Quite often, when I talk to mining explorers, I’m left to wonder why their focus is so often on digging things out of the ground and selling the raw materials, rather than integrating them into a value-added product for much more money.
- If you grow coffee beans, why not open cafes?
- If you dig up potash, why not run farms?
- You’ve got uranium, why not build a power plant?
- Lots of lithium? Why not manufacture batteries?
Obviously, in most of those cases, it would require a lot of capital and expertise to pull off true vertical integration and build out to those bigger margins, but that’s not always the case.
Voyageur Pharmaceuticals (VM.V) had itself a Barium/Iodine mine in a world market where both are in a global shortage.
That’s a good thing – they can ramp up that mine pretty quickly and inexpensively and lean into that shortage like any good resource company.. but there’s also an accompanying shortage of the products barium and iodine are useful for. That is, MEDICAL CONTRAST AGENTS.
CONTRAST AGENTS ARE BIG BUSINESS
For the uninitiated, contrast agents are substances used in medical imaging to enhance the visibility of organs, tissues, or blood vessels. They improve diagnostic accuracy by highlighting structures during X-rays, CT scans, or MRIs. Common types include iodine-based, gadolinium-based, and barium sulfate agents, each tailored for specific imaging applications like gastrointestinal or vascular studies.
I was in hospital earlier this year and the medicos used contrasting agents when I received an MRI. They made my veins blue so they could get a good image of them, and not for the first time. I’ve been blue several times before. I’m, not alone – there were 80 million CT scans alone last year in the US.
The shortage of those contrasting agents is a problem that drives costs up for medical suppliers, healthcare companies, insurance firms, governments, and patients.
The boffins at Voyageur saw this situation unfolding and realized, while they can get 20% margins digging up raw materials, they can run 60% margins if they process those materials into the agents they’re useful for – and without needing to build out a massive infrastructure that would take hundreds of millions to pay for. In fact, they can third party manufacture in Alberta right now and have Health Canada approval to do so.
They can supply the raw materials as needed, they can process thosee materials and sell them to other medical suppliers, and they can turn those processed materials into end user-facing products for more money still.
And because their raw materials are so pure, they’re super competitive at every turn.
The key point here:
Their BC mine project has enough in-situ pharma-grade barium to supply their entire target market for 100 years+, and at 1/10 of the cost.
Key Strengths Investors Will Appreciate
- Unique Vertical Integration
Unlike competitors, Voyageur controls its supply chain through ownership of the Frances Creek Quarry in British Columbia, which contains a naturally high-grade pharmaceutical-quality barium sulfate deposit. This vertical integration allows the company to reduce costs significantly and improve margins, with projections of over 60% gross margin once fully operational. - Global Market Opportunity
The demand for radiology contrast agents is growing due to an aging population and increased use of diagnostic imaging as as medical tool. The global contrast agent market was valued at US$6.3 billion in 2023, with a projected compound annual growth rate (CAGR) of 7.5%, reaching US$9.7 billion by 2029. If VM captured just 1% of that barium-related market, you’re looking at US$97m in revenues, before they even get to the potential of iodine products. - Regulatory Progress and Product Approvals
Voyageur has already secured Health Canada approval for five barium contrast products and is targeting FDA approval by 2025. This regulatory momentum positions the company for expanded market reach, particularly in North America and Europe. - Environmental and Cost Advantage
Natural pharmaceutical-grade barium sulfate is rare, and competitors rely on expensive synthetic alternatives. Voyageur’s quarry allows the company to produce barium sulfate at approximately $650 per ton, compared to the $7,230 per ton cost for imports. This cost advantage translates into very competitive pricing and higher profitability.
Financial Highlights
- Market Capitalization and Structure
As of November 2024, Voyageur’s market cap stands at approximately CAD$14 million, with a current stock price of $0.09. Fully diluted, board and management ownership accounts for 20%, demonstrating strong insider confidence. - Revenue Potential
The company anticipates significant revenue growth starting in late 2025, driven by its barium products’ commercialization and global distribution agreements, such as their $1.9 million deal in Latin America. - Low Capital Requirements
With a capital expenditure (CAPEX) estimate of $17 million for its fully integrated manufacturing facility, the investment is modest compared to the US $6.3 billion market size. This low upfront cost reduces risk while enabling high returns.
Opportunities for Growth
- Expansion into Iodine and Gadolinium Markets
Voyageur is developing iodine-based contrast agents, targeting an additional US$4.2 billion iodine market currently facing significant shortages. This diversification could expand revenue streams and mitigate reliance on barium. - Strategic Partnerships
The company is negotiating additional distribution agreements and plans to secure manufacturing independence with its Calgary facility, enhancing operational efficiency and market reach. In other words, they could become an inexpensive supplier for much larger pharma companies before even launching their own SKUs. - Future Pipeline
Long-term projects, such as endohedral fullerene drugs, position Voyageur as an innovative player in radiopharmaceuticals. These products have potential applications in MRI and targeted cancer therapies with the landscape evolving every month.
LET’S TALK ABOUT THAT MINE
The Frances Creek Asset has a PEA from 2022 with an NPV of $344m and an IRR of 137%.
Those are bankable numbers.
Bringing a manufacturing facility up to the standards necessary to scale will take just $17m.
BUT WHAT ARE THE RISKS?
Though the company has already successfully managed Canadian regulatory approvals, every US FDA approval process carries a semblance of risk.
- FDA approval: Expected by 2025 but not guaranteed. Delays could always impact revenue timelines.
- Cash Flow Constraints: The company needs to secure additional funding and is reticent to do so at the current pricing levels. That said, there’s no present rush.
- Market Competition: Large conglomerates dominate the radiology market, which may challenge Voyageur’s ability to scale quickly, though that may also present a market opportunity to supply those larger players and get a larger piece of the current market.
Conclusion
Voyageur’s ability to produce pharmaceutical-grade barium sulfate at a fraction of traditional costs, coupled with growing demand for diagnostic imaging agents and future growth into iodine products, puts the company right where it needs to be in terms of potential for significant growth. Investing in niche medical products may not be the sexy portfolio addition some are looking for, but this company is one good piece of news from tearing away to higher levels, and by already threading the needle with Health Canada approvals, they’ve shown their very capable of vrossing all the Ts and dotting the Is when needed.
Time to add them to the watchlist.
— Chris Parry
FULL DISCLOSURE: No commercial arrangement with the company. An investor in the company brought it to my attention, and I like what I see.