J Taylor’s DJIA %
Dow Jones/Gold Annual Returns 80%
& Technology Stocks Volume 20 No. 2
(Since 1981 - Formerly J Taylor’s Gold & Gold Stocks)
February 13, 2001
McKenzie Bay International What do you think a company’s shares should be worth if it is able to play a major role in not only solving America’s energy crisis, but also doing it in an environmentally friendly manner? I think you would agree that such a company may well become one of the biggest storybook stocks since Microsoft. Given the company’s 80% ownership of the Lac Dore vanadium project in Quebec, MKBY appears to be one such company. The Lac Dore Vanadium Project * Lemoine & Rinfret Townships, Quebec Traded: (OTC Pinks – MKBY) Initial Recommendation 3/25/00 :2.00 Price 2/9/01: $1.95 Shares Outstanding: 16,625,000 Major Institutional Holdings: 1,000,000 Public float: 3,950,000 Quality Rating: “B” (At Bankable Feasibility Stage)
The Lac Dore project is located in the Lemoine & Rinfret Townships in Quebec, less than 30 air miles south of the mining and forest service town of Chibougamau, Quebec. The area is well serviced with air, rail and roads. Together with available electrical energy and water, a solid infrastructure is in place for the development of the mine and production of vanadium.
We initially recommended McKenzie Bay International (MKBY) just after it began trading in the pink sheets. It has endured some rather shameful market maker short selling action, which moved the price briefly below $0.50 toward the end of 2000. Oddly enough, California’s energy crisis has been the short seller’s worst nightmare with respect to MKBY. Why so? Because two new technologies capable of solving America’s energy problems, require enormous amounts of vanadium and MKBY just happens to hold one of the biggest vanadium deposits in the world.
Some C$12 million has been spent on this project to date including extensive exploration and metallurgical work. McKenzie acquired an 80% interest in the Lac Dore claims from Soquem in exchange for 1 million shares of its stock. McKenzie Bay is obligated to provide a bankable feasibility study to Soquem, which is anticipated before the end of this year. For Soquem to retain its 20% interest in the project, it is required to fund 20% of capital expenditures.
TAYLOR HARD MONEY ADVISORS, INC.*
Vanadium is one of the more abundant metals found in the earth’s crust. If that is true, why should the
Box 770871, Woodside, N.Y. 11377.*
Tel.:(718) 457-1426* Feb. 13, 2001
mere ownership of a vanadium deposit make MKBY so special? The reason is because the Lac Dore is uniquely capable of meeting a surging demand for vanadium thanks to the following advantages it holds over all other known vanadium deposits 1. 2. 3. 4.
Large-scale reserves. Quality of vanadium mineralization. Uncommitted future production. Low production cost
Following is a discussion of these four factors favoring the Lac Dore property. Large Scale Reserves With respect to reserves, the project contains at least 450 million tonnes of ore grading 0.50% vanadium. This means that there is something like 5.0 billion pounds of inferred vanadium pentoxide reserves on the property. Earlier, the company talked about possible capital expenditures of $85 million that could produce 16.4 million lbs. of vanadium pentoxide per year at a cost of $1.56 per lb. That would generate 36.3 million in annual cash flows or $29 million for MKBY over a mine life of over 300 years! With large reserves, MKBY should be in a position to commit to large scale delivery of vanadium product in line with the needs of vanadium battery producers. It now appears likely that the level of production from Lac Dore may surpass the earlier annual projected 16.4 million lbs. by a factor of several times, which would also significantly reduce the cost of production. A host of questions related to new commercial applications for vanadium are now in the process of being answered and they will be factored into the final bankable feasibility study anticipated by the end of this year. By year end, we should have a much better idea about future levels of production and hence the mine life at the Lac Dore. High Quality of Vanadium Mineralization For optimal battery performance, it is necessary that the vanadium contain low levels of impurities such as silica and chromium. Based on metallurgical studies carried out to date, silica level from Lac Dore production is expected to be only 1/3 to ½ as high as in South African production. The chromium levels are also said to be lower in the Lac Dore ore than in South African ores.
