Mineworx: Looking beyond electric vehicles

Mineworx: Looking beyond electric vehicles

October 28, 2021 -- InvestorsHub NewsWire -- BY LEON LOUW

With a market cap of USD27-million, TSXV listed Mineworx (TSX.V: MWX) should be on the radar of all penny stock enthusiasts.

The company has evolved from being a junior miner to a serious player in the industrial and cleantech spaces. Mineworx recently developed a proprietary processing technology to extract platinum and palladium from used automotive catalytic converters, of which there is currently an oversupply in the world.

Although for now the company's focus will be on getting the first commercial plant up and running in North America in the second quarter of 2022, the growth potential beyond the USA is frightening.

Mineworx and Davis Recycling, its JV partner, have just successfully tested a 100L pilot plant, and will ship it to Tennessee in the upper south of the USA. Their innovative technology ticks all the environmental boxes and was designed specifically to reduce harmful pollutants emitted during the extraction process of traditional smelters. Smelters in America have become increasingly reluctant to take in spent diesel converters as the world continues its quest to slash carbon emissions.

An oversupply of catalytic converters

There are about 275 million vehicles in America, and with stringent emission standards being in place for more than 10 years, the exhaust systems of 99.9% of them are fitted with catalytic converters to reduce hydrocarbon and carbon monoxide emissions. About 80% of the world's platinum and close to 50% of its palladium, goes into manufacturing these converters.

Today, platinum is predominantly used in autocatalysts in diesel vehicles, with palladium principally in those of gasoline vehicles. However, this usage is shifting, with substitution of palladium for platinum occurring due to sustained palladium deficits and the high price of palladium.

In the USA alone, a staggering 27 million catalytic converters are scrapped annually, and currently, not even 30% of these spent converters are being recycled for their platinum and palladium. With the platinum spot price hovering at about USD900 per ounce and palladium close to USD2,000, the value of the precious metals extracted from one catalytic converter is close to USD600.

Phenomenal numbers from a business perspective

This is ground-breaking technology, and Mineworx is first to the market. The commercial plant, once in full swing, will produce approximately ten tonnes of spent converters per day and revenues are expected to exceed USD100million per plant. These are phenomenal numbers from a business perspective, considering that the recycling of converters is currently worth more than USD25-billion.

According to Greg Pendura, CEO of Mineworx, revenues will start showing on the balance sheet in the fourth quarter of this year once the pilot plant in Tennessee gets into the swing of things.

Will the rise of EV's hinder growth?

But is the rapidly growing Electric Vehicle (EV) market not the end of the road for diesel converters, and ultimately for Mineworx? Well, not until at least 2050. Although the sale of EVs will soon overtake that of diesel and petrol cars and trucks, they will be around until at least 2030 – the deadline the US government has put in place to ban the sale of all new diesel and petrol vehicles. Whether this deadline will be honoured, remains to be seen.

Plug-in hybrids will still be on the market until 2035. That means there will be a continuous supply of spent converters for at least another 10 to 15 years after the line has been drawn in the sand. But not everybody is convinced that diesel and petrol will evaporate overnight.

According to business information provider IHS Markit (NASDAQ: INFO) commercial vehicles in the USA will continue to run on diesel fuel for the foreseeable future.

"66% percent of new medium and heavy commercial vehicles sold in the U.S. will still be fuelled by diesel (diesel and diesel-hybrid) in 2040. This compares to nearly 80% today," the company said.

Diesel is expected to remain the dominant fuel type globally through 2040 due to increases in fuel economy which will play a major role in keeping diesel competitive versus alternative powertrains, the study says. "Range and load capacity requirements from long-haul, on-highway trucking will keep diesel relevant in the short- and long-term, while other propulsion types will grow in popularity as technology continues to advance."

Trucking accounts for half of diesel demand globally, or one-sixth of oil demand, making the trucking industry extremely important for the oil industry and potentially very lucrative for companies like Mineworx.

Besides the fact that trucks and heavy off-road equipment such as mining equipment that operate 24/7 are required to replace converters every three to four years (as opposed to 10 years for normal cars). These converters in these vehicles contain 12-to-15 times more platinum, palladium, and more recently their cousin rhodium. The recoverable amounts of platinum and palladium in one diesel catalytic converter can range from about 1-5 grams for small cars and up to more than 15++ grams for a big truck in the USA.

Biden's plans will stimulate demand

Moreover, President Joe Biden's recently announced USD2-trillion infrastructure plan will require large new fleets of diesel driven construction equipment and long-haul trucks. If implemented, the infrastructure plan would translate into 20,000 miles of rebuilt roads, repairs to the 10 most economically important bridges in the country, and a long list of other plant and equipment intensive projects. These heavy-duty machines will be around for at least the next 20 years, which means the recycling of about three to four large truck converters during its lifetime.

Infrastructure plan or not, if America's recovery after Covid-19 follows the rest of the world's trajectory, heavy-duty vehicle (HDV) production will shoot the lights out. If China's data is anything to go by, Mineworx can start licking their lips as diesel HDV production start increasing after the Covid hiatus. China saw an unexpected quick recovery of HDV production in the first five months of 2020 and most of 2021 (90 percent of China's HDVs are diesel driven).

This means that more and more platinum and palladium will be consumed to manufacture the converters, resulting in a supply deficit. Increased demand leads to higher prices and recycled platinum and palladium steps in to fill the supply gaps.

The world is its oyster

But the world is really Mineworx's oyster, as the saying goes. In South America and Africa, for example, the infrastructure to enable EVs to operate, will simply not be in place by 2030, no matter how hard the developed world fights to do away with fossil fuels. Moreover, spent converters are either gathering dust in the scrapyards or being sent to dirty old smelters.

Not only that, but in some European countries there are counter- arguments to further reduce carbon emissions through catalytic converters rather than to completely ban diesel and petrol cars and trucks. If proponents of diesel and petrol cars and trucks pull it off and manage to prolong their life even for as little as five years, it will inevitably stimulate demand and in the process push up the price.

It is telling that German based Daimler, a company that owns brands like Mercedes-Benz, Freightliner, Thomas Built Buses, Detroit Diesel, and Smart Automobile, put out an article hinting that it will continue using a mix of drive technologies in the future and diesel drivetrains feature prominently in their strategy.

In the article Daimler says that it supports the modern diesel engine as part of the drive-system mix of the future for the following reasons:

The diesel engine, with the catalytic converters, has not been a significant source of particulates for many years now.
The new diesel engine generation already demonstrated how Mercedes-Benz can provide a technical solution to the NOx challenge posed by diesel cars in 2016. The Daimler article goes onto saying that they are able to improve the NOx emissions of many older vehicles both effectively and relatively swiftly using software updates.
Thirdly, the improvement of diesel drive systems will greatly help Daimler in reaching climate targets over the medium term because it reduces the amount of CO2 from road traffic. As such they feel that as the world progresses toward electric mobility, the failure to use this new diesel drive technology would be counterproductive for the climate as well.

"In short, doing away with the diesel at this point in time would be a mistake, for both ecological and economic reasons," Daimler stated.

Concluding Remarks

We have not seen the end of diesel cars and trucks yet, which certainly plays right into the hands of innovative cleantech companies like Mineworx. Their business model is sound, and with both the balance sheet and the supply chain management under control, it should prove to be of the most interesting developments to follow over the next few years.