RNS Responses , Spotlight

What do salt, green hydrogen and private equity have in common? A money-spinning investment opportunity, that’s what!

11 May 2021 | by: Kirsteen Mackay

Red Moon Resources (TSXV:RMK) has a magnificent salt deposit, glittering with pure white perfection. It’s an environmentally friendly project ideally located right at the source of where it’s needed on the Canadian Atlantic coast. But that’s not all. Among Red Moon’s other valuable assets investors have overlooked is an underground renewable energy storage opportunity with the potential to host green hydrogen, a clean resource our afflicted planet is crying out for. This micro-cap stock is perfectly positioned to respond to the green revolution, anchored by a proven management team including a president who built his career with a successful New York Stock Exchange company.

A new name and a clever strategy

Red Moon is planning on changing its name to better reflect the company’s core business, making it obvious to investors the potential that lies behind an incredible rock salt resource, while a planned renewable energy storage spinout of another one of its assets offers investors more ways to win.

The salt business is big

Private equity has completed more than $5 billion (U.S.) in acquisitions in the North American road salt market in the past year, underscoring how big this sector has become.

Salting the roads in Canada and the United States is becoming an ever-more pressing problem and one that needs to be addressed as extreme weather events are increasing and no economic alternative to road salt has ever been found. Salt mines are ageing, and the two countries now import road salt from overseas to fill a supply gap to the tune of 8 to 10 million tonnes a year. Imports shipped over long distances from Chile and North Africa contribute to global carbon emissions.

Annual road salt consumption varies, but it’s estimated that the U.S. uses ten times as much salt on its roads than in its processed food – now that’s saying something!

Quite simply, road salt will be in high demand for the foreseeable future, through all economic cycles, and it’s also worth noting that the chemical industry requires very high-grade rock salt for many everyday products we take for granted.

Stepping into the picture is Red Moon which owns 100% of what’s regarded by many industry experts as the most attractive undeveloped salt resource, high-grade and relatively shallow, in eastern North America, immediately adjacent to critical infrastructure including two ports. The Great Atlantic salt deposit, with its strategic location, gives Red Moon (or a bigger player) the opportunity to serve local and regional markets in Eastern Canada and the Northeast U.S.

An attractive jurisdiction

According to the Annual Survey of Mining Companies, 2020, the Fraser Institute report notes Newfoundland among the top three most attractive jurisdictions for mining investment. The island, the world’s 16th largest, is currently drawing global attention for a gold rush triggered by exciting new discoveries, but this is a multi-commodity district that offers much more to resource investors including salt plus the perfect structures for underground renewable energy storage.

An ancient commodity that never gets old

When looking to invest in commodities, you’ll be forgiven for thinking salt is rarely the first to spring to mind.

Oil, gold, silver, sugar, soybeans, coffee, corn, and lumber all rank high on the list of commodities preferred by traders. But salt is possibly the most widely used commodity on earth. In fact, there are over 14,000 different uses for salt, and scientists are even coming closer to developing a greener alternative to the lithium-ion battery through the use of salt!

So, surely a mineral in such high demand makes for a solid investment opportunity? It would seem so. And with the so-called salt wars heating up, timing is everything.

Is the great North American salt war emerging?

According to legend, the mythical Huangdi, a Chinese sovereign also known as The Yellow Emperor, presided over the first war ever fought over salt. Since then, there have been many more notable salt wars battled out around the world. Such as the San Elizario Salt War between the U.S. and Mexico.

In recent years, supply gaps have forced North America to import much of the salt required to meet its de-icing needs. There are now concerns over security of supply and rising prices, so it should come as no surprise that private equity sees an increasing opportunity in this space right now, along with Compass Minerals (NYSE: CMP), the salt giant among publicly traded companies. A battle over market share (the new “salt war”) maybe brewing between the two.

The pandemic is highlighting the fragility of many of the world’s supply chains, and this is one of them. Having a supply close to market is a distinct advantage. So, in keeping with this line of thought, Red Moon’s undeveloped salt resource so close to key markets is exceedingly attractive.

Acquisition target?

Red Moon’s high-grade salt asset makes the company a potential acquisition target for aggressive private equity and venture capitalists.

The private equity mobs are eager to fill their pension pots with profitable pure-play projects. A Great Atlantic Salt acquisition is appealing because Red Moon’s resource has longevity. With a projected 50-plus-year-lifespan, this far outperforms the usual 10-to-15-year lifespan of gold and silver mines.

New-York listed Compass Minerals International (NYSE: CMP) is a $2.3 billion salt producer that has seen its share price soar in the past year. And on more than one occasion it’s Goderich rock salt mine in Ontario has been the M&A target of Wall Street venture capitalists.

Not to be outdone, German chemical company K&S AG (ETR: SDF) recently sold its Americas salt business to Stone Canyon Industries for a whopping $3.2 billion. This was the culmination of a bidding war between Wall Street major players Cerberus Capital Management, oil conglomerate Koch Industries, and revered private equity investor Advent International.

The fact so many heavyweights were keen to snap up this salt producing giant shows billions of dollars are at the ready for nurturing this most ancient resource.

A highly attractive advanced micro-cap

K&S produces around 15 million tonnes a year in the Americas. By comparison, Red Moon is targeting 2 to 4 million tonnes a year from Great Atlantic (subject to a positive Feasibility Study). Red Moon’s current market cap is approximately $50 million (CDN). This remains speculative but needless to say, it’s not hard to appreciate why Great Atlantic would appeal to private equity.

And another twist in this interesting tale is the interconnected world of mining, where Rowland Howe, President of Red Moon, used to work for Compass Minerals for many years and actually developed the Goderich mine to become the largest underground salt mine in the world.

The time will come when Red Moon captures the attention of the major industry players.

And that’s without taking into consideration the underground renewable energy storage opportunity Red Moon is proposing to spin out to shareholders through the formation of a new company. This move, in itself, is very strategic in multiple ways, as it’ll create a “pure play” salt deal and unlock the value of an asset that’s currently overshadowed by Great Atlantic.

Storing green hydrogen safely

Green hydrogen is one of the most exciting energy transition projects to take shape in recent years. It is zero emission energy with the potential to play a key part of curbing climate change and could be a real game changer in the world’s energy markets.

There are varying degrees of hydrogen and green is the most environmentally friendly. That’s because it’s produced using renewable energy and electrolysis to separate hydrogen from water.

Red Moon owns the Fischell’s Brook salt dome deposit and other nearby ground favourable for additional salt domes, providing very large potential energy storage capability which suddenly makes these assets potentially more valuable than ever.

While salt domes contain a lot of salt, the grades tend to be lower than in bedded homogeneous deposits such as Great Atlantic. But salt domes are becoming highly sought-after and cost-effective underground storage facilities for renewable energy.

Perhaps you’ve heard of oil reserves being kept safely tucked away in ‘salt caverns’. That’s because they provide a large storage capacity.

Salt domes are seen as perfect storage solutions for renewable energy. Caverns are created in the salt domes by circulating water through them which dissolves the salt. Due to the unique rock properties present in these caverns, they present safe storage sites for fluids.

With the Paris climate agreement and ESG at the forefront of company agendas, the race is on to drive the clean energy transition to the next level. Therefore, underground energy storage is expected to play an important role in Canada’s energy future. That’s why Red Moon sees an opportunity to hone in on this and make a more lucrative use case for its salt dome at Fischell’s Brook.

In fact, Red Moon envisions a possible wind-hydrogen combination, making the perfect utilization of the Fischell’s Brook location – this windswept coast would make an ideal spot for a green energy wind and storage facility.

Underground “Battery” storage

While green hydrogen storage is one perfect use case for the Fischell’s Brook property, another is compressed air energy storage (CAES) – otherwise known as underground “battery” storage.

Dumbed down, CAES means compressed air can be stored underground to be released into power generating turbines efficiently when needed, supplementing green energy sources that require backup energy. It’s a technology that’s already in use and being further developed to maximize productivity.

Therefore, the Fischell’s Brook salt dome may well appeal as a store of CAES as it could supply electricity required to balance the load of nearby sources of electrical generation.

Great Atlantic CEO, Patrick Laracy, commented:

“Developments in the energy storage space have been dramatic since we were the successful bidder for Fischell’s Brook. Just like Red Moon was born out of a spinout, we see a great opportunity to launch a dynamic energy storage play anchored by the Fischell’s Brook asset.”

The Government of Canada recently developed and published a “Hydrogen Strategy for Canada” predicting a global market reach worth over $11 trillion by 2050.

This document outlines that Canada is sitting on an expanse of uniquely extensive resources which can be leveraged into the coming hydrogen economy. It can deploy hydrogen domestically as well as export clean hydrogen to Europe, Asia, and the U.S. Altogether this could lead to a $50 billion domestic hydrogen sector, potentially generating over 350,000 high-paying jobs from coast to coast.

A disrupter!

Red Moon, very much a “cleantech” play, is a potential disrupter in the North American salt market with its vision of a state-of-the-art environmentally friendly “salt factory” at Great Atlantic. Add to that the potential for a renewable energy storage opportunity for investors with the Fischell’s Brook salt dome, and you have a powerful combination that will further build on Newfoundland’s attractiveness as one of the world’s friendliest jurisdictions for resource development.


IMPORTANT NOTICE AND DISCLAIMER

Paid Advertisement

This communication is a paid advertisement. ValueTheMarkets is a trading name of Digitonic Ltd, and its owners, directors, officers, employees, affiliates, agents and assigns (collectively the “Publisher”) is often paid by one or more of the profiled companies or a third party to disseminate these types of communications. In this case, the Publisher has been compensated by Red Moon Resources to conduct investor awareness advertising and marketing and has paid the Publisher the equivalent of sixty thousand US dollars to produce and disseminate this and other similar articles and certain related banner advertisements. This compensation should be viewed as a major conflict with the Publisher’s ability to provide unbiased information or opinion.

Changes in Share Trading and Price

Readers should beware that third parties, profiled companies, and/or their affiliates may liquidate shares of the profiled companies at any time, including at or near the time you receive this communication, which has the potential to adversely affect share prices. Frequently companies profiled in our articles experience a large increase in share trading volume and share price during the course of investor awareness marketing, which often ends as soon as the investor awareness marketing ceases. The investor awareness marketing may be as brief as one day, after which a large decrease in share trading volume and share price may likely occur.

No Offer to Sell or Buy Securities

This communication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security.

Information

Neither this communication nor the Publisher purport to provide a complete analysis of any company or its financial position.

This communication is based on information generally available to the public and on an interview conducted with the company’s CEO, and does not contain any material, non public information. The information on which it is based is believed to be reliable. Nevertheless, the Publisher does not guarantee the accuracy or completeness of the information. Further, the information in this communication is not updated after publication and may become inaccurate or outdated. No reliance should be placed on the price or statistics information and no responsibility or liability is accepted for any error or inaccuracy. Any statements made should not be taken as an endorsement of analyst views.

No Financial Advice

The Publisher is not, and does not purport to be, a broker-dealer or registered investment adviser or a financial adviser. The Publisher has no access to non-public information about publicly traded companies. The information provided is general and impersonal, and is not tailored to any particular individual’s financial situation or investment objective(s) and this communication is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor or a personal recommendation to deal or invest in any particular company or product. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the advertised company’s SEC, SEDAR and/or other government filings. Investing in securities, particularly microcap securities, is speculative and carries a high degree of risk. Past performance does not guarantee future results.

Forward Looking Statements

This communication contains forward-looking statements, including statements regarding expected continual growth of the featured companies and/or industry. Statements in this communication that look forward in time, which include everything other than historical information, are based on assumptions and estimates by our content providers and involve risks and uncertainties that may affect the profiled company’s actual results of operations. These statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results and performance to differ materially from any future results or performance expressed or implied in the forward-looking statements. These risks, uncertainties and other factors include, among others: the success of the profiled company’s operations; the size and growth of the market for the company’s products and services; the company’s ability to fund its capital requirements in the near term and long term; pricing pressures; changes in business strategy, practices or customer relationships; general worldwide economic and business conditions; currency exchange and interest rate fluctuations; government, statutory, regulatory or administrative initiatives affecting the company’s business.

Indemnification/Release of Liability

By reading this communication, you acknowledge that you have read and understand this disclaimer in full, and agree and accept that the Publisher provides no warranty in respect of the communication or the profiled company and accepts no liability whatsoever. You acknowledge and accept this disclaimer and that, to the greatest extent permitted under applicable law, you release and hold harmless the Publisher from any and all liability, damages, injury and adverse consequences arising from your use of this communication. You further agree that you are solely responsible for any financial outcome related to or arising from your investment decisions.

Terms of Use and Disclaimer

By reading this communication you agree that you have reviewed and fully agree to the Terms of Use found here https://www.valuethemarkets.com/terms-conditions/ and acknowledge that you have reviewed the Disclaimer found here https://www.valuethemarkets.com/disclaimer/. If you do not agree to the Terms of Use, please contact ValueTheMarkets.com to discontinue receiving future communications.

Intellectual Property

All trademarks used in this communication are the property of their respective trademark holders. Other than Valuethemarkets.com, the Publisher is not affiliated, connected, or associated with, and the communication is not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by the Publisher to any rights in any third-party trademarks other than Valuethemarkets.com.

Authors: ValueTheMarkets

Valuethemarkets.com and Digitonic Ltd and our affiliates are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above. This article does not provide any financial advice and is not a recommendation to deal in any securities or product. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

ValueTheMarkets do not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above piece. ValueTheMarkets have been paid to produce this piece by the company or companies mentioned above. Digitonic Ltd, the owner of ValueTheMarkets.com, has been paid for the production of this piece by the company or companies mentioned above.

Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

  • Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.
  • Kirsteen Mackay has been paid to produce this piece by the company or companies mentioned above.
  • Digitonic Ltd, the owner of ValueTheMarkets.com, has been paid for the production this piece by the company or companies mentioned above.

RNS Responses