It’s not every day you come across a business model like MetalNRG’s (LSE:MNRG).
The company has everything in place for serious growth, leveraging some of the most exciting energy and metal trends in the world across divisions operating in three thriving industries.
What’s more, its investment case has only been getting stronger lately, as support for its well-chosen industries continues to soar at a record pace in the face of global supply and sustainability concerns.
Here, chief executive Rolf Gerritsen talks MiningMaven through the group’s increasingly bright future and its innovative operational approach.
(Sample is chipped off pillars at MetalNRG’s Gold Ridge project)
Choosing wisely – How MetalNRG picks its investments
What first binds MetalNRG’s businesses together is the ultra-strict investment criteria they all meet.
Indeed, each offers not just short-term sustainable revenue and the potential for further development, but also exploration upside.
Specifically, the sectors the company is focusing on include gold mining (through the Gold Ridge project in Arizona), UK onshore oil and gas (through Brit NRG), and green energy infrastructure (through the MetalNRG Eco Ltd /EQTEC strategic partnership).
Each is its own special purpose vehicle (“SPV”), providing a unique degree of independence with separated leadership.
Not only that, but the independent nature of these SPVs makes them perfect candidates for future IPOs. In fact, the company plans to implement one of these spin-offs for Brit NRG within the next 18 months.
This is an increasingly popular approach among UK-listed firms when it comes to generating more value for shareholders.
For example, exploration firm Power Metal (LON: POW) plans to spin out a number of projects in its portfolio while pharma firm Open Orphan is spinning off its Poolbeg Pharma unit with others to follow.
The “ultimate plan”, says Gerritsen, is to reach the point where MetalNRG has “set up a number of investments that produce revenues”, putting it on the path “to start paying dividends to shareholders”.
He even sets out his philosophy for achieving this, saying:
“It’s about driving the company forward while managing the financial risks, strong leadership, and making sure that we’re focused on close to or revenue-producing assets.”
“Freedom in a box” – A unique approach to leadership
Gerritsen says MetalNRG’s leadership style will be particularly key to its long-term success.
Indeed, he describes the group’s approach as “freedom in a box”, with the leaders of each SPV being given full reign within certain parameters once their technical skills and pedigree have been established.
This is “absolutely vital”, Gerritsen tells us, since it means the SPVs each have the unique, specific technical expertise needed to deliver their projects.
Ultimately, these powerful leaders and their unique skills will therefore be what pushes these SPVs—and MetalNRG itself—forward.
Likewise, these characteristics mean that investors don’t just get a gold company, or a gas and oil firm, or a green technology business, but all three at once.
So, let’s take a look at each of these divisions in more detail…
Oil and gas
Brit NRG—MetalNRG’s closest division to IPO—is an onshore conventional oil and gas firm with three producing licences and six exploration permits, all in Lincolnshire.
Gerritsen points out that it is already profitable, producing revenue, and cutting costs with “its own strong management team”. Not only that, but there are opportunities for developing further upside and increasing barrel production.
(Map of Brit NRG projects)
But the bigger picture for this SPV is also important.
Indeed, Gerritsen highlights that oil and gas “is very much a transitioning industry”, and while “larger players” move to green energy he expects there will be “a squeeze on the supply side in terms of oil and gas”.
For this reason, he expects the upcoming ten to fifteen years to bring “an interesting dynamic” when it comes to prices.
When the spin-off is eventually complete, MetalNRG will continue to hold an economic interest in Brit NRG to retain exposure to this upside potential.
With its Eco strategic partnership, MetalNRG also has exposure to the green energy sector.
Gerritsen calls EQTEC (LON: EQT)—the firm with which it is partnered—an “outstanding company with some very strong unique technical processes” that is “uniquely placed to take advantage of projects close to delivering revenue”.
The chief executive says the sector at large is approaching “the next big growth phase”, covering “a lot more” than just wind farms and solar.
Indeed, the JV’s areas of investment focus include hydrogen, carbon capture, anaerobic digestion, fuel derived from biomass-woodchip and refuse, as well as gasification.
Gasification is EQTEC’s particular specialty.
Over the years, it has developed proprietary and patented technology for making a combustible mix of gasses known as synthesis gas, or syngas, from all kinds of waste products. This mixture can then be applied to generate all sorts of energy sources at a commercial scale.
Potential energy sources from EQTEC’s syngas include electricity, heat, biofuels, synthetic natural gas, and green hydrogen.
And as Gerritsen notes, in the face of growing demand, EQTEC is “uniquely placed to develop a pipeline of business and projects that are shovel-ready”.
Finally, in Gold Ridge, MetalNRG has access to waste dumps from previously producing gold mines, offering “relatively quick access to revenue”.
Not only that, but work at the Gold Ridge project in Arizona supports the potential to discover additional minable gold mineralisation.
(Rock showing high sulphide vein at Gold Ridge)
In fact, although ore has already been found in the waste dumps and pillars from Gold Ridge’s three historical mines, further work indicates the presence of a larger structural system connecting the project as a whole.
“We’re looking at those for open pittable opportunities that, if confirmed, would make the project potentially much larger and therefore much more financially attractive,” Gerritsen explains.
He also notes that gold “is fascinating in terms of potential pick up of the price”. Gold spiked in 2020 amid the Covid-19 pandemic, exceeding $2,000 per ounce for the first time on record. In 2021, the price approached $1,900 an ounce and could return to the $1,900 range again into 2022.
MetalNRG’s model sets it up perfectly to bring new opportunities into SPVs through acquisitions.
The focus, in particular, is on developing “cash generative opportunities, or those that are close to producing value”, as Gerritsen notes. However, the company is also focused on “undervalued assets” where it can step in and “add substantial value” with ease—something it is already doing at its existing projects.
In Brit NRG, adding value is possible “from a decommissioning angle”, says the chief executive. The division is already examining the decommissioning process—which can be a serious expense in the oil and gas space—and has identified ways to cut costs considerably down the line.
If these decommissioning costs can be reduced, then “the investment case will be substantially enhanced”, adding a great deal of value to projects.
In the EQTEC JV, meanwhile, added value comes from picking “projects that are called shovel-ready, but are being recommissioned”. Gerritsen notes that by recommissioning such plants, the JV can also take advantage of “historical premium tariffs”.
And—finally—at Gold Ridge, as well as looking at the area as a whole, the company is also looking at “other opportunities close to the previously producing mines” where value can be added.