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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine,... More
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  • China and Copper
    China and Copper
    Richard (Rick) Mills
    Ahead of the Herd
    As a general rule, the most successful man in life is the man who has the best information
    In this author’s opinion, China, and to a lesser extent India and other developing nations, are responsible for the largest and longest base metals bull market the world has ever experienced. Many fear the bull market for natural resources is over when in fact nothing could be further from the truth. This seems especially true, because of the supply/demand picture, regarding copper.
    Copper's chemical and physical properties:
    • High ductility
    • Corrosion resistant
    • Malleable
    • Excellent conductor of heat and electricity
    • Alloyed with other metals - zinc to form brass, aluminum or tin to form bronzes or alloyed with nickel - it acquires new characteristics for use in highly specialized applications.
    Copper is used for:
    • Conducting electricity and heat
    • Telecommunications
    • Transporting water and gas
    • Industrial machinery and equipment
    • Coins for currency
    • Roofing, gutters and downspouts
    • Protecting plants and crops
    • A feed supplement
     
    Industrial Consumption
    World Copper production
     

    Copper’s price hit US$3.75 per pound in May 2006 after rising from a 60 year low of US$0.60lb in June 1999. By February of 2007 it had dropped to US$2.40lb but had rebounded to US$3.50lb by April 2007.
     
    By February 2009 copper prices were - because of weakening global demand and a steep fall in commodity prices - at US$1.51 per pound.

     
    5 yr copper spot
     

    Copper prices started a comeback and during the summer of 2009 and again during the summer of 2010 the price of copper defied conventional market wisdom – sell in May and go away – by rallying strongly and in 2010 managed to hold close to its recent highs coming into the end of August.

     
    60 day copper spot
     

    Copper inventories at the London Metal Exchange (LME) and Shanghai Futures Exchange have both seen dramatic reductions.
    lme copper 1 yrShanghai 1 yr

    Copper exploration/development companies looking for or trying to develop deposits already found and copper miners looking to expand their production capacity are all facing some serious challenges:
    • Falling ore grades
    • Country risk
    • Water supply
    • Labor problems, strikes
    • Shortage of skilled labor
    • Cost of capital for project finance
    • Capital cost overruns
    • Tax and sharing initiatives
    • Energy costs
    • Inadequate exploration funding - The Metals Economics Group estimates that exploration spending plummeted 42 percent to $7.7 billion in 2009.
    • A lack of new discoveries
    • Currency fluctuations
    "The reason why the prices are holding up so very high is that there has been only marginal increases in new copper mine development over the past five years."  Patricia Mohr, Vice President, Economics at Scotiabank Group in Toronto.
    On August 24th 2010 The International Copper Study Group (ICSG) released preliminary data which showed world copper production fell short of refined usage by 190,000 tons in the first five months of 2010.
    World Refined Copper

    This author believes the full ICSG report showcases an underperforming industry and tells us there is the potential for a large copper demand/supply imbalance coming in the near future.
    Also consider:
     The declining rate of production at the world's largest copper mine, Escondida. BHP Billiton forecasts a 5 to 10 percent production cut at the mine this year due to lower ore grades - Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, said this could take as much as 80,000 to 100,000 tonnes of copper out of the market.
    • U.S. copper mine production had been expected to increase by more than 200,000 tons last year, instead production declined by 120,000 tons
    • Rio Tinto and Freeport McMoRan both saw their output drop in the first six months of this year
    • A lack of investment in new mining capability because of recent low prices
    • The growth in demand from China, India and other emerging markets
    • Consistent declines in warehouse inventories are underpinning the price of copper
    • A low interest rate environment bodes well for the whole resource sector
    • The overall weakness in the U.S. dollar translates into support for dollar denominated metal prices
    • The potential for a drop in production from Australia - the world's fifth largest copper producer - as a result of a resource tax the government might implement
    • India's power production needs to rise by 15 to 20 percent annually which means, according to the International Energy Agency (IEA), India needs to invest $1.25 trillion by 2030 into its energy infrastructure. Because of this investment into new infrastructure India's annual copper demand is expected to more than double to nearly 1.5 million tonnes by 2012 - up from a current 600,000 tonnes. India usually exports between 100 and 150,000 tonnes a year, Indian copper exports are likely to cease and indeed Indians might become large copper buyers 
    "There is no question that the current production numbers are to some degree validating that there is an issue starting to manifest itself on the supply side.” Mark Liinamaa, vice president of market research with Morgan Stanley.
    "Prices are underscoring the relatively robust nature of physical conditions and from a business cycle perspective inventories remain fairly low. If economic conditions deteriorate there isn't going to be that much destocking as manufacturers have been quite disciplined ... The market is factoring in the fact that supply tightness is not going away." Dan Brebner, analyst at Deutsche Bank
    According to Barclays Commodities Research analysts copper is forecast to average $6989/t this year and $7763/t in 2011.
    For 2011, BMO anticipates a global supply deficit of some 280,000 metric tons, with a price forecast of $3.70 a pound.
    Investors have concerns:
    • The extent of the recovery currently underway in the US and Europe
    • A slowdown in Chinese growth
    China
     
    Copper consumption estimates for China are being revised up. Huge spending on copper-intensive power infrastructure on the state grid in ‘rural areas' will continue through 2012 (12 bn RMB). Beijing has also renewed the ‘home appliance subsidy scheme' and is promoting electric cars, which are twice as copper-intensive as conventional vehicles.” Patricia Mohr Scotiabank economist
     
    Mohr also said that China's demand for copper will grow 13% this year and by another 8-10% in 2011.
     
    "I think the global growth story is back on. China, India, and Brazil, especially, are just growing by leaps and bounds ... and they need the copper for housing and infrastructure." Michael K. Smith, president of T & K Futures and Options Inc.
     
    The Chinese are: 
    • Increasing the level of housing construction
    • Seeing strong increases in car sales, up over 50 percent yoy
    • Targeting urban population growth of 60 percent by 2020, this is up from 49 percent in 2010*
    • Currently consuming 40 percent of total global base metal production
    • Raising domestic metal prices, by stockpiling, to stave off unemployment
    • Creating and transmitting more electricity
    • Providing massive direct subsidization of export production in many key industries
    • Maintaining strict non-tariff barriers to imports
    • Keeping their currency, the yuan, at an artificially low exchange rate - the undervalued currency keeps China's exports cheap 
    *Chinese urbanization
    • At the end of 2009 mainland China's total population was 1.334 billion. 712 million people or 53.4 percent of the population were residing in rural areas while 622 million or 46.6 percent were residing in urban areas - Chinese urban dwellers are the largest such population in the world
    • City's Blue Book: China's Urban Development Report No. 3 said China's urban population is twice that of the population of the United States, one quarter more than the total population of 27 countries of the European Union and that the urban economy would continue to drive domestic demand
    • The UN has forecast that China's population will have about an equal number of people, the 50-percent point phenomenon, living in the rural and urban areas by 2015
    • China has set a goal of 65 percent of urbanization rate in 2050. Over the coming 40 years that means 20 percentage points of urban growth per year, that translates into 300 million rural residents becoming urban residents over this time period
    • By 2025 China's urban population is expected to rise to 926 million. By 2030 that number will increase to a billion
    • China's current urbanization rate of 46 percent is much lower than the average level of 85 percent in developed countries and is lower than the world average of 55 percent
    • In 2010 the disposable income of the urban population stood at 17,175 yuan per capita - the net income of the rural population was 5,153 yuan per person
    • Over the next two decades China will build 20,000 to 50,000 new skyscrapers
    • By 2025, 40 billion square meters of floor space will have been built
    • 221 Chinese cities will, by 2025, have one million people
    • More than 170 cities will need mass transit systems by 2025
    "The growth potential of the vast middle and western regions, together with the rapid development of small cities and towns, could keep the economy on the fast track for at least 15 to 20 years." Wei Houkai, director of the center for China's regional development at the Chinese Academy of Social Sciences (NASDAQ:CASS)
     
    India
     
    “Every major industrialized country in the world has experienced a shift over time from a largely rural agrarian-dwelling population to one that lives in urban, nonagricultural centers. India will be no different. However India’s urbanization will be on a scale, that outside of China, is unprecedented.” McKinsey Global Institute’s report India’s Urban Awakening

    India has 1.2 billion people and the second largest urban system in the world -  currently 340 million people.
    Less than 60 percent of the households in India’s cities have sanitation facilities, and less than half have tap water on their premises.
    The share of the urban population in India is expected to reach 40% by 2021, and by 2011, urban areas could contribute around 65% of GDP.
    A report done by the McKinsey Global Institute called India Urban Awakening predicts that 590 million people or 40% of the population will live in cities by 2030 up from 340 million today. By that time, Asia’s third largest economy would have 68 cities with populations over 1 million, up from 42 today.
    With less than 1/3 of the population India’s urban areas generate over 2/3 of the country’s GDP and account for 90% of government revenues.
    Scrap Copper
     
    People have been using copper for over 10,000 years and recycling (it can be recycled without any loss of chemical or physical properties) almost as long - it has been estimated that at least 80% of all copper ever mined is still in existence.
     
    Unfortunately:
     
    “Indications are that demand in Europe, the US and Japan is holding up well and scrap has become very tight." Barclays Commodities Research analysts
     
    “Scrap (supply) is tight.” Edward Meir, analyst with MF Global
     
    “There is little information regarding this market (talking about the scrap market); however, it has not been a decisive factor either for the demand or supply side of the copper market.” Juan Villarzu, former head of world’s largest copper company, Codelco
     
     Conclusion
     
    This author believes that the US and Europe are, or are in the process of becoming, mostly irrelevant when it comes to the demand side of the copper supply equation. Increased demand for the red metal in developing nations will more than make up for decreased demand in the western world. And when western economies recover, as they eventually must, then the supply squeeze will become even tighter.
     
    The citizens of the worlds developing nations aspire to have what we have, the ease of travel, home phones, electricity, central plumbing, heating and air conditioning, cars, toys, consumer electronics and home appliances.
    When you consider the recent lack of exploration spending, increasing demand from developing countries, country risk (the Democratic Republic of the Congo, the DRC, comes to mind) declining resources/grades at the world's largest copper mines and that a sufficient number of new deposits that have been found are not being brought on stream in a timely enough fashion - and those that are, carry, for the most part, much lower grades than those presently being mined then you might be forgiven for coming to the same conclusion that I have - growth in global copper demand, at the same time supply is declining, seems likely.
    China alone has one fifth of the world’s population, India another 1.2 billion people, most of them want the same quality of living and level of consumerism and materialism we enjoy in the west.
    Could copper come into a major demand squeeze? Is the red metal on your radar screen?
    If not, maybe it should be.
    Richard (Rick) Mills
    rick@aheadoftheherd.com
    www.aheadoftheherd.com
     
    If you're interested in learning more about specific copper juniors and the junior resource market in general please come and visit us at aheadoftheherd.com.

    Membership is free, no credit card or personal information is asked for.

    ***

    Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.

    ***

    Legal Notice / Disclaimer

    This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

    Richard Mills does not own shares in any company mentioned in this report.
    No company mentioned in this report is an advertiser on his website aheadoftheherd.com


    Disclosure: no position
    Aug 31 10:36 AM | Link | Comment!
  • Lithium ABC’s
    Lithium ABC’s
    Richard (Rick) Mills
    Ahead of the Herd
    As a general rule, the most successful man in life is the man who has the best information
    The Puna plateau sits at an elevation of 4,000m, stretches for 1800 km along the Central Andes and attains a width of 350–400 km. The Puna covers a portion of Argentina, Chile and Bolivia and hosts an estimated 70 - 80% of global lithium brine reserves.
    The evaporate mineral deposits on the plateau - which may contain potash, lithium and boron - are formed by intense evaporation under hot, dry and windy conditions in an endorheic basin - endorheic basins are closed drainage basins that retain water and allow no outflow - precipitation and inflow water from the surrounding mountains only leaves the system by evaporation and seepage. The surface of such a basin is typically occupied by a salt lake or salt pan. Most of these salt lakes - called salars - contain brines which are capable of providing more than one potentially economic product.
    This Puna Plateau area of the Andean mountains - where the borders of Argentina, Bolivia and Chile meet and bounded by the Salar de Atacama, the Salar de Uyuni and the Salar de Hombre Muerto - is often referred to as the Lithium Triangle and the three countries mentioned are the Lithium ABC’s.
    a Brine “Mining” Business Model
    The salt rich brines are pumped from beneath the crust that’s on the salar and fed into a series of large, shallow ponds. Initial 200 to +1,000 parts per million (ppm) lithium brine solution is concentrated by solar evaporation and wind up to 6,000 ppm lithium after 18 - 24 months.
    The extraction process is low cost/high margin and battery grade lithium carbonate can be extracted. The cost-effectiveness of brine operations forced even large producers in China and Russia to develop their own brine sources or buy most of their needed raw materials from brine producers.
    The major lithium producers, from brine, are the "Lithium Three": Sociedad Quimica y Minera (NYSE:SQM), Rockwood/Chemetall and FMC.
    The Lithium Three are all extracting lithium from Puna Plateau salar brines. The majority of lithium produced today comes from brines in Chile, Argentina and Nevada.
    These brines are considered primarily potash deposits with lithium as a by-product.
    SQM’s Atacama brine deposits have the highest lithium content on the Puna - yet just 11% of its 2009 revenues were from lithium - 70% of SQM's revenues are from fertilizers. SQM is the world's largest producer of lithium and lithium is SQM's highest gross margin product at +50%.
    Potash is Fuel for Food
    According to the United States Geological Survey (USGS) Canada has the world’s largest reserves of potash - roughly 50%. Coming in second is Russia with just over 25% and trailing a distant third is Belarus at 9% of world reserves.
    In a presentation at the 2010 Prospectors and Developers Association Conference in Toronto Ontario, Canada, T.D. Newcrest minerals analyst Paul D'Amico forecast significant growth of offshore potash demand. D'Amico said the potash supply situation is complicated by the fact there hasn't been a green field potash development in 30 years. D'Amico also estimated that global annual potash demand growth will average 3% compounded annually.
    Potash is used as a major agricultural component in 150 countries but the largest importers of potash are China, India, the US and Brazil.
    Potassium sulfate is commonly used in fertilizers, providing both potassium and sulfur. Potash is the common name for potassium chloride.
    Because the financial markets crashed and the economy contracted in 2008 farmers put off buying potash - potash use fell 20%, phosphate fertilizer use declined 10% and the price per tonne of potash dropped by two thirds. This lack of fertilization drastically depleted the soil nutrient base and global soil nutrient levels need to come back to the trend line.
    “Failure to feed the fields is a trend that can’t last for long, while the global recession severely impacted fertilizer demand, the science of food production has not changed. The significant volumes of potash and phosphate that have been mined for crop production must be replaced to sustain the productivity of the soil.” Potash Corp.
    The basic fundamentals of the global potash market are hard to ignore:
    • An increasing global population - the world's population is steadily increasing and is expected to reach +9 billion people by 2050. The United Nations Food and Agriculture Organization (FAO) reported they think that the total world demand for agricultural products will be 60 percent higher in 2030 than it is today.
    • Increasing incomes in developing countries will lead to more people being able to afford protein rich diets – a western style diet heavy in meat - which means more grain consumption.
    • Decreasing arable land - arable land is being lost at the rate of about 40,000 square miles per year. Land is being used for production of bio-fuels, topsoil is eroded away by wind and water and the agriculture land base is being paved over as we become more and more urbanized. Farmers need to produce more food on less land. There is only one way this can be done and that’s with an increase in the use of fertilizer.
    The current potash market is estimated at 50 million tonnes annually and is projected to grow at a compounded annual rate of 3-4%. Potash is a crucial element in fertilizer and has no commercial substitute. Quite simply, we have to grow more food on less land.
    There are several ways farmers can get increased yields, Genetically Modified Organism (NYSEMKT:GMO) seed, pesticides, fertilizers, and satellite (NYSE:GPS) farming.
    Improved seeds, pesticides and new farming techniques are all going to be needed, improved and used. But the nutrients in soil are soon used up by ever more intensive farming - and Mother Nature can’t replace them fast enough. These nutrients need to be replaced or you have land where crops cannot grow.
    Lithium
    The world’s future energy course is being charted today because of the ramifications of peak oil and a need to reduce our carbon footprints.
    A whole new industry - a global wide automotive and industrial lithium-ion battery industry - is going to be built. As a result of lithium-ion battery demand for hybrid-electric and electric cars the increase in demand for lithium carbonate is expected to increase four-fold by 2017.
    Lithium-ion batteries have become the rechargeable battery of choice in cell phones, computers, hybrid-electric cars and electric cars. Chrysler, Dodge, Ford, GM, Mercedes-Benz, Mitsubishi, Nissan, Saturn, Tesla and Toyota have all announced plans to build lithium-ion battery powered cars.
    Demand for lithium powered vehicles is expected to increase fivefold by 2012. The worldwide market for lithium batteries is estimated at over $4 billion per year.
    Lithium carbonate is also an important industrial chemical:
    • It forms low-melting fluxes with silica and other materials
    • Glasses derived from lithium carbonate are useful in ovenware
    • Cement sets more rapidly when prepared with lithium carbonate, and is useful for tile adhesives
    • When added to aluminum trifluoride, it forms LiF which gives a superior electrolyte for the processing of aluminum
    • Lithium carbonate can be used in a type of carbon dioxide sensor.
    Demand today is in the range of 120,000 tonnes of lithium carbonate equivalent (LCE) annually. Lithium is not traded publicly - and is usually distributed in a chemical form such as lithium carbonate (Li2CO3) - instead it’s sold directly to end users for a negotiated price per tonne of Lithium carbonate (Li2CO3).
    Production figures are often quoted in lithium carbonate equivalent quantities. By weight approximately 18.8% of lithium carbonate is lithium. Therefore 1kg of lithium is the equivalent of 5.3 kg of lithium carbonate.
    “We are projecting 40% Li demand increase by 2014, with batteries accounting for 34% of use, the largest single end-use segment.”  Jon Hykawy, analyst Byron Capital Markets
    Lithium-ion batteries are quickly becoming the most prevalent type of battery used in everything from laptops to cell phones to hybrid and fully electric cars to short term power storage devices for wind and solar generated power.  At present, 39 per cent of lithium-ion batteries are produced in Japan, 39 per cent in China and 20 per cent in South Korea.
    “With forecast 10% to 20% penetration rates by 2020 for pure and hybrid electric vehicles, we expect an incremental increase in demand of 286,000 tonnes of lithium carbonate equivalent, significantly outstripping current supply.”  Canaccord Adams analyst, Eric Zaunscherb
    “Our electric vehicle investment is not one-car innovation, it is a new way of looking at our industry. This is the beginning of the story.” Carlos Ghosn, Nissan chief executive officer
    Sodium Chloride (rock salt or halite)
    The principal use for salt is in the chemical manufacturing business - chloralkali and synthetic soda ash producers use salt as their primary raw material.
    Salt is used in many applications and almost every industry:
    • Cooking
    • Manufacturing pulp and paper
    • Setting dyes in textiles and fabric
    • Producing soaps, detergents, and other bath products
    • Major source of industrial chlorine and sodium hydroxide
    Global demand for salt is forecast to grow 2.5 percent per year to 305 million metric tons in 2013.
    Solar evaporation is the most popular and most economical method of producing salt. China is the world’s largest consumer of salt – other than the dietary needs of 1.3 billion people - there’s an enormous chemical manufacturing industry being built in China.
    Boron
    Boron combines with oxygen and other elements to form boric acid, or inorganic salts called borates.
    Borates are used for:
    • Insulation fiberglass
    • Textile fiberglass
    • Heat-resistant glass
    • Detergents, soaps and personal care products
    • Ceramic and enamel frits and glazes
    • Ceramic tile bodies
    • Agricultural micronutrients
    • Wood treatments
    • Polymer additives 
    • Pest control products
    • Boron is an essential component in the manufacture of borosilicate glass used in LCD screens
    Boric Acid uses:
    • As an antiseptic/anti-bacterial compound
    • Insecticide
    • Flame retardant
    • In nuclear power plants to control the fission rate of uranium*
    • As a precursor of other chemical compounds
    *Boric acid is used in nuclear power plants to slow down the rate at which fission occurs. Boron is also dissolved into the spent fuel cooling pools containing used fuel rods. Natural boron is 20% boron-10 which can absorb a lot of neutrons.

    When you add boric acid to the reactor coolant – or to the spent fuel rod cooling pools - the probability of fission is reduced.
    The first half of 2009 saw a sharp drop in demand for borates, but in the second half of the year markets for both textile-grade fibreglass and borosilicate glass recovered.
    World production of borates remains mostly concentrated in the US and Turkey – these two countries account for 75% of supply.
    Chinese boron - both in terms of quantity and grade - is inadequate to meet domestic demand so the country is now the largest importer of both natural borates and boric acid.
    Silly Putty was originally made by adding boric acid to silicone oil.
    Considerations – may I see junior’s grades?
    The key factors that determine the quality, economics and attractiveness of brines are:
    • Potassium content
    • Lithium content
    • Presence of contaminants ie magnesium (Mg)
    • Porosity
    • Net evaporation rate
    • Recoverable by-products
    • Infrastructure – or lack thereof
    • Country risk
    • 100% control over production
    • Low capex, low production costs, high margin products
    A common industry axiom says that the ratio of Mg to Li in brines must be below the range of 9:1 or 10:1 to be economical. This is because the Mg has to be removed by adding slaked lime to the brine - the slaked lime reacts with the magnesium salts and removes them from the water. If the ratio is 1:1 in the original brine, then the added cost (due to today’s present cost per tonne of slaked lime) is $180/tonne of lithium carbonate produced. If the Mg to Li is 4:1 than the cost of removing magnesium is $720.00 per tonne of lithium carbonate.
    The porosity of a rock is expressed as a percentage and refers to that portion of the rock that is void space - rock that is composed of perfectly round and equal sized grains will have a porosity of 45%. Fluids and gases will be found in the void spaces within the rock.
    Ten million cubic metres of brine bearing rock with a porosity of 10% will contain one million cubic metres of brine fluid. A cubic metre is equivalent to a kilolitre.
    Salar de Atacama apparently has a porosity of about 8%. By oil and gas standards 8% is quite low, but brines are less viscous than hydrocarbon fluids and will flow more easily through rocks with lower porosity and permeability characteristics.
    A major factor affecting capital costs is the net evaporation rate – this determines the area of the evaporation ponds necessary to increase the grade of the plant feed. These evaporation ponds can be a major capital cost. The Salar de Atacama has higher evaporation rates (3200 mm pan evaporation rate per year (py) and <15 mm py of precipitation) than other salt plains in the world and evaporation takes place all year long.
    Contributing to efficient solar evaporation and concentration of the Puna Plateau brines are:
    • Low rainfall
    • Low humidity
    • High winds
    • High elevations
    • Warm days
    Though its evaporation rate is only about 72 percent of Atacama’s, Salar de Hombre Muerto is still commercially successful because costs are low and are further offset by the sale of recoverable byproducts like boric acid.
    Rockwood Holdings recover moderate tonnages of potassium chloride as a co-product at their Chile operation. SQM recovers potassium chloride, potassium sulphate and boric acid. 
    According to FMC’s website they have:
    • High concentrations of lithium - reportedly between 680 and 1210 ppm Li
    • High in potassium - concentrations from 0.24 to 0.97 wt% K
    Chile and Argentina supply 78% of global lithium carbonate and hold more than 90% of the proven lithium carbonate reserves.
    The Salar de Uyuni (Bolivia) has the lowest average grade of Li at .028 and has an extremely high ratio of Mg/Li at 19.9
    Uyuni’s higher rainfall and cooler climate means that its evaporation rate is not even half that of Atacama’s. The lithium in the Uyuni brine is not very concentrated and the deposits are spread across a vast area. Bolivia also has limited infrastructure - compared to that of Chile, Argentina or the US – and they lack free access to the sea.
    Consider also the high “country risk” factor companies face doing business in Bolivia. Evo Morales, Bolivia’s President, has already nationalized the oil and gas industry - who’s next?
    “The state doesn't see ever losing sovereignty over the lithium. Whoever wants to invest in it should be assured that the state must have control of 60% of the earnings.”  Morales at a March 2009 press conference
    “The previous imperialist model of exploitation of our natural resources will never be repeated in Bolivia. Maybe there could be the possibility of foreigners accepted as minority partners, or better yet, as our clients.” head of lithium extraction Saul Villegas
    In 1990 hunger strikes and massive protests forced US based Lithco out of a $46 million investment into Bolivia’s Salar de Uyuni. The company set up operations at Argentina's Salar de Hombre Muerto, and eventually became part of FMC.
    It’s not surprising to this author that while Chile and Argentina have thriving lithium and potash production, Bolivia lags far behind.
    A company should have 100% control over the production rate from their salar. It’s possible an aquifer can become diluted - over producing can impact the brine’s salt concentrations and chemical compositions - or depleted by too many wells sucking up more brine than should be produced.
    If two or more companies have straws (wells) into the same salar legal battles might result over the sharing of the resources.
    “Lithium production via the brine method is much less expensive than mining.  Lithium from minerals or ores costs about $4,200-4,500/tonne (€2,800-3,000/tonne) to produce, while brine-based lithium costs around $1,500-2,300/tonne to produce.” John McNulty, analyst Credit Suisse.
    Global lithium production was dominated by the US - until the 1980s - with hard rock mining from spodumene. The better economics of the Chilean/Argentine salars priced hard rock lithium mining out of the markets.
    There are exceptions - Talison Minerals has its Greenbushes operation (a combined tantalum and lithium mine) in Australia. This is the largest, highest grade lithium (spodumene) pegmatite deposit in the world and recent price increases have enabled them to sell their production to China for transformation into lithium carbonate. Two other producers of lithium ore concentrates are mostly concerned with the glass industry.
    Hard rock lithium miners have two large problems facing them when competing with brine economics – firstly most have large capital (capex) costs for start up and secondly their production cost is roughly twice what it is for the brine exploitation process. These higher production costs are because of the different extraction processes used.
    When lithium chloride reaches optimum concentration - using nothing more than sun and wind - the liquid is pumped to a recovery plant and treated with soda ash, precipitating lithium carbonate. The carbonate is then removed through filtration, dried and shipped.
    In the case of production from pegmatites the process is: 
    • Mining
    • Concentration to a higher grade
    • Calcination at 1100 degrees Celsius to produce acid-leachable beta spodumene
    • Treated with sulphuric acid at 250 degrees Celsius
    • conversion of the lithium sulphate solution with sodium carbonate
    This author believes investors will see development financings and start-up capital flow towards advancing the easier, quicker to production and cheaper to produce brine deposits rather than the higher start up cost and more expensive to produce hard rock mining situations.
    There is room in the market for first mover juniors now positioned with quality salar packages in Argentina and Chile. Competition in these markets will not hurt margins for any company, old or new, due to the potential for exponential demand growth of potash and lithium.
    But
    The prime candidates have to be the lowest cost producers from both a capital (land package costs and capex) and variable (ie removal of contaminents) cost point-of-view. 
    Dajin DJI – TSX.v
    Cash: $350,000 
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    Insiders own: 25%
    Institutional ownership = 5%
    Retail ownership = 70%
    Dajin controls a 100% interest in mineral concessions in Salta and Jujuy provinces of Argentina that cover regions known to contain brines rich in lithium, potassium and boron.
    These concessions total approximately 101,000 hectares in various drainage basins including 81,000 hectares of salar and Tertiary paleo-salar in the Salinas Grandes/ Guayatayoc salt lake basins.
    Dajin’s principal focus for lithium exploration will be the Salinas Grandes/ Guayatayoc salt lake basins. DJI’s project data indicates both permissive brine chemistries and lithium concentrations that are similar to those being produced from elsewhere in the Lithium Triangle. 
    Dajin has recently received, from Safari Energy Inc., a Calgary based geophysical consultant, the interpretation of 417.6 line kilometres of 2D seismic lines shot on and around Dajin’s Salinas Grandes/Guayatayoc project. The data indicate stacked salt deposits deposited in sedimentary/structural basins which have potential to be collection zones for denser, higher grade brines.
    Based on geophysical factors eleven drill sites were selected for initial delineation and evaluation of possible reservoir quality lithologies.
    “The receipt of this report identifying a series of horizons that are very prospective for brines rich in boron, lithium and potash below our mineral tenures is just one more indication of Dajin’s exploration momentum since it follows closely on receipt of Jujuy provincial government certification of Dajin’s 83,248 hectares of mineral tenures at the Salinas
    Grandes/Guayatayoc project and registration of an Argentine subsidiary to house said project.”
    Mr. Brian Findlay, President of Dajin
     Mr. Findley went on to point out that as a consequence of Dajin’s 100% ownership in the concessions the company will have no payments or work commitments to previous owners and no royalties to pay to third parties.
    Orocobre (ASX: ORE)
    A deal between Australian explorer Orocobre and a subsidiary of the world's largest automaker Toyota for Orocobre’s Salar de Olaroz Lithium-Potash Project in Argentina is considered an important step in the future use of lithium-ion batteries in electric cars.
    Toyota Tsusho emerged the winner in an army of suitors representing auto makers, battery manufacturers and chemical groups all anxious to secure a dependable supply of lithium. Toyota Motors owns 22% of Toyota Tsusho - the procurement company for Toyota Motors.
    Toyota Tsusho will provide US$4.5 million to fund the completion of a feasibility study and other associated pre-development activities which are expected to be completed in the third quarter of 2010. 
    The Japanese company will also be responsible for securing a Japanese government guaranteed low-cost debt facility for at least 60% of the project's development cost. This facility is expected to be secured through Japan Oils, Gas and Metals National Corporation - a government entity that provides assistance to Japanese companies in obtaining mineral resources.
    The Salar de Olaroz Lithium-Potash Project is believed to have 1.5 million tonnes of lithium carbonate and 4.4 million tonnes of potash. Orocobre hopes to develop a 15kt lithium carbonate and 36kt potash annual production capacity beginning in 2012.
    Project capex is estimated at $80 million to $100 million.
    Orocobre recently announced, on March 8th 2010, two significant discoveries.
    Extensive pit sampling at their Salinas Grandes Project has shown the highest average lithium and potassium grades in Argentina. Grades average 1,409 mg/l lithium and 16,394 mg/l potassium with a very low average magnesium to lithium ratio of 2.6.
    The values from Salinas Grandes are significantly higher than reported data from other salars in Argentina, and are comparable to the reported brine grades from Salar de Atacama.
    The world view until this announcement was that there is Atacama, and then there is everybody else. Now, for the first time as far as any of us know, there has been discovered in Argentina by Orocobre brines that are essentially economically equivalent in their quality to the best, lowest-cost production in the world.” Orocobre chairperson James Calaway
    The second discovery is a high quality potassium target at the Company's Laguna de Guayatoyoc property. Pit sampling on the Guayatoyoc properties show potassium grades averaging 4,635 mg/l potassium (NYSE:K) (ranging from 39 mg/l to 7,464mg/l K).
    Salares Lithium LIT – TSX.v
    Cash: $1.6 mm  (January 31, 2010)
    Debt: NIL
    Shares Outstanding: 35.5 mm
    Fully Diluted: 47.0 mm
    Insiders own: 2%
    Institutional ownership = 0%
    Retail ownership = 98%
    Salares Lithium’s  'Salares 7' Project consists of 96,604 hectares (966 sq km) with 39,404 hectares (394 sq km) of exploration potential solely within actual salares/brine lakes. Salares Lithium believes this is one of the largest land and pure salar concession packages in the lithium exploration sector (LIT controls 100% of five salars clustered within 155 km's of each other - no severed ownership means the only potential straws into these salars will be Salares Lithium’s).
    Historic sampling (non NI43-101 compliant) has returned lithium and potassium in all seven salars with grades up to 1,080 ppm lithium and 10,800 ppm potassium.
    Surveys have presently been conducted on two salars:
    Salar de la Isla - Encompasses a total of 16,500 hectares and is approximately 22 kilometres long and 6 km wide on average. The northern area surveyed and studied comprises approximately 65% (10,750 hectares) of the areal extent of the salar.
    Using the results obtained from the 38.5 line km survey, Geodatos SAIC ("Geodatos") of Santiago, Chile constructed a three dimensional model of the distribution of the interpreted brine bearing horizon.
    Using a resistivity cut-off of 1 ohm/metre (interpreted by Geodatos as definite brine), Geodatos than calculated the brine bearing horizon within the northern portion of the salar to have a volume of 2.459 billion kilolitres (a kilolitre is equal to a cubic metre). Using a resistivity cut-off of 2 ohm/metres (interpreted by Geodatos as possible brines) the calculated volume of this horizon increases to 5.393 billion kilolitres.
    Salar de las Parinas – This salar is situated approximately 6.5 kilometres southeast of the Company's Salar de la Isla and encompasses a total areal extent of 5,400 hectares. The TEM survey lines for Las Parinas were extended beyond the boundaries of the salar onto areas covered by alluvial and/or volcanic material. The survey identified a continuous brine bearing horizon that extends up to 2.5 km from the salar’s edge and underneath the adjacent rocks.
    Using the results obtained from the 26.5 line km survey Geodatos constructed a three dimensional model of the distribution of the interpreted brine bearing horizon. This horizon extends from surface to a depth of 170 metres.
    Using a resistivity cut-off of 1 ohm/metre (probable brine) Geodatos has calculated the brine bearing horizon within the surveyed portion of the las Parinas salar to have a volume of 1.177 billion cubic metres. Using a resistivity cut-off of 2 ohm/metres (possible brines) the calculated volume of this horizon increases to 4.009 billion cubic metres.
    We are excited about the volume calculation identified by Geodatos… The Company will now be required to drill/sample the extensive interpreted brine horizons before a porosity value and a resource calculation can be established.”   Todd Hilditch, CEO Salares Lithium.
    Conclusion
    “We think lithium-ion batteries for electric vehicles are the best technology.”   Don Walker, CEO Magna International Inc.
    “Magna wants to be on the leading edge of any new technology, and so we jumped on this technology a few years ago. The high-cost is the battery. So, working on the supply chain, getting the price down, and working on new composites for the battery are all things we are working on.”   Ted Robertson, Magna's chief technical officer
    We seem to be going through an Eco-Energy Revolution - consider the ongoing nuclear renaissance, the surge towards energy retrofitting, cleaning up the environment and billions of dollars being given out to develop the technology behind the lithium-ion battery for the electrification of our transportation system.
    This energy revolution is a serious investable long-term trend and we, as investors, have to take advantage of the opportunities being presented. We’d be smart to get in early, ahead of the herd, to take advantage of the coming global rush to electricity – generated by nuclear power and stored in lithium-ion batteries.
    “The power of population is indefinitely greater than the power in the earth to produce subsistence for man.”  Thomas Robert Malthus
     The U.N. calls the global food crisis a "silent tsunami" and faith in the ability of local and global commodity markets to fill 6.6 billion bellies, never mind the projected 2.7 billion more by 2050 (U.N. projections say the world's population will peak at 9.3 billion in 2050) has been shaken.
    Are the words of Thomas Malthus coming back to haunt us?
    In order for a plant to grow and thrive, it needs a number of different chemical elements. Three of these are the macronutrients nitrogen, phosphorus and potassium (a.k.a. potash, the scarcest of the three). Potassium makes up 1 percent to 2 percent of any plant by weight and is essential to metabolism. The availability of nitrogen, phosphorus and potassium in the soil, in a readily available form, is the biggest limiter to plant growth.
    “Strong farmer returns, a depleted distributor pipeline and the agronomic need to replace soil nutrients have kick-started a potash rebound from 2009 lows.”   Potash Corp. CEO Bill Doyle
    Potash Corp – the world's largest fertilizer maker - issued cautious guidance in January saying it expects first-quarter earnings to be between $1.30 and $1.50 per share which is well above its previous forecast of .70 - $1.00 per share.
    “The upward revision reflects a sharp rebound in potash demand that is expected to drive a record quarter for North American sales volumes and strong offshore shipments”   the company said in explaining the revision.
    This Brine “Mining” Business Model should be on every investors radar screen.
    Is it on yours?
    Richard (Rick) Mills
    rick@aheadoftheherd.com
    www.aheadoftheherd.com
    If you're interested in the junior resource market and would like to learn more please come and visit us at aheadoftheherd.com
    ***
    Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald and Financial Sense.
    Legal Notice / Disclaimer

    This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
    Richard Mills owns shares of Dajin Resources. Dajin Resources and Salares Lithium are advertisers on aheadoftheherd.com


    Disclosure: Long DJI
    Aug 27 9:11 AM | Link | Comment!
  • Two for Diabetes
    Two for Diabetes

    Richard (Rick) Mills
    Ahead of the Herd

    As a general rule, the most successful man in life is the man who has the best information
     

    With two out of three people in the US overweight and one in three obese it’s not surprising that one in four Americans is either pre-diabetic or has Type 2 diabetes.

    The International Diabetes Federation estimates that 285 million people around the world have diabetes and…

    This total is expected to rise to 438 million within 20 years. Each year a further 7 million people develop diabetes.

    Exactly what is Diabetes?

    The foods you eat are broken down into a simple sugar called glucose. In response to a rise in glucose after a meal your pancreas secretes insulin. Insulin acts to move the glucose from your blood stream into the cells where it can be utilized for energy. Diabetes is a condition in which normal blood sugar levels are too high.

    A Type 1 diabetes diagnosis means your pancreatic beta cells that secrete insulin have been damaged or destroyed - glucose cannot move from the bloodstream into the cells.

    A Type 2 (insulin resistance) diabetes diagnosis is a far more common verdict for people than Type 1. Insulin resistance happens because of chronically elevated blood sugar and insulin. These elevated levels of sugar and insulin have the effect of "numbing" the cellular processes which moves the sugar from the blood stream to the cells - the body cannot respond to the insulin "requests" to move blood sugar into the cells. Roughly 27% of the people who start out as Type 2 diabetics, will, in the future, require insulin injections similar to Type 1 diabetics.

    Short-term complications:

     

    • Hypoglycaemia – low blood sugar which can lead to coma and death
    • Diabetic Ketoacidosis (DKA) – results from absolutely no insulin, the body switches to burning fatty acids instead of glucose and low PH ketone bodies are produced which turns blood acidic.
    • Lactic acidosis
    • Bacterial/fungal infections

    Long-term complications:

    • Retinopathy - eye disease
    • Nephropathy - kidney disease
    • Neuropathy - nerve disease
    • Diseases of the circulatory system
    • Amputation

    The cost of Diabetes

    • Healthcare expenditures on diabetes are expected to account for 11.6% of the total healthcare expenditure in the world in 2010.
    • Estimated global healthcare expenditures to treat and prevent diabetes and its complications are expected to total at least US $376 billion in 2010. By 2030, this number is projected to exceed some US $490 billion.
    • More than 80% of the estimated global expenditures on diabetes are made in the world’s economically richest countries, not in the low- and middle-income countries where over 70% of people with diabetes live.
    • The US is projected to spend US $198 billion or 52.7% of global expenditure in 2010
    • India, the country with the largest population of people living with diabetes, is expected to spend an estimated US $2.8 billion - less than 1% of the global total.
    • The American Diabetes Association estimated that the US economy lost US $58 billion, equivalent to almost half of the direct healthcare expenditure on diabetes in 2007, as a result of lost earnings due to lost work days, restricted activity days, lower productivity at work, mortality and permanent disability caused by diabetes.

    In this article I’m going to introduce you to two companies actively working towards making life better for diabetes sufferers - socially responsible investments and also two investments, capable, in my opinion, of returning many times your invested capital. Quite simply put, I believe we can maximize our financial return while also doing some social good.

    iCo Therapeutics ICO-TSX.v

    Shares Issued: 41,057,301
    Warrants: 334,334 agent warrants @ .60
    Options: 2,521,429 average weighted price .49
    Fully Diluted: 43,612,164
    Insider Ownership: 11.77%
    Institutional Ownership:
    ISIS Pharmaceuticals – 12.3%, Special Situation fund – 14.3%, others – 5-6%

    iCo has exclusive worldwide rights to three products:

    iCo-007 is for the treatment of Diabetic Macular Edema (DME). DME is the swelling of the retina in diabetes patients due to leaking blood vessels within the macula, the central portion of the retina that is critical for daytime vision. Diabetic macular edema (DME) is a serious manifestation of diabetic retinopathy that involves retinal swelling brought on by the leaking of fluid from small blood vessels within the macula. As the condition develops, central vision becomes blurred. DME can progress fairly rapidly and over just a few years can lead to permanent visual loss. There is a significant unmet need to both reverse the visual loss associated with DME and to help delay the progression of this condition.

    There are currently no approved therapeutics for DME, the leading cause of blindness in working age adults. DME affects approximately 1.6 million people in the U.S. alone, a number that is expected to grow as Diabetes is forecast to increase by almost 50% in the US by 2025.

    iCo licensed the worldwide exclusive rights to all therapeutic applications of iCo-007 from ISIS in 2005. Drug products that prevent the growth of new blood vessels and inhibit increased vascular permeability may have the potential to treat neovascular diseases, including diabetic retinopathy and diabetic macular edema.

    iCo has just released its Phase 1 clinical trial results for iCo-007 in patients with diffuse diabetic macular edema. The primary objective of the phase I trial was to evaluate the ocular safety and tolerability of iCo-007. Secondary objectives included assessment of systemic pharmacokinetics, retinal thickness using optical coherence tomography (OCT) measurements and visual acuity.

    "We are extremely pleased that iCo-007 successfully met the primary endpoint for our Phase I trial. In addition, we have seen signs of biological activity in a very difficult to treat patient population refractory to many other treatments, including anti-VEGF agents in some cases. The safety and secondary endpoint information we have gleaned from this trial, including the biological activity we have seen at various dose levels, will be extremely useful and fully supports advancing to a Phase II clinical trial program which is currently in the planning stage.” President and CEO, Andrew Rae

    iCo-008 is being developed for severe ocular allergies. During an allergic response the levels of eotaxin-1 are elevated. This attracts eosinophils, a type of white blood cell, into tissues where they can degranulate causing tissue damage that occurs in a variety of allergic disorders. This condition, known as eosinophilia, can occur in a number of disorders, such as allergic ocular disease of conjunctiva and cornea (conjunctivitis and keratoconjunctivitis), asthma, allergic rhinitis, atopic dermatitis, and other inflammatory disorders, such as inflammatory bowel disease and Crohn’s disease.

    Blocking eotaxin-1 was shown to be effective in inhibiting early phase mast cell activation as well as late phase eosinophilia. This broad spectrum mechanism of action is unique and differentiates iCo-008 from other available agents.

    Recent evidence suggests re-orientating the strategic direction of this drug towards targeting Wet Age-related Macular Degeneration (NYSE:AMD) would be appropriate.

    AMD is the leading cause of visual loss in the western world. This disease of the aging eye results in loss of the sharp, central vision that is necessary for clearly seeing objects and undertaking routine tasks including reading and driving. AMD occurs in both wet and dry forms, with the wet form accounting for the vast majority of cases of AMD-related blindness and progressing much more rapidly than dry. Partnering discussions are ongoing.

    iCo-009 is an oral reformulation of Amphotericin B for sight and life threatening diseases. iCo-009 also represents a new drug delivery technology with the potential to re-profile other IV administered drugs to the oral route of administration.

    June 25, 2009 - iCo Therapeutics Inc. (TSX-V: ICO) is pleased to announce that iCo’s oral Amphotericin B (AmpB) oral formulation “iCo-009” has been published in a leading journal, The Journal of Infectious Diseases. The article represents the first ever publication of an oral AmpB eradicating the parasite responsible for Visceral Leishmaniasis (VL), which affects 12 million people worldwide. Administration of the highest dose of iCo-009 resulted in 99.8% inhibition of the parasite.

    AmpB has for many years been the gold standard for systemic antifungal drugs. AmpB formulated for IV use remains one of the most effective agents in the treatment of systemic fungal infections, yet no oral formulations are currently commercially available. Over the past 50 years, many attempts have been made to formulate AmpB for oral administration, with limited success. The article indicates that with iCo-009, a self-administered, oral formulation of AmpB is attainable.

    iCo is continuing with preclinical work.

    Sernova Corp. SVA - TSX.v

    Common Shares: 78,899,024
    Options: 3,693,875 average exercise price of $0.29
    Warrants: 5,703,467 average exercise price of $0.19
    Fully Diluted: 88,296,366
    Insider Ownership: 6%


    Sernova is developing two, novel, closely integrated, proprietary platform technologies. The first is the Cell Pouch System™ - a medical device providing a natural “organ-like” environment for therapeutic cells - such as insulin producing islets for diabetics. The second is Sertolin™ - a cell-based technology providing an immune-privileged environment for donor cells which reduces or eliminates the need for anti-rejection drugs.

    The Standard of Care for patients with reduced or missing critical hormones or proteins, such as insulin, is often monitoring and injecting these proteins multiple times a day. This has lead to a patient track record of missing dosages and serious side effects resulting in US $150 billion a year hospital costs for diabetes alone.

    Sernova’s Cell Pouch System is a versatile, credit card-sized device made of FDA approved materials. Placed under the skin in a simple inexpensive procedure it develops organ-like characteristics for delivery and natural housing of therapeutic cells. A key feature of the device is its ability to stimulate natural microvessel development, thought to be essential for long-term survival and function of therapeutic cells.

    Cell therapy (a projected yearly US $8 billion market) is a new and increasing alternative for patients with severe disease.

    At this time there is no approved device to house and protect therapeutic cells in the body. Instead, cells are often injected into vessels in an extremely expensive and risky procedure - most of the injected cells die from inflammation and clotting, an instant blood-mediated inflammatory reaction (IBMIR) - resulting in the need for reoperations. Currently cell therapy is limited to expensive procedures, poor cell survival and inappropriate delivery as well as lack of available donors.

    Sernova’s first application of its proprietary Cell Pouch System is islet transplantation for treatment of insulin-dependent diabetes - think of the Cell Pouch System™ as a potential natural insulin pump with the added benefit of fine-tuned glucose control. The Cell Pouch System is expected to prevent IBMIR (which is believed to rapidly destroy up to an estimated 90% of the transplanted islets) and in addition eliminate serious complications such as islet-induced blood clotting and liver thrombosis. The reduction in islet loss, once verified, could lead to improved safety and efficacy of islet transplantation and the potential of treating multiple patients from a single pancreas donation.

    While the initial primary focus of the Company’s development efforts will be assessment of the Cell Pouch System for insulin-dependent diabetes (which includes all Type-I diabetics and about 27% of Type-2 diabetics), the Company is planning to develop partnerships with academic and corporate collaborators to further develop the Cell Pouch for other applications including:

    • Chronic metabolic, hematologic and neurological diseases - Parkinson’s disease and Haemophilia are two candidates
    • Implantation of multiple cell types including natural cells, stem cells and genetically engineered cells
    • The Cell Pouch System may be used for autograft cellular transplants
    • Allograft cellular transplants with the use of immunosuppressive drugs or in conjunction with co-transplantation of islets and Sertoli cells

    Sernova recently released interim results from a key porcine (pig) diabetes study evaluating the safety and efficacy of the cell pouch system.

    These interim results wesre presented at the American Society of Artificial Internal Organs 56th annual conference, Baltimore, Md., May 2009 and confirm that:

    • Sernova’s Cell Pouch system establishes a biological environment capable of preserving the functionality of therapeutic cells
    • The Cell Pouch system allows for safe and efficacious cell-based therapy and may offer a revolutionary improvement over the current practice of injecting therapeutic cells into blood vessels
    • The Cell Pouch can provide glucose control with only about 10% of the equivalent functioning islets that are used to achieve normal blood glucose levels in the current standard of care involving  injection of cells into the veins suggesting that the device may be islet-sparing

    Sernova’s second technology, Sertolin, is for patients who have had therapeutic cell therapy and who want to avoid toxic and expensive anti-rejection drugs (US $10-15,000/yr). Sertolin, when combined with therapeutic cells protects them from attack by the immune system. Animal models have shown that the combination of these protector and therapeutic cells leads to long-term functional survival of the therapeutic cells without drug therapy.

    Conclusion

    There is no market cycle for bio-technology drug or device stocks. The need is always there and demand is growing at an alarming rate. More and more people are receiving medical coverage while at the same time big pharma’s number of patents and pipeline of new drugs has been drastically reduced.

    Both iCo Therapeutics and Sernova Corp. management teams have very realistic end game plans - their objective is to add substantial value to existing assets and subsequently monetize them for the benefit of shareholders. This could take the form of an acquisition or such other mechanism whereby the value can be transferred to shareholders. It is not the objective of either company to build a large permanent, integrated pharmaceutical company. I’m in complete agreement, build as much value into each product as is reasonable, then sell, let your shareholders reap the rewards and move on.

    Both these companies should be on every investor’s radar screens.

    Are they on yours?

    Richard (Rick) Mills
    rick@aheadoftheherd.com
    www.aheadoftheherd.com

    If you're interested in learning more about our junior markets please visit us at aheadoftheherd.com.

    Membership is free, no credit card or personal information is asked for.

    ***

    Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald and Financial Sense.

    ***

    Legal Notice / Disclaimer

    This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

    Richard Mills owns shares in iCo Therapeutics and Sernova Corp.
    iCo Therapeutics and Sernova Corp. are advertisers on aheadoftheherd.com



    Disclosure: Long iCo Long SVA
    Aug 27 8:59 AM | Link | Comment!
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