Our previous editorial on Strategic Resources Inc. (TSXV:SR) had a lot to say about the Montreal based critical minerals company.
With assets in two world class mining jurisdictions, Canada and Finland, this is an ideal time to deepen due diligence on this high-purity iron and critical minerals company, given the positive metal market fundamentals.
Let’s take a deeper look at the company’s projects ….
Background:
Strategic acquired BlackRock Metals in a reverse takeover and now has three main assets: A fully permitted Metallurgical processing facility to be built at Port Saguenay, Québec as well as a mine and beneficiation plant planned and permitted in Chibougamau, Québec, and the former producer, Mustavaara mine, Finland.
In 2022, the company completed a 43-101 Final Feasibility Study on the Québec assets and in 2021 a PEA on the past producing Mustavaara mine in Finland. The Québec assets are permitted and ready for construction in Spring of 2024.
The company has said that given the planned metallurgical facility in Québec for the BlackRock Vanadium-Titanium-Iron project, and the low-cost green electricity from Hydro-Québec and the availability of Canadian natural that the Québec assets are the new flagship project for Strategic Resources.
The go forward flagship BlackRock Project has a mine life of 39 years to produce 550,000 tpy of high purity pig iron, 4,400 tpy of Ferro-Vanadium and 120,000 tpy of titanium slag equaling $800 million per year of revenue, almost $500 million per year of EBITDA and approximately $350 million per year of after-tax cashflow.
What really sets the Blackrock Project apart from a ESG perspective is its long-term relationships and agreements with local communities and First Nations. On the operational side the company has envisioned a unique combination of iron processing equipment to minimize the environmental footprint …
Green steel:
The metallurgical plant for the company will be centered around Tenova’s Energion HYL Technology, which uses natural gas, green hydrogen, or both. The HYL directly reduces the iron rich concentrate into metallic iron used for the production of steel.
Metallic iron (commonly referred to as pig iron) is typically produced in coal-based furnaces which emit two tonnes of CO2 per tonne of iron. This highly polluting iron is imported into North American and Europe mainly from Russia and Brazil.
The BlackRock Project will produce clean iron with 1/3 of the CO2 emissions from traditional plants making it the Greenest Iron Plant in the world according to Tenova’s HYL Energion technology documentation.
When green hydrogen becomes economically comparable to natural gas, the Tenova technology is designed so that Strategic can move away from Natural Gas and reduce CO2 emissions to almost zero.
It should be noted that, today, the steel industry accounts for seven per cent of global greenhouse gas emissions which is equal to the combination of all emissions from global aviation, shipping, and chemicals industries collectively, according to Ottawa.
The steel industry is a major consumer of and generator of carbon, which is “low hanging fruit” for the Canadian Government and the Government of Québec to fund projects working toward cleaner (electric) operations. The steel industry is eager to find the best, most economically viable way to get away from coal blast furnaces. Strategic Resources is taking advantage of a proven metallurgical process and technology that is currently being used elsewhere and re-design it into the greenest iron plant in the world. Once fully operational, Strategic Resources will have a very low carbon (with the potential to be an almost zero-carbon) product on its hands, which is the ultimate goal of the iron and steel industries right now.
Leadership commentary:
Speaking on the acquisition in a news release, Strategic Resources’ now EVP Corporate Development and Director, Scott Hicks, called the transaction the third step in the company’s mission to add large-scale iron and critical minerals resources in Tier 1 global jurisdictions. “The combination of our assets provides a path to being a globally significant producer and will help unlock value for shareholders. Our team is extremely excited to welcome BlackRock’s shareholders (Government of Québec and Orion Mine Finance) as large institutional shareholders and long-term partners of the company.”
Strategic’s new CEO and the founder of BlackRock, Sean Cleary, added that the combination of Strategic and BlackRock creates a platform for growth in high purity metallic iron, critical minerals (vanadium / titanium alloy) for the global battery industry.
“The transaction also enhances the value of our high purity pig iron / vanadium / titanium project in Québec. The execution of our business plan will help secure a North American supply of vanadium, titanium and steel value chain inputs that have the lowest carbon intensity products available on the market. The addition of Ross Beaty and his experienced management team alongside the BlackRock management team and institutional shareholders also accelerates our ability to advance the financing and construction of the BlackRock Project.”
Financing:
Along with the Government of Québec, Orion Mine Finance is another major shareholder. Following the closing of the BlackRock transaction, Orion received an aggregate of 22,566,086 common shares of the Strategic Resources.
Orion also participated in a private placement of subscription receipts from the company for a total of 8,600,000 subscription receipts, entitling Orion to receive a total of 1,433,334 post-consolidation common shares of Strategic Resources.
Orion now holds 23,999,420 post-consolidation common shares, representing 40.81 per cent of the company’s issued and outstanding common shares. These shares have a total value of C$71,998,260.
Orion is in a position to be a similar go-forward investor into the company like the Québec government who also participated in the recent financing. These shareholder relationship will be critical when it is time to fund the CapEx of the project. Orion, an experienced private equity firm, is funding many different projects around the world, such as a $1.2 billion build partnership with Equinox Gold Corp. (TSX:EQX) in Ontario on the Greenstone Project. The Government of Québec also has a demonstrated track record of funding important resource projects in its jurisdiction.
Investment corner:
Longer term market fundamentals for green steel are strong, and Québec is expected to be a major supplier of minerals for the transition to electric arc furnaces and high-end iron metallic products. For example, nearby operations, such as Algoma Steel Inc. (NASDAQ: ASTL) will need a supply of quality pig iron as it modernizes its operations to cleaner technology.
North America is already ahead of the rest of the world on the green steel transition, but there is a lot more on deck and investors would be wise to keep companies such as Strategic Resources, who are clearly ahead of the curve, on their radar.
Our next feature article on Strategic Resources Inc. will take a closer look into the leadership team responsible for its direction to a greener future (both environmentally and financially).
For more details on the company, visit strategic-res.com.
This is sponsored content issued on behalf of Strategic Resources Inc., please see full disclaimer here.