Uncommitted Future Production Most existing vanadium mines have either pledged the lion’s share of their future production for existing vanadium applications, most notably as a metal alloy, or they produce vanadium as a byproduct, which means output depends on their steel production. Hence their ability to meet the major vanadium demand anticipated for battery and energy storage cell manufacturing is very limited compared to that of MKBY. Also, being a primary producer, MKBY will be in a position of entering into a long-term cost plus contracts geared to ensuring manufacturers have ample supplies of vanadium at prices they can lock in for the long term. In fact, MKBY has already signed a ‘Guaranteed Offtake Agreement’ with a metals trader guaranteeing the annual off-take of 1.2 million pounds of Vanadium Pentoxide for a period of ten years with a ten-year extension. Pricing as per the Agreement is to be at market less 4%. Low Production cost For a host of reasons having to do with grade, low mining dilution, metallurgical characteristics, infrastructure and low tariffs, the Lac Dore project figures to become North America’s largest vanadium deposit and one of the lowest, if not the lowest cost primary producer of vanadium pentoxide in the world. At the present time, the most cost competitive mines in the world are located in the Bushveld complex in South Africa where costs average in the $1.70 to $2.00 range. By contrast, Lac Dore production costs are expected to be in the $1.40 to $1.70 range. Actually, the Lac Dore ore contains a large amount of titanium mineralization, that is likely to provide meaningful cash flow to the project at higher levels of production. It is believed that at moderately higher levels of production, titanium credits combined with economies of scale would reduce the cost of producing vanadium considerably below even the highly competitive $1.40 to $1.70 range. Revolutionary New Vanadium Technologies
There are essentially two new energy technologies in existence that are expected to require huge supplies of vanadium in the near future. The first technology is known as Vanadium
TAYLOR HARD MONEY ADVISORS, INC. Box 770871, Woodside, N.Y. 11377. Tel.: (718) 457-1426 Copyright @ 2001 TAYLOR HARD MONEY ADVISORS, INC. ALL RIGHTS RESERVED.
Feb. 13, 2001
Redox Storage Cell, which allows charging and discharging of energy as available and as needed. This technology has been used successfully in Japan and is now ready to help solve our energy crisis in a major way. The second technology that is nearing commercial viability has been developed by Hydro Quebec and it involves the production of a vanadium-lithium fuel cell for hybrid electric vehicles, electric vehicles and communication applications. Both of these applications will require an enormous supply of vanadium. Following is a description of these two emerging technologies that not only promise to produce lower cost energy but also should lead to a cleaner environment. Vanadium Redox Storage Cells Vanadium redox batteries or cells (“VRB”), invented in Australia is a proven technology that has been used at a number of locations in Japan. More units are being planned or are now under construction. VRBs are power storage batteries that have a vanadium ion solution as an electrolyte in positive and negative electrodes. While electrolytes circulate in the battery cells, charge/discharge reactions are caused by a change of the ion state. Thus, reactions within the VRB simply change the vanadium ion state resulting in an indefinite life. Unlike all other batteries, VRBs do not lose power sitting idle therefore provide an indefinite shelf life. VRBs have the ability to simultaneously charge at one rate, while discharging at another. The VRB technology is being commercialized internationally by Pinnacle VRB of Australia. (Additional information is available through their website - http://www.pinnaclevrb.com.au.) Although no agreement exists between Pinnacle VRB and McKenzie Bay, the advancement of this technology is being followed with great expectation. The need for huge amounts of vanadium combined with advantages enjoyed by the Lac Dore project as noted above may well result in either a formal or informal arrangement between MKBY & Pinnacle or at least companies manufacturing VRBs. To provide a sense of the amount of vanadium required for VRB applications, please note that six metric tons of high quality “battery grade” vanadium
pentoxide is required per mega-watt hour battery. VRBs are expected to encompass 10 to 50% of a utility companies power grid. For example, if VRBs represented 20% of California’s power grid today, approximately 500 million pounds of vanadium pentoxide or 10% of the Lac Dore reserves would be required. With no other known minable deposit in the world capable of supplying the large quantities of “battery grade” Vanadium Pentoxide required for VRBs other than the Lac Dore, MKBY appears to be in a very strong position to become a dominant player in this emerging technology. VRBs represent the world’s best source for a clean, reliable, in-line, uninterruptible electric storage. There is no other alternative cost-effective means of storing electricity. VRBs enable power generators to operate their generation facilities more effectively and efficiently. Load leveling capabilities by storing electricity during periods of lower demand and releasing electricity into the grid at periods of high demand are but one of the many applications for VRBs. VRBs can be fully charged and discharged repeatedly (over 16,000 times) and from any state of charge without any adverse operating effect and will last indefinitely. VRBs are ideally suited for peak shaving situations and storing power generated from wind, solar and hydro. VRBs may be fully discharged without damage and do not have a memory if recharged before being fully discharged. VRBs operate over a temperature range of 5C to 40C safely with easy maintenance. VRBs do not discharge any harmful exhaust gases such as CO2 making the VRB completely favorable to the environment. And, unlike other batteries, it does not generate heat. It should also be noted that the VRB technology can be scaled up or down to virtually any size application. Thus, it is conceivable that a large number of individual homes will be built or retrofitted with solar cells and VRB technology in the future and that wind farms may become much more prominent as a result. What we are getting at here is that the potential demand for the VRB technology is astronomical. Vanadium - Lithium Fuel Cells Over the past twenty years, Hydro Quebec has been involved in the research and development of a solid state fuel cell for hybrid electric vehicles, electric vehicles and communication applications. Until 1999
TAYLOR HARD MONEY ADVISORS, INC. Box 770871, Woodside, N.Y. 11377. Tel.: (718) 457-1426 Copyright @ 2001 TAYLOR HARD MONEY ADVISORS, INC. ALL RIGHTS RESERVED.
Feb. 13, 2001
this work had been carried out jointly with 3M. At that time, Hydro Quebec spun this activity into a separate company now named Avestor Corporation that is now gearing up for commercial production of these fuel cells. The fuel cell is comprised of many thin layers of lithium and vanadium in a jelly-roll design that contains a lithium foil anode and a vanadium foil cathode. Demand has been projected by Avestor to begin slowly but then rise exponentially, reaching 15,500 metric tons of V3O8 by the year 2010. That represents approximately twice the vanadium production levels initially discussed at Lac Dore. Although MKBY has no arrangement with Hydro Quebec or Avestor, the presence of the Lac Dore in Quebec combined with anticipated cost advantages may well work in favor of MKBY once it commences vanadium production. Additional information on Avestor is available at www.avestor.com. Portfolio Scorecard Mining Stocks
Summary The economics for this company’s vanadium mine look excellent even without the development of energy producing technologies requiring lithium. Now, with two vanadium “fuel cell” technologies moving rapidly toward commercialization, the company’s Lac Dore project would seem to offer shareholders an exceptionally exciting future as part of a new energy/environmental/technology play that could make MKBY one of the most exciting stocks on our list. Given our bearish view on the stock market and the economy in general, we are especially fond of technology plays that can lower the cost of producing essential goods and services. The ability of VRB to store energy from renewable sources like solar, wind, tidal and geothermal, not only seems to hold the potential to lower the cost of energy but to reduce the need to use environmentally controversial Price Initial make Initial shareholders Price 2000 Overall Buy/ hydrocarbons and of MKBY a Date Price 7/17/00 % Gain Gain Hold “ton of$12/31/99 money” in the process. 0.51 8/15/97 $ 0.88 $ 0.57 12% -35% Buy
Under a development agreement with General Aurizon Mines T ARZ A Junior Gold Producer in Ontario Anglogold Avestor has N A Word's largest gold producer$ 25.69 8/29/98 $ 21.75 $ 19.81 -23% -9% Buy Motors, built AU and delivered a high power South Africa Asia Minerals C AMP B Advanced Stage gold project in Arizona $ 0.17 2/2/99 $ 0.16 $ 0.11 -38% -33% Hold battery designed especially for the Precept, GM’s Based on the discussion above, we think MKBY is Barramundi Gold C BAM C Junior Gold Exploration with Newmont Deal $ 0.06 9/10/99 $ 0.14 $ 0.05 -3% -60% Buy Barrick Goldhybrid electric N ABX A Major internatioal gold producer - large hedger $ 15.69 3/31/00 $ 15.69 of$ 17.88 14% 14% Buy concept vehicles. Avestor, which is shaping up as one the more exciting Canarc Resources * T CCM B Advanced stage project in B.C. $ 0.15 2/27/89 $ 1.19 $ 0.18 15% -85% Buy located expects tostage, launch in the-39% market today. Coral Gold outside of Montreal, T CLH B Advamced low costits Nevada gold. mining/energy/technology $ 0.26 3/20/99 $ 0.55 plays $ 0.15 -72% Buy Eaglecrest Explorations C EEL C Multi-million oz. gold target in Bolivia $ 0.18 2/20/99 $ 0.16 $ 0.20 12% 25% Buy automotive line of batteries by 2004, following the However, with actual vanadium production from Lac Energold Mining Ltd. C EGD D Gold exploration projects - Dominican Repub $ 0.13 8/23/97 $ 0.61 $ 0.07 -44% -88% Hold Foran Mining * FOM C Gold & Basesector. Metal Exploration - Canada Dore at $ least 0.48 two 1/31/98 $ 1.26 -81% Hold launch in 2002 in theCtelecommunications years into $the 0.24 future,-51% this remains a Formation Capital T FCO C Copper/Cobalt/Gold play in Idaho & Mexico $ 0.21 4/13/96 $ 3.96 $ 0.24 14% -94% Hold high risk/high return proposition. As such, we Golden Phoenix * O GPXM B Advanced Stage gold & copper Explorat'n $ 0.23 7/3/99 $ 0.13 $ 0.20 -15% 50% Buy Goldcorp * N GG.A A Gold Producer low cost depositsuggest $ you 5.75 limit 5/1/99 $ allocation 5.94 $ 6.75to this 17% one 14% Buy Management - This company’s CEO with is major Gary your stock to IMA Exploration C IMR D Highly Prospectie Argentinian Gold Properties $ 0.40 2/5/00 $ 0.40 $ 0.37 -7% -7% Buy Westerholm been Aa Low successful mining no more than 5%$ 23.31 of your overall Newmont Mining * who has N NEM Cost - 2nd Largest gold producer $ 24.50 7/18/98 $ 19.44 -21% investment -17% Buy McKenzie Bay Int'l * O MKBY B Advanced stage diamond and vanadium projects $ 2.00 3/25/00 $ 2.00 $ 0.55 -73% -73% Buy entrepreneur in the past. Gary is a CPA by trade, but portfolio. For 7/8/00 additional information please-23% contact NovaGold Resources Inc. T NRI B Avanced Stage gold Mining Project in Alaska $ 0.44 $ 0.44 $ 0.34 -23% Buy Pacific Northwest Cap C PFNis his C Highly Prospect PGM targets $ 0.32 9/25/99 $ at0.27 800-631-8127 $ 0.86 165% 219% visit Buy his most important attribute ability to attract top in Canada investor relations or Placer Dome N PDG A Senior gold mining producer $ 10.75 3/20/99 $ 11.63 $ 9.34 -13% -20% Buy talent. Thus, has attracted some the top http://www.mckenziebay.com Polymet Mining Corp he * C POM B World Classof polymetallic Deposit - Minnesota $ 0.82 12/19/98 $ 0.64 $ 0.60 -27% -6% Hold Repadre Capital Corp. T RPD Canadian Gold and Diamond Royalty Company $ 1.35 9/10/99 $ 1.46 $ 1.25 -8% -15% Buy technical talent anywhere in theAA world with respect to Richmont Mines A RIC Producing gold mines in Canada $ 1.40 10/5/97 $ 3.85 $ 1.19 -15% -69% Buy Royal Gold mining and O production. RLGD A Gold Royalty Company $ 2.75 7/1/00 $ 2.75 $ 2.81 2% 2% Buy vanadium Stillwater Mining A SWC A Virginia Gold C VIA D X-Cal Resources Ltd. T XCL B Average Gain (Loss) on Gold Mining Stocks
Largest North American Platinum Producer $ 31.88 12/4/99 $ 23.13 $ 28.19 -12% 22% Buy Highly prospective gold claims in Quebec. $ 0.44 7/29/95 $ 1.75 $ 0.51 14% -71% Buy Operator on Sleeper Mine nearing production 0.24 4/8/00 0.24 $ 0.15 -35% -35% Buy (Including closed positions) ================================================================================= > -6.94% -20.48%
Proprietary Energy * Sharpe Energy
Oil & gas producer/ real estate/ mining expl. Producing oil & Gas Company - Texas
J Taylor’s Gold & Technology Stocks, (formerly J Taylor’s Gold & Gold Stocks) is published monthly as a copyright Technology Stocks publication of Taylor Hard Money Advisors, Inc. (THMA), Box 770871, Woodside, N.Y. Tel.: (718) 457-1426. Website: Altair International * O ALTI B Centrafugal jig recovers fine heavy metals 8/31/96 $ 3.14 $ 3.13 -22% 0% Buy www.miningstocks.com. THMA investment advice solely prod on a$$ paid4.00 subscription law, AMBI Inc. O AMBI Aprovides Develops & Markets Nutritional & Medicinal 4.88 2/26/00 $ basis. 4.88 $Under 2.63 copyright -46% -46% from Buy Birch Mountain THMA receives C BMD D Metallurgical Gold $ 1.45 11/22/99 1.02 $ 0.91 in this -37%publication -11% Buy time-to-time, a standard fee of R&D $250 per& PGM pageProject from companies whose shares$ are discussed in Biolabs Inc. * O BILB C Mammastatin test & therapy for breast cancer $ 6.56 2/4/00 $ 6.56 $ 5.00 -24% -24% Buy exchange for the right to reproduce reports written herein. Under the Right to Reprint Agreement, companies who purchase EMR Microwave * C EMW C Microwave for enhanced metal recoveries $ 0.15 9/25/97 $ 0.33 $ 0.11 -29% -67% Hold iExalt, Inc. to * reproduce articles, O IXLTacknowledge B Christian oriented e-commerce web site in this publication $ 4.31 2/26/00 4.31 $ 1.88 -56% -56% Buy the right that reports appearing and/or$ provided in the weekly telephone International Wex Tech C WXI B Pharmaceutical - Near commercial detox drug $ 1.99 11/5/99 $ 0.59 $ 1.65 -17% 181% Buy messages are intended for the exclusive benefit of the paid subscribers of THMA. Companies also acknowledge that THMA Integral Technologies O ITKG B Patented Technologies for wireless applications $ 1.96 7/1/00 $ 1.96 $ 1.81 -8% -8% Buy retains full editorial authority over the content of material published in this letter or spoken in the weekly hotline messages. Itronics Inc. * O ITRO A Photo waste recycled to silver & fertilizer $ 0.73 3/1/97 $ 0.10 $ 0.52 -29% 420% Buy Luxor Industrial Corp. LRL A Patented floor joist Construction Technology $ 0.39 5/22/99 $ 0.44 $ -30% -39% Buy Information contained CTherein is obtained from sources believed to be reliable, but we do not guarantee0.27 its completeness or its Napier International NIR C Prop. envionmentally friendly paint stripper $ 0.80 8/8/98 $ 1.40 $ 1.68 111% 20% Buy accuracy. The management of Taylor Hard Human Money Advisors, Inc. may,$ from to time, own of-6%the companies Ortec International O ORTC C Innovative Tissue Engineering 9.00time 1/15/00 $ 9.00 $ shares 8.50 -6% Buy Research Frontiersherein, such O REFR B SPD Light denoted Technologyby - Royalty Companybehind$ the 14.81 12/19/98 $ 9.63in $the28.19 90% 193% Buy recommended ownership being an asterisk names displayed chart above. However, Samsys Incorporated $ 1.73 1/15/00 $ 1.73 $ 1.65 -5% -5% Buy T SMY C Inventor of Radio Frequency ID Hardware (RFID) any purchases or sales of equities for(Including the account Jay Taylor or his family recommended herein >are made no sooner than 24 Average Gain (Loss) on Technology Stocks closedof positions) ================================================================================= -7.68% 42.7% hours following any such recommendations made herein or on our weekly telephone hotline service. No statement or Miscellaneous Stocks expression of any opinion expressed herein constitutes an offer to buy or$ sell the securities mentioned Cresu d Inc. (ADR) O CRESY A Agricultural production & Argentina Realestate 8.75 6/6/00 $ 8.75 $ 8.13 herein. -7% Subscription -7% Buy Helijet Fax: International C WMH runE-mail commuter helicopter transportation $ 0.24hotline 1/8/00 $ 0.47 96% 96% Buy rates: US - *$150; Direct mail AUSShort $99. $99 (13 mos) -E-mail weekly - $24/ 0.24 (13 mos.) T M
5/6/96 $ 5/15/99 $
Average Gain (Loss) on Miscellaneous Stocks (Including closed positions) ======================================================================= > 68.2% 85.5%
Other Portfolio Assets TAYLOR HARD MONEY ADVISORS, INC. Box 770871, Woodside, N.Y. 11377. Tel.: (718) 457-1426 The Prudent Bear Fnd * O BEARX A Well Managed Hedge fund for small investors $ 3.66 9/25/99 4.37 $ 3.53 Copyright @ 2001 TAYLOR HARD MONEY ADVISORS, INC. ALL RIGHTS RESERVED. The Prudent Harbor Fund O N/A A Well Managed Hedge Against the U.S. dollar $ 9.48 5/20/00 9.48 $ 9.45 Gold Silver Platinum Palladium
N/A N/A N/A N/A
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Time Honored Currency $ 290.50 2nd Best Currency in Mankind's History $ 5.40 Precious metal for Industrial use with rapid growth$ 443.00 Precious metal for Industrial use with rapid growth$ 451.00
12/3/90 $390.00 11/15/97 $ 5.29 12/17/99 438.00 12/17/99 $443.00
$ 282.70 $ 4.99 $ 585.00 $ 701.00
Feb. 13, 2001
-3.55% -0.32% -2.69% -7.59% 32.05% 55.43%
-19% 0% -28% -6% 33.6% 58.2%
Buy Buy Buy Buy Buy Buy
Published on Jul 13, 2012
The Lac Dore project is located in the Lemoine & Rinfret Townships in Quebec, less than 30 air miles south of the mining and forest serv...