This last weekend the mining industry converged on Vancouver for the 2017 Vancouver Resource Investment Conference (VRIC). The whole event was a massive departure from two years ago, in terms of tone and number of exhibitors.
In short, the commodity pricing recovery has put a twinkle back in the eye of miners and investors who play in the resource space. The optimism was palpable.
I rolled in Monday morning and sat in on a forum moderated by Marin Katusa, author of the New York Times bestseller, The Colder War, and one of the most successful portfolio managers in the resource sector.
Katusa was chatting with Doug Casey, a highly respected professional investor and author of New York Times bestseller, Crisis Investing.
Casey, who had been inducted into the Mining Hall of Fame the night before, had an incredibly positive viewpoint on commodities and felt that the dizzying highs of 2011 would return once more in 2019.
According to a report released in December, IMF’s base metal index (based on 8 metals) bumped 12.1% in November and with China’s manufacturing Purchase Manager Index staying above 50 since July 2016, there seems to be a continued growth. Maybe the Chinese economy isn’t headed into the toilet.
Combine this with Trump’s trillion-dollar promise to pump up America’s infrastructure and you have a resource sector primed to pop.
I don’t know if Casey’s assessment isn’t without a little hyperbole though, as I think he and many others are getting caught up in mining’s resurgence.
In my mind, the 2011 peak was based on certain conditions like China’s seemingly unquenchable thirst for grand infrastructure projects, but now that the country is transitioning from manufacturing and investment to services and consumption, that appetite will not be as rapacious.
Will mining metals have good run? Absolutely, but I think we should temper our optimism somewhat.
That said, it was sure good to see smiles instead of grim resolution.
As a tech guy, I took my time to wander the venue in search of 21st century opportunities and I managed to find a few that piqued my interest.
One of those opportunities was Proton Technologies based out of Calgary, Alberta. Proton is still private, but with the company’s leading-edge hydrogen extraction technologies, when they go public, it will be with a bang. Pun intended.
Proton Technologies’ proprietary approach involves Hygenic Earth Energy (HEE) and will allow oil producers to generate new revenue streams from abandoned wells while ringing in the affordable age of hydrogen power cells.
In layperson’s terms, a hydrocarbon reservoir is heated in a controlled, targeted fashion by the injection of oxygen, sometimes in conjunction with radiative heating.
As the temperature rises next to the injection sites, the hydrocarbons and water split briefly into hydrogen, oxygen and carbon. Hydrogen, being what it is, rises to the top of the hydrocarbon reservoir.
Utilizing a dynamic down-hole device, the hydrogen is then selectively harvested.
That’s not all. Residual heat can also be harvested to generate electricity. As a result of Proton’s process, other products can be captured in smaller amounts such as helium, sweet gas and syngas.
All this turns a wellhead into a multi-purpose facility. What producer is going to turn down that opportunity.
On the end user side, Proton technology has many benefits. First, power generation in fuel cells and oxidation of hydrogen for steam to power turbines.
Then you have transportation fuels in hydrogen powered vehicles as well as being mixed with existing fuels.
There is also a heavy demand for hydrogen as feedstock for the chemicals industry in heavy oil upgrading, ammonia, methanol and fertilizer production.
If that’s not enough, more than 80% of all air pollution is produced by hydrocarbon oxidation and on average 18,000 people die each day from poor air quality. HEE could be the antidote.
Look at it this way. Burn a liter of gas and you get power, but you also get pollution. Burn a liter of hydrogen and you get 8 liters of pure water. Now that’s an exchange I can get behind.
So how much is it going to cost?
Well, economic modelling has determined that HEE can produce hydrogen in high volumes at less than US$1.0 per kg. This is much less than conventional methods and far below current market prices for hydrogen which range between $8.00 to $10.00 per kg. Can you say profit margin?
So just where is Proton in commercializing their process?
Well, they spent 2016 in Phase 1 producing proof of concept which included numerical simulations, design specifications, lab test protocols, construction prototypes, acquisition of field sites and product testing.
Phase 1 was facilitated through a network of innovators including the University of Calgary, IconOil, The Southern Alberta Institute of Technology, Vanguard Engineering, Vepica (global engineering firm) as well as Garrison Energy Advisors who assisted with targeting suitable reservoirs for field tests.
This year it’s Phase 2 where Proton will carry out reservoir deployment which will include modeling and field trials in various reservoir types, in multiple regions with the support from Regional Centres of Excellence and global partnerships.
The global market for hydrogen sits at about US$135.0 billion with about half going to fertilizer production and much of the rest going toward hydro-cracking (heavy oil refining). Almost all of this hydrogen is currently generated from natural gas which produces carbon emissions.
Down the road as the new hydrogen economy flexes its muscles, the potential for the hydrogen market and the blue-sky potential for Proton Technologies hydrogen extraction process is almost mind-bending.
I spoke with Grant Strem, Managing Director of Proton, and Dr. Sebastian Moffat, also Managing Director for the company. I was wildly impressed with their enthusiasm, candor, technical knowledge, and industry experience.
The management team at Proton are certified brainiacs with degrees and experience as long as your arm.
All tolled, there is approximately 70 years of combined experience in resources, chemical engineering, research and development, petroleum engineering, oil recovery, fluid mechanics, reactive reservoir processes and bioreactor design. There was a lot more to list, but I think you’ve got the picture.
This is a company I can really get behind and 2017 is going to be an exciting year for Proton Technologies. I think investors should keep this one on their radar.
As always, do your own due diligence.
I will be writing more in the coming days as this years’ VRIC had other such opportunities you should be aware of.
–Gaalen Engen
http://twitter.com/gaalenengen
FULL DISCLOSURE: The author has NO connection to Proton Technologies, he just likes what they’re doing.