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AMNL - Applied minerals


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It is a halloysite clay mine with a very quick catalyst (early next year), and 4-5 bagger potential . Normally I am very sceptical with mining, but this one has drawn my attention, because of the high inside ownership. There is a great write up on VIC, and a ok one on seeking alpha. They explain the details much better then I could. Would recommend reading that to get the details here.


What makes this interesting like I said is the high inside ownership. David taft, a turn around fund manager with excellent track record (1900% from 1990 to 2004) owns about 22% and is director, and the CEO owns 7.5%. And the market seems to underestimate its potential here.


They are finishing a facility that they will use to process this halloysite clay early next year. It was suposed to be finished this year, but there were some delays in construction.



From page 134 on I think, they explain the potential of this clay, and the markets it could capture. I have also read various independent recent research papers that confirm this clay has high potential and is pretty rare apparantly, and they are sitting on the motherload basicly. And what makes this interesting are the margins (because it is easy to mine and of high quality), and the fact that they could get a pretty high price for it once it is processed. Details are in the write up on VIC and that resource statement.


The two red flags I can think of are the delay of the processing facility, and the exorbitant management compensation paid in 2012. But then again, inside ownership is 30%. Upside could be large, and there is a quick catalyst to make up for the risk (?). And I guess they don't seem to promote their company much. This is more a lack of a red flag, but still. :)



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Well I can see this board is very excited about this idea :P .


they just signed a distribution agreement with a large distribution company for their flame retardant:



Not sure what the implications are tho.


I cannot copy from the resource statement (page 134 link in OP), but basicly current material (ATO) used in flame retardants costs 11k $ per ton, and price has risen 5 fold in the last decade (and 100% in the last 3 years). If you read various independent research papers about halloysite, you will see it can be effectively used for this. They also explain this in detail in their research statement. They expect to fetch between 3-5k$ per ton for their product (they already sold test quantities for this price). While cost of making it is expected to be 100$ per ton I think (the v low cap ex makes this idea interesting, because the deposit they are sitting on is so rich). But lets assume this is 800$ and they get only 3k$, then with their production capability of 40k tons p/a (that is only a 2% market penetration) that is suposedly 88 million in profit. They can increase this capacity quick and cheap (if i have to believe their 10k) .


Lets make it 40 million to be safe, and it is still cheap at the current price. And the facility to produce this is suposed to be finished (soon). This is not counting in their waste piles that could be sold to the fracking industry (they are strategically located for this) and the iron oxide that can be produced once their facility is finished. that is suposed to get them several million in profit as well.


Now the above agreement is suposed to enter them into this flame retardant market. But I am not exactly sure what this means in reality.  I really hate the fact that the CEO gets paid so much, one reason why I havent pulled the trigger yet. He owns 7.5% tho, and the rest of the board owns the remaining 22% or so. The investor I mentioned even bought stock with his own money (and not just his fund's). And he probably has a better idea what is going on.

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  • 2 weeks later...

Some papers on flame retardancy and halloysite clay, they are behind a paywall, but you can see the conclusion






Can probably find more. But basicly lots of promising applications for this, even besides this. But if there wasnt 30%+ inside ownership, I would toss this in a second. But that and the multibagger potential within a year kinda bugs me. The material looks legit, I looked up prices, and there is an actual demand if this clay does what it says it does for this price. And a valueinvestor with a impressive track record owns a quarter of the shares. ZINC anybody? They set up the distribution agreement as well. Which seems like a big step in the right direction.


To give some further explanation, this clay consists of tiny hollow tubes that can absorb liquid. This is suposed to be pretty rare in nature and would make it usefull as a flame retardant. You also need much less then most other flame retardants (which limits the use of the much cheaper flame retardants). And its eco friendly, which is v important, because if its an additive then it will leak out over time. ATO which is used now is going for much more then this, and this is basicly more effective and cheaper.


if you look at these fillings:





All insiders are all hoarding up the stock, which really makes me believe the above story. This whole thing reminds me a little bit of that Malone warrant situation with Liberty Media. At what point can you just say fk it, and believe the story when insiders all put their money where their mouth is? If this would stink then the CEO would just sell the shares hes getting through his option compensation, instead of keeping them all right? Unless hes a total idiot.


No one has an opinion on it? Was hoping to see some chemist value investors here :) . If you get to the bottom of this, call up a bunch of the right people then you might get a v accurate view on the potential here. If garbage like JCP can generate many pages of discussion, this should at least get a few comments?

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On the surface, this looks like a total scam to me.


The G&A expenses relative to exploration spending is completely out of whack.  It looks like insiders are feasting off of the company's money.


Its halloysite mine seems to be horribly uneconomic.



Since January 1, 2009, the Company has sold only $258,694 of clay and no iron oxides or mineralization from the waste piles and there is no assurance that it will sell significant amounts of any of these resources or sell sufficient amounts with sufficient profit margins to be profitable.


The borrow costs 3.75% on IB.  I'm surprised it's not higher.

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shorting this seems like a horrible play, Terrible risk reward. And the reason it looks like a scam on the surface is precisely the reason this is cheap. But if you look uunder the surface then it makes zero sense to be a scam.


Most of the G&A is stock option compensation. But they are not turning them into cash. Why wouldnt they do that? Doing this as a pump and dump makes zero sense with this large inside ownership (40% actually, material advisors is basicly owned by the CEO). Every insider is increasing their ownership. They also did little promotion in the last few years. No seeking alpha articles (in contrast to companies like Odyssey, that spend alot on promotion and have like more then a dozen seeking alpha articles). Also the reason they havent had any significant revenue is because this is a new material. You need to do  experiments and tests first to see if its legit then do exploration to see how much you got, market it to companies you want to sell it to , they need to verify it. And once you get the green light you build a facility to process it.


It seems like a really weird scam, owning alot of stock (again 40%) , not really promoting it etc. If you start pumping and dumping this it seems the stock will just crash ?  And it would mean that one of the directors is basicly feasting of his own 25% stake? While not turning it into cash. Who would do that.


Looks like to me they just want to own as much of this as possible before they start turning this clay into major cash and the stock shoots up. While not making it look v attractive to increase their insider ownership at a lower price. That is why this whole thing reminds me a bit of liberty media and Malone.

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But they are not turning them into cash.


There's a S-1 filing for major shareholders to sell their shares.




2- The CEO has an interesting non-mining background:


Mr. Andre M. Zeitoun has been the Chief Executive Officer and President of Applied Minerals, Inc. since January 12, 2009. Mr. Zeitoun founded Material Advisors LLC and serves as its Manager. He has been a Director of Applied Minerals, Inc. since January 12, 2009 and Member of Executive Committee. Mr. Zeitoun served as a Portfolio Manager at SAC Capital LLC, where he was in charge of a several hundred million dollar portfolio invested primarily in companies that required an operational and/or financial turnaround. Mr. Zeitoun is graduate from Canisius College.


If this was a legitimate company, I wouldn't want somebody like that in charge.  I would want somebody who has successfully brought a profitable mine into production.  The CEO should have a track record of success.


3- A lot of pump and dumps have large insider ownership.



I have no position in the stock currently, I may end up shorting it in the future, and I wish you the best of luck.



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I have zero expertise in mining, but one of the precepts of the Toyota Production Process is loosely translated : "go see for yourself".  Applying TQM principles to a situation with uncertainty cries out for an on sight visit with a knowledgeable local person or mining engineer who doesn't have a dog in this hunt.


Why is this rich deposit of a material that supposedly works better than what is currently used sitting there with waste tailings and no sales?  Its supposed value per unit of weight would seem to make it economical to haul to another facility for processing.  What happened to the stuff that was removed when the tailings were produced?


The S1 filing linked by ItsaValueTrap shows that of the dozens of purchases of their stock by insiders only a handful netted any proceeds to the company, evidently to provide a little working capital.  The S1 filing lists bankruptcy and going concern issues as risks, but says nothing about the details of  their mining prospects.

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But they are not turning them into cash.


There's a S-1 filing for major shareholders to sell their shares.




2- The CEO has an interesting non-mining background:


Mr. Andre M. Zeitoun has been the Chief Executive Officer and President of Applied Minerals, Inc. since January 12, 2009. Mr. Zeitoun founded Material Advisors LLC and serves as its Manager. He has been a Director of Applied Minerals, Inc. since January 12, 2009 and Member of Executive Committee. Mr. Zeitoun served as a Portfolio Manager at SAC Capital LLC, where he was in charge of a several hundred million dollar portfolio invested primarily in companies that required an operational and/or financial turnaround. Mr. Zeitoun is graduate from Canisius College.


If this was a legitimate company, I wouldn't want somebody like that in charge.  I would want somebody who has successfully brought a profitable mine into production.  The CEO should have a track record of success.


3- A lot of pump and dumps have large insider ownership.



I have no position in the stock currently, I may end up shorting it in the future, and I wish you the best of luck.



So they are getting legit funds to put money in and then buy shares and proceed to pump and dump? Also David taft is a legit value investor with a very solid track record. He actually has his own money in this. Your basicly saying the CEO is scamming the funds then?


It just seems like the weirdest pump and dump ever. The points I brought up are hidden somewhere in a resource statement, just seems like this would really be a next level pump and dump then.


Also from the VIC write up;

Anecdotally, Imerys (ticker NK FP, a eu3.7bn market cap company based in France) scoured the globe for a deposit similar to what they acquired in NZ - one of much lower purity halloysite, with a high content of crystalline silica (a carcinogen), used for fine china applications. In the end, the Imerys chief geologist (1974-2001) in charge of the search was unsuccessful, but took a role as consulting geologist with AMNL (in retirement) once he became familiar with the Dragon Mine deposit.


David taft (director and investor who owns 25%) interview from 98



Doesnt really sound like a guy who would get into an incredibly weird pump and dump like this. Sounds like he could post on this board.


Also wtf does thismean?



And in the S1 statement it says that Berylson is selling shares, and only owns 2.5 million after that? But in the Def 14a it says he still owns 6.5 million shares? All confusing as fk. Would love to know how this scam is working, and why exactly they are scamming here then. Id short it as well :D .


If i managed a fund i supose i would drop by with a scientist. But im not that rich


To add, if you  look at the credentials of the people involved, doesnt look exactly like a pump and dump team:



Seems like if anyone is qualified to commercialize this its this guy:

Khanna, Yash



Dr. Yash Khanna, Ph.D., is Chief Technology Officer of Applied Minerals, Inc. Dr. Khanna is a globally recognized in plastics, functional fillers and additives with over 38 years of industry experience. From 2005 through 2009 Dr. Khanna served as a Senior Technology Fellow/Director of Technology for Imerys, a $5 billion minerals-based specialty solutions company. From 2001 through 2004 he was a manager of the Reinforced Engineered Thermoplastics division at Rayonier, a $3.6 billion international forest products company. Dr. Khanna's professional career was spent at Honeywell (formerly Allied Signal) where, from 1975-2001, he worked in the firm's Corporate Research and Technology Center as a Research Group Leader/Senior Principal Scientist. At Honeywell he also held the position of Business Unit Liaison to the firm's Specialty Films segment and was a key technologist for the Packaging Resins business where he was involved in new product development and marketing for North America and Europe. Since 2009 he has been the President of InnoPlast Solutions, a consulting firm providing educational conferences, courses, and problem solving services to the plastics industry. Dr. Khanna had been a technical consultant for Applied Minerals since 2010, a time during which he developed an understanding of the Company's Dragonite material, introducing the product to a number of companies that are at various stages of commercialization. Dr. Khanna received his M.S. and Ph.D. degrees in Polymer Science & Engineering from Polytechnic Institute of New York University. Dr. Khanna has authored more than 120 research publications, is listed as an inventor of 25 U.S. patents, and has been awarded the Plastics Engineer's International "Engineering/Technology" Award (2001), the North American Thermal Analysis Society's Fellowship (1998) and the International Mettler Award (1997).


Googled this guy, and he really exists. So hes either in on it, or they are using his name without telling him. Which seems extremly unlikely. Seems like if you want to use this material as a flame retardant for plastics, you need this guy on your team.


Some more papers:





Articles are behind a paywall. But the summary shows the conclusion. Seems like if this was a pump and dump, they would show stuff like this in flashing letters on their website? Instead of making your targets search for it and decipher some summary on a scientific website. basicly more confirmation of the promising uses, and also that there are different qualities of halloysite.  Some hold water better then others.

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It doesn't have to be a pump and dump to be a bad investment.


Invert.  In order to be a good investment, AMNL has to be good at mining, processing and selling halloysite. They have extremely minimal experience doing any of those things.  Also, with the market cap $92M greater than book value, the first $92M they earn is already baked into the price. How can you make those assumptions with any margin of safety?

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Let me clarify:


They probably have a real mine.  The issue is that the halloysite clay / "nanotubes" "nanoclay" stuff is a science project where they are trying to develop a market for the clay.  Apparently there used to be a market for the clay decades ago before some substitute material came along.


They've been trying to market halloysite clay since 2009 or earlier.  (I haven't done that much research.)  So far, it hasn't been working out.


I like to short promotional 'science project' type stocks.  It's just an area that I am very cynical about.  If you wanted to run a fraud, one of the ways to do it is to promote a science project type company.  Very few people would understand the technology (I don't).  And you can make crazy predictions about how profitable the business will be since nobody knows.  Lastly, because it is a science project, the fraud can last a long time because you can claim that there are legitimate delays and so on and so forth.  (Though the VIC writeup said that the company should be producing revenue by now.)

I believe this is what the last management team was doing (or tried to do, before the company ran into financial difficulty).

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aