Zeox Corp.’s (ZOX-V, ZOXCF-O) new CEO Garold Spindler and new CFO Michael Shea had been eyeing the company for quite some time before they took over last August. Zeox had both confused and intrigued them.
“We could never understand their business plan,” says Shea. “It seemed like they had raised good money and were committed to a lot of research and development, but they were, for some reason, not producing revenue. We were, however, quite envious of their public valuation.”
A zeolite-focused industrial-mineral miner engaged in the mining, processing and distribution of non-metallic minerals, at one time Zeox traded at $3.50 a share and had a market cap of about $100 million.
Spindler and Shea followed Zeox through its various vicissitudes. When the company hit a wall, they even suggested a merger between Imagin Minerals, also known as St. Cloud Mining (a zeolite-mining company owned by Spindler) and Zeox.
“We hoped to marry St. Cloud’s good operating management and mining experience with Zeox’s reserves and interesting technology applications,” Shea says.
Connecticut-based Zeox has a wealth of zeolite deposits in North America, including the only active chabazite deposits in the world near Bowie, Ariz. (Chabazite is the only zeolite proven to remove mercury from coal-fired plants.)
But the discussions hit a dead end. Some six months ago, however, the Zeox board re-approached Spindler and asked if the offer was still open.
By then, Zeox was on the verge of bankruptcy. Its once-enviable market cap was down to a dismal $9 million.
Spindler agreed to come on board as CEO, and his company even loaned Zeox more than $500,000 to meet payroll needs and have its financial statements audited.
It was a testament to his troubled leadership that when LuVerne Hogg finally exited his role as longtime president and CEO, Zeox stock nearly doubled.
Spindler and Shea were quite impressed with some of the applications Zeox had — mercury-removal and down-hole segmentation in particular.
And ever since they’ve been at the helm, the duo have bailed out and steered this sinking ship by restructuring operations, reducing costs, raising revenues through private placement of equity, and raising short-term working capital.
The market cap is already climbing.
“Some of that reflects the market satisfaction with the solvency and anticipated merger,” Spindler says.
His goal is to take the company back to a $100-million market cap within the next three years.
Unlike his predecessor, Spindler doesn’t plan on spending a lot of capital on research and development of technology.
“We plan to partner with proprietary technology,” explains Spindler. “Trying to develop your own can cost too much, and takes too long. We aren’t the size that can do that.”
The first casualty of his management philosophy and restructuring has been the company’s zeolite processing plant at Butte, Mont.
“The Butte facility had a design capacity in excess of 100,000 tonnes annually, but was only producing about 300 tonnes, Shea notes. “We struck a deal with the mortgagor and were able to eliminate $1.3 million in payables. We also eliminated substantial overhead costs.”
Canadian operations have also been carefully reviewed for head-count reduction. “We closed two plants that gave us $1.7 million in new capital,” he adds.
Spindler and Shea plan aggressive acquisitions of industrial minerals and operations that fit their management style. They’ll target smaller-sized industrial operations that don’t rely a whole lot on chemical separation.
“A number of these operations are single proprietors and represent pretty attractive targets,” Spindler says.
While the new management is ensuring things are moving at an accelerating pace, Spindler is also cautious of the potential conflict arising from the fact that his interest in Zeox stems largely from the possibility of a merger between Imagin Minerals and Zeox.
“I have a fiduciary duty to act to the benefit of shareholders, which in fact increases the value of Zeox, causing us to pay more for it when we merge,” he maintains. “But we recognize it is the right thing to do. We are operating to increase Zeox’s value and in a sense will pay for that increased value with the anticipated merger.”
If all goes according to plan, the merger will go through in mid-June.
Once shareholders and the board approve the merge, the revived company intends to go all out, focusing on a growing pollution-entrapment market, radiation-waste containment, cementation and water purification for both humans and cattle.
The current mercury-removal market is estimated at $400 million. Due to emerging environmental regulations, this market is expected to grow.
Zeox, which is NSF-certified, will also occupy a pretty sweet spot in the market when it comes to drinking- water filtration. There are some 120 municipalities in the U.S. that currently don’t meet potable-water standards on a regular basis, and are good targets for enhanced-filtration technologies.
The company is also targeting applications in wastewater purification, especially a growing market of animal-feed applications.
“St. Cloud currently enjoys about 20,000 tonnes of that market, so we’ll try to grow our combined presence in that market by increasing our presence in cattle feed and entering other markets with other animals that are yet to be fully explored,” Shea says.
“As the green movement looks for ways to reduce carbon dioxide emissions, as people look for ways to remove a variety of industrial contaminants in water supply, as the East Coast looks to remove nutrient- algae blooms in Chesapeake Bay, zeolites will stay in high demand,” Shea adds.
He believes the company is now an attractive proposition for shareholders because it has a management team capable of commercializing its deposits, expanding its markets, and growing the company through acquisitions.
“Zeolite being a green product also makes it extremely timely.”
— The author is a financial journalist in Toronto
———
Zeox’s Core Assets
Mines
Ash Meadows (Zeolite)
-40 million tons of reserves
-Average selling price of US$150-US$175 per ton
-Mining and processing costs US$30-US$60 per ton depending on size of grind and order
Bowie (Chabazite)
Upper Bed (Zeofume and Water Filtration):
-1.3 million tons of reserves
-Average selling price of US$500 -US$600/ton Lower Bed (Mercury Removal): -880,000 tons proven reserves, 1.1 million tons probable
-Average selling price US$600 to US$800/ton
-Mining and processing costs US$100 -US$300/ton depending on size of grind and order
Operating Plants
White Cliffs, Mammoth Mining District, Pinal County, Arizona (Diatomaceous Earth)
-Annual capacity of 30,000 tons
Be the first to comment on "New Management Revives Zeox"