signed off by competent persons and it shows the enormous upside that is contained within the Kotech as a company. Our market cap continues to be pretty small. Just this project alone, which is one of many projects has the potential to be many multiples of our existing market cap. And we can talk later about why that's the case. So, like Chenine is one of our iron ore assets, our strategy has always been to look at the recycling space as a way in which we can produce high-grade green materials quickly, much more quickly than conventional ways of mining would propose.

2:02 And this is a project in Quebec. It's a closed mine site, which hasn't operated for a number of decades, but which still contains quite a lot of copper, I mean, iron ore within it. And our proposal, we have a deal to acquire this. We have an option arrangement. Kotec initially would own all of that. So all of the upside at this stage would come to Kotech, although we will in due course bring in financing partners.

2:42 And this is a way in which we can develop the very high-grade iron ore, which is a strategic asset for Canada and for the West quickly and with relatively low cost. So It's an exciting development. I hope it, and I believe it will be the first of many such announcements which will roll out over the coming months and years which show how much value we are creating already at Kotech for our shareholders. Thank you. And I'm actually just gonna share my screen here for people in attendance so they can review the press release. There's a lot of great detail in it. I'm gonna highlight some things that caught my eye personally, after tax NPV of 59.5 US million dollars with a 30% IRR and 11 year mine life with a grade of 8.4

3:43 to 7% on the first 3 years, then it tapers down to about 6%, but there's a cutoff grade of 3.3%. The strip ratio is essentially 0 being 0.016. DNA PEA, it's preliminary in nature, and the entire resource of 73 million tonnes is in the inferred category. Upfront capital cost of the project, $64.6 million. This includes a 15% contingency. And you're looking at a payback of 2.5 years. So overall, it looks great. I'm going to scroll down to this block model diagram here. Yeah. Now, you can see the black circles are the sonic drill holes. Easy path to increase the resource if you want, all the potential in the yellow.

4:33 The mineral resource estimate is 100% in the inferred category though, so is there plans on doing infill drilling? Can you touch on that? Well, first of all, you have to understand here we're dealing with tailings. We're not dealing with a traditional mine. And the tailings generally are pretty uniform throughout. So not only do we believe that the red section can be reprocessed, but we believe the yellow section can be reprocessed as well. So we actually believe, and this is something we will be drilling and proving out over the coming

5:14 months, that the deposit is twice the size of what we've announced. That the NPV will be more like $120 million, because it doesn't require more capex, we'll have built the plant. But on the other hand, the time that the deposit will be processed is further up. So those 2 things cancel one another out in terms of creating an NPV. And so, you know, this is a new type of mining in a way. You know, there's no need to do high grading. These deposits are uniform. And so we're very excited that the upside is actually much more than what we've announced yesterday.

6:07 And it looks like I'm counting 13 holes, it's rather consistent throughout, because I noticed there's about a 200 meter perimeter based off that scale around all the drill holes. So it must be rather consistent throughout the whole tailings pile. That is what we found so far. And that would be consistent with a mining operation of this nature. But we will obviously have to do further drilling as we move forward on the project. I think the other point that's worth making is that this is the first stage of the project.

6:49 This is the stage where we concentrate and we're highly confident that we'll get to the, I think it's a 68% level, which is considered to be strategic. We're just underneath that at the moment, but with more drilling and testing, I'm confident that we'll be there, which makes it a strategic asset as far as the Canadian government is concerned. So that will lead to all sorts of positive developments in terms of financing. But the next stage will be to have identified a number of these sites and we're working on some others, and then put them together to create a sufficient material for a pelletizer, which will be another leg up in value creation. So ultimately, we think that this project, when combined with others,

7:52 will have an NPV probably, including the yellow bits and the pelletizing bit of closer, hopefully, to something like $200 million, which alone is many multiples of Kotex current market cap. And as I said in the introduction, this is just one of many assets that we already own and that we're also examining. Can we discuss investment strategy a bit here? Like I know you're in advanced negotiations on a few other projects, but are you able to share timelines at all? Would you like to see Lakchanine through, make sure the concept is concrete, or would you be willing to invest in these other projects before results on Lakchanine?

8:43 I think we will look at other projects before the results. I mean, whilst this is much quicker than conventional mining, it's still going to take, you know, 2 years, 3 years to be in production. That's much, much quicker. We only took the option 12 months ago. So it's relatively lightning speed when it comes to the mining sector. So we can't, though, wait for 2 or 3 years. This is not, you know, rocket science in terms of what we're doing. And as I mentioned, the second stage of the strategy is to get sufficient critical mass to do a pelletizing

9:32 piece, ideally with our binding solutions technology. And for that we'll need other sites contributing concentrate to the palletizer. So we are in discussions with 2 other sites at the moment. Generally, what we'll try and do is structure the deals as we've done with Lakshaneen. So, a relatively small upfront payment, spending money to test the outcome, and then some later payments, potentially also royalties once the site is in production. I think that that model is less capital intensive for us, and it makes sense in terms of risk mitigation.

10:26 But what you're seeing here is, as you show on this model, a much quicker path to revenues and a much lower risk path because these sites have been previously mined, they've been permitted,

10:45 they are not green fields, They are effectively brownfield restarts, which also have the enormous advantage for, you know, governments and states that we shrink the rehabilitation profile of these sites. And so we will be saving significant amounts of money for the government of Quebec in due course, once the project is in production.

11:25 Right, I did read somewhere in here about it being a liability to the government right now. So Are those the other types of projects you're looking for that are with governments? Where is that then? Well, I think governments, particularly in Canada and the US, are saddled with the costs of fixing up these sites, particularly if they're orphan sites. This is an orphan site. The mine is no longer in production. I think if the mine site is owned by an operating company, then obviously they are liable for this.

12:11 But we do think that this model, if replicated in size, could save many billions of dollars for the different provinces in Canada and obviously can be applied to other jurisdictions

12:26 as well. Thank you for this Julian. I'm just looking at the chat now and I see a question that Julian has. So I think it's, that Tony has, my apologies. I think it's worth explaining again, your structure with Binding Solutions Technology, the Lack Janine project, because He's asking, are you planning on increasing Kotex position in Lactunene, but you actually own 100 percent of it, correct? Yeah. So at this stage, well, we have an option to buy 100 percent of it. And so I think in due course, it's likely that will be diluted as we bring in financing partners. But we think with the very high grade of iron ore that we are proving the benefits to the government of Quebec in terms of shrinking their liabilities, the green aspect, because we haven't talked about this at Lactionine, because we're not mining, we're simply processing.

13:32 We believe there'll be considerable interest in providing debt financing for a project like this. So we don't see enormous dilution in due course. When we are at the pelletizing stage, which is, as I mentioned, is the second stage here where we need to have 2 or 3 sites and then we have sufficient critical mass to build a pelletizer And that will add another leg of value to the CoTech story. Then at that stage, we will do a commercial arrangements with a BSL who are preferred partner or with another form of pelletizing technology, depending upon the optimization opportunity at that time.

14:25 So the pelletizing technology is binding solutions, correct? So is there any, do you have to pay for utilizing this or because you own 3% is it all? How does that work, the economics behind this palletizing part? Well, there are 2 models which we can pursue with, with binding solutions. One would be potentially a licensing fee and a royalty, or alternatively, we might agree a share of the economics in exchange for utilizing the technology. But we haven't agreed that yet.

15:02 At the moment, this project is all about concentration, and it stands on its own feet, you know, with, as I said, in our view an NPV of well over 100 million dollars when you take into account the additional size of the deposit. And so we'll cross the binding solutions, pelletizing economics once we have the critical mass sufficient to hold a pelletizer. Thank you. Tony has a follow-up question. Are there other projects in the same vein you're evaluating like L'Occitane?

15:38 I don't know if it means like how specific you want to get like Quebec iron tailings or maybe just discuss the other types of projects you're looking at? Well, we are looking at, as I mentioned, other iron ore tailings or deposits in Quebec and also in Ontario at the moment. At the moment. And we think that those can feed a pelletizer. And that's our initial priority. Obviously, the Magnolian business, which we own 17% of, has 200 million tons of tailings in Minnesota. And, you know, we're looking at ways in which we can restart the concentrator there.

16:26 That project has a $1 to $2 billion NPV.

16:30 So the stake there that we have, if it comes into production, would again be worth another couple of hundred million dollars to Kotex shareholders. And then moving away from copper, iron ore to copper, we are looking at tailings projects for the SABO technology. The theme that we have running through COTECH is making better use of waste to develop the cheaply and in a green way, the commodities that the West is going to be needing, high quality commodities. And that obviously then also leads into the other investment we have, which is in Magneto, which is recycling e-waste and recycling in particular the magnets in e-waste. So that's the theme.

17:32 And I think it's a theme that the governments and the green and impact funds are warming to all the time. They see this as a way to plug the gap in supply that's going to be facing us all in the coming

17:49 decade. I think we could spend like 30 minutes to an hour on each project or technology, but I'm going to try and stick with the news from yesterday because I do have some questions, but I wrote some stuff down for later when we do the Q&A. But regarding Lactamine, how would bind-in solutions be involved in this site? Well as I mentioned, once we've got at this stage not, although we've done some tests with them on the materials, which have gone very well. So we believe they can create good pellets for us. But I think once we have another site under our belt, which hopefully will happen in the coming months.

18:34 Then we can start to really examine the pelletizing phase in more detail. And at that stage, binding solutions would be involved,

18:43 hopefully. And the pelletizing would be on site because in this PEA, we're talking about the concentrate and it even said, it looks like it'd be a rail, 2 different rails, but essentially on rail straight to a seaport in Quebec. Can you provide further commentary on negotiations or what's required for the Cartier rail for transportation? And then again, with the pelletizer, it would just be on site and that'd probably be a lot more cost effective too, right?

19:15 I think, you know, we're going to start exploring the logistic solutions now that we have the PEA and we know we have an economic project in place. So that's something which we'll update the market on in the coming months. I believe that the plan is to, if we tie down other concentrated sites in, say, Ontario, to bring them both to a port in Quebec and do the pelletizing there. So we'd have no critical mass. Because it's not only about logistics, it's also about the amount of material you can feed through the site. Right, that makes sense.

20:02 There is a question about HyperMeg in the chat, so we'll transition to this because this week the company, Kotech, also announced the appointment of Linda Laurie to the advisory board of HyperMeg USA. Before we dive into this news, I think it's worth reminding people about your partnership with Mekango Resources and what HyperMeg USA entails because this is obviously different than the Lactunene project and investment and one that you're very excited about, right? Yeah, absolutely. Well, I'm excited about everything we're doing. Otherwise, we shouldn't be doing it. But this is something, again, using technology to unlock the wasted potential of waste and, you and provide something super interesting and strategic, particularly for the West.

20:53 So we have this technology.

20:58 Kotech owns 20 percent of that technology worldwide in partnership with Mekango resources. But then we've also established a joint venture for the US in particular and also probably Canada where we have 50% of that joint venture. So effectively in North America, we have 60% of the business, 50% of 1 half, and then 20% of the other 50%. And we think this has enormous potential. This week our Chief Operating Officer John Singleton has been in Washington meeting with various aspects of the US government and they see the enormous potential this has.

21:50 It's really interesting because

21:54 one of the really difficult things about rare earths is processing the individual elements. It's very tough to do, It's very complicated. China is great at it. We haven't really done that yet in a major way in the West. There may be 1 or 2 sites in Australia and Malaysia, but it's very, very tough. And what our technology does is it doesn't bother with that. We call it the short loop process. And so what we do is we take the mix that's already been processed for magnets and just recycle that mix. So that allows us in a much simpler way, a much faster way and a much more safer way to get the magnets which the West will need, not only for defense applications but for lots of applications.

22:51 And so we are in the process of doing a similar study on the first hub and spoke structure, which will be in the US. We think that the hub will be in Texas. The spokes we're identifying in different locations. And we are starting to talk not only with the different states, but also with the sources of feedstock who can supply us and whom we will be very useful to as well because if we can take the magnets out of this recycling process before they are shredded The actual recycling of the rest the e-waste will be much more efficient because it won't have all this magnetic material in it. So it's super interesting for e-waste recyclers for us to just clip on a plant before the main conveyor belt system starts to get going, or the shredding occurring.

24:06 So that's another very interesting project, which we think has enormous value. It sounds like you covered this question, but I'm going to repeat it just so Oliver knows that I did indeed read it. You said HyperMIG has stated there's a lot of interest, but you clearly just shared. Can we expect some MOUs or OEMs shortly? Well, there's discussions happening on a number of fronts. We've already had the announcement that there's a strategic, mineral strategic partnership, a Global Western Alliance, which considers this to be a high priority project.

24:52 And so we are working along, but I would rather announce the viability of this whole model with numbers done correctly, which we plan to do by the end of this year. And then we would move to announcing further deals. You know, We are in a hurry, but we want to do things properly and methodically. And you'll see with the Black Chenine announcement, you know, how much detail we've spent, how many competent persons have signed off on the announcement. We're doing a lot of work in the background, but we need to not run ahead of ourselves. We need to check that everything is viable.

25:42 That announcement will come by the end of the year. And then you'll see following that, those further announcements. And I forget if you said probably or potentially, but regarding a Canadian JV, will it be a similar setup, Oliver is wondering, with the hub and spoke with 3 HPMS reactors? It could be, or it depends how close it is to the US. I mean, initially, we could have a number of different hubs and spokes. You might be supplying material from Canada into the US. These will have to be decided in due course. But it looks like the starting one is going to be, you know, in Texas and focused on the, you know, supplying material from the Midwest and the 2 coasts in the US.

26:34 Now, I don't have the press release up with Linda. Maybe I'll find that while you answer this next question I have for you. It seems like a fantastic addition to your team. Can you elaborate on Linda's experience, both past and present, and how does her experience directly benefit HyperMAC? Well, as I said, a major focus of HyperMAC is going to be, and is already, engagement with the US government. Not only the Department of Defense, but other branches of the administration, parties that are interested in dealing with the threat from China.

27:22 Linda is uniquely qualified to help us. She's super connected in Washington. She has great entrees into the Department of Defense. She's particularly knowledgeable about technology. And, You know, the Export-Import Bank can also help us, the people who are concerned about China. So we looked at many different candidates and we felt she was absolutely the best one. And she's already starting to make a difference in Washington as we move forward with our engagement.

28:11 You can see here all the appropriate skill sets that she has developed. So how did your team discover Lynda? Just how crucial is this network to establish a foothold in the US market? Well, we are, I mean, Lynda is very important to us. We also have a director and she's really working at the HyperMAG level, the HyperMAG US board level. We also appointed a director at the Cotech level who was previously involved with the US Navy. You know, our business and generally the mining business has gone from being a sort of peripheral aspect of the economy to being something very crucial and strategic.

29:05 And so, COTECH needs to mirror that, because a lot of the funding that's going to come for our projects will be coming from governmental sources who are stepping in where the public markets are not willing to move ahead or not conducive to that. So it's an important aspect of our business and our business model. And as you see, you know, with Canada recently announcing that high-grade iron ore is a strategic asset. A lot of our focuses are on these assets which the West needs.

29:57 So, you know, copper, high-grade iron ore, green copper, high-grade iron ore, recycled rare earths. These are all very important. So I think we've chosen well, and we'll see a lot of value created from these particular suites of assets. And with this year being an election year in the US, I suppose it's just all irrelevant or bipartisan, like everyone wants to source from America, You don't see either party being more better for the for Kotech or? No, I mean, I think obviously there are major differences on the parties with regards to Russia and Ukraine, but I think when it comes to China, there's much more uniformity. So I don't believe that that's gonna make much difference to our strategy.

30:56 And in fact, we may see an acceleration of interest in this area in the coming years. Oliver in the chat is wondering, what do you see as the catalyst for hypermed valuation? I think the big catalyst will be this particular, I mean, we're talking from the Kotech basis. Obviously, Mekango is dealing with other jurisdictions and there'll be progress in the UK and in Germany. They have announced an early stage agreement with some Japanese. But as far as the US business is concerned, As I said, I think the big catalyst will be the first study being announced later this year which will have a value associated with it and that will rapidly be followed with deals with governmental entities and feed providers.

32:04 And there are also some people who've already indicated initial interest in taking stakes in the US business, people who are magnet manufacturers. So I think that's the path that we see for the US business. Now, so for Kotech, the way I picture it is Kotech has technologies and those technologies have different assets or projects. Are you looking at another technology investment in 2024? Well, we are. Hopefully, It's just halfway through the year, but we have the rest of the year. Hopefully we will announce 1 or 2 more but We're also as you'll note from this Discussion we're moving quite quickly into the asset application of the technology business.

33:04 I think when we started Kotech, we said this is not a tech incubator, it's not a tech holding company, it's ultimately going to be an operator using technology. And I think that confused a lot of people, but I think you can now see the way in which we can take technologies and particularly apply them to undervalued waste assets, which is our major focus. So whilst we will be making 1 or 2 more technology investments, just with high quality iron ore, green copper and rare earths, we have many potentially huge businesses which we need to focus on execution and rolling out.

33:50 The model ultimately for Kotech is to be like a major mining company or mid-tier mining company for the 21st century utilizing technology but with ultimately you know a number of assets in different geographies, which use our technologies to unlock value. So we think that's a cheap, sensible way to build value in today's world. And we're at the beginning stages of evidencing this. And what you see with Lactamine, which is just not huge, but it's the first, is something which, you know, has, we believe, more than $100 million of NPV when you include the outer section of the deposit.

34:39 And then if it's coupled with a validizer, it has a value closer to $200 million. And as I said at the beginning, our market cap is just $30 million. So I'm putting more and more money into Kotek as I see the story evolve, because I can see something which will create multiples of value. This is I just pulled up the level 2 data for Kotech and it looks like 0 shares traded today. It's only the second day of after the announcement or the first day after the announcement. Do you have any thoughts or commentary on, frankly, the lack of interest of the news? Yeah, I think, I mean, maybe the summer or maybe people, you know, aren't interested in making small cap investments.

35:32 But I don't think of Kotick as a small cap. I think of it as a large cap, but trading at a small cap valuation. And I think it's an opportunity. So, you know, if other people aren't stepping up to the plate. I plan to do so myself. Now, you've had a few slip ups, say in copper instead of iron. So maybe subconsciously you're very bullish on copper. You want to talk about copper. You did mention the Siebel technology. Can you educate us on what this technology is and any developments for 2024 in that tech? Yeah. Well, SABRE is a way of leaching low-grade copper deposits which were previously uneconomic.

36:19 There have been some other technologies who've sought to do this, but haven't managed to do so successfully to our knowledge thus far. So we're pretty excited about it. As I have mentioned, I think previously on your program, Kyle, it generally takes us about a year from identifying a technology which we've invested in to find asset applications. We are testing already some materials from sites, which we think would work well with the SABRE technology. And hopefully, you know, towards the end, by the end of this year, we'll make further announcements on this front as well.

37:08 Julian, this was a very informative update. Really appreciate it. And thank you for everyone that submitted questions. I'll leave it for, and for anyone that came in late, just to let you know this is being recorded and will be available today. But did I miss any questions? Is there anything you wanted to discuss that we haven't touched on yet? Just provide some closing remarks and we can end it unless some other questions come in. Sure. I mean, I think this was quite a comprehensive survey of the things we're involved with. As I said at the beginning, what we're excited about with this announcement is it's the first external independent validation with competent persons of the value which we think we're creating. We think we've already got a business which is worth several hundred million dollars in terms of different projects and we'll daylight that as we make further announcements And so it's an opportunity to make, you know, many multiples of your investment.

38:10 And by the way, you know, we've assumed, we haven't assumed carbon tax credits with Lakshmini. We've assumed pretty conservative tax rates. We hope that there'll be tax breaks as well. So it could be even better than what we've announced. So I'm very excited and we move forward. Julian, thank you so much for your time. We appreciate the update. Always a pleasure, Karl. Thank you.