126 Million Revenue Projections Over 5 Years As CTGX Mining Signs Acquisition Agreement
Wednesday, November 12, 2014
In the small and microcap space, name changes can be very common as companies try to find their space to execute a business model and management gets changed around. Market watchers also see plenty of Letters of Intent and Memorandums of Understanding that are publicized that unfortunately do not end up amounting to anything. Moreover, companies often announce merger and acquisition deals with unknown companies that are touted as being formidable in their respective industries, although little information can ever be found on said companies. That’s just the nature of the beast, but it doesn’t mean there aren’t exceptions.
CTGX Mining Inc. (OTCPK:CHCX) is a firm looking to be getting a deal done that has potential. The lineage of CTGX Mining shows incorporation in 1986 as Superior Growth Inc. and subsequently eight name changes later, looks to be sticking with its current name, according to a supplemental information filing posted on OTC Markets. The filing also shows the stock to be tightly held with 27.07 million shares outstanding and only 2.02 million in the float. Chancellor Investments Ltd. owns 94% of the issued and outstanding common stock.
The San Francisco-based miner owns a 95% equity interest in its subsidiary Chancellor Mining and Minerals, Mexico, which holds all rights to a mining concession in a 56,577-acre property in the state of Michoacan, Mexico. Roads to the virgin, open-pit type project and infrastructure (water, electricity, etc.) are in place. Initial sampling and analysis on the property showed a wide presence of lithium oxide, boron, gold, sodium, potassium and magnesium, while providing that there may be additional ores from the Rare Earth Elements discovered. CTGX says it intends to move forward with compliance work and additional exploration necessary to generate a NI 43-101 compliant reserve estimate and operational plan.
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In the third quarter, CTGX inked an MOU with specialty fluids company Aphtech Fluids, Inc. contemplating the acquisition of Aphtech by CTGX. No terms regarding acquisition price was released. Aphtech has a full line of chemicals, muds and other fluid products built upon its Aphron technology that it sells to the oil and gas industry. The Aphron technology has been used in over 1,000 wells across six continents and is protected by over 100 worldwide patents. Aphtech’s two subsidiaries, HiTech Fluids and MASI Technologies, have amassed a client roster that contains some of the biggest names in the business, including Shell (NYSE:RDS.A), Encana (NYSE:ECA), Total (NYSE:TOT), MEG Energy (TSX:MEG) and others across the world. In fact, although they are dated 2010, the HiTech Fluids website has testimonials from an Encana project manager and a MEG consultant praising the company and its technology.
Aphtech estimates revenue of $7 million for 2015, and expects that sales will increase in 2016 based on current projects. 2015 earnings before interest, taxes and amortization are forecast in the range of $1.8 million to $2.0 million. Revenue projections over the next five years are currently projected at $126 million with profits of $44 million, according to a statement today.
The potential deal has taken another step with an Acquisition Agreement being announced on Wednesday. Next up to complete the acquisition is the “appropriate” exchange of shares of each company being placed into escrow to be held until CTGX completes its obligation to raise $1 million for Aphtech for streamlining and improving current and future operations, market expansion and increasing the product line.
Also noted today was the resignation of CTGX CFO James Pinto and appointment of five new directors to the CTGX board, including Daniel Worthington as the new Chairman and Aphtech’s Wayne Crosbie and Tom Brookey as directors.
According to CTGX CEO Greg Trombley in August, CTGX planned to diversify, but he was referring to minerals in the company’s operations. The Aphtech acquisition is certainly broader-reaching diversification. There is some cloudiness in the details (for example, an 81%-stake in Aphtech originally announced with MOU news in September and no mention of percentage in latest news) and no real guidance on how the companies will operate going forward has been provided. CTGX has lofty ambitions, stating they want to raise $10 million in the next three years for Aphtech and turn it into a company generating $85-$100 million in revenue in the next five years, although it hasn’t completed a performance audit of Aphtech operations yet. Time will tell on those matters, as investors watch for the completion of the acquisition first. Shares of CHCX are trading Wednesday at 20 cents, equating to a market capitalization of approximately $5.4 million.
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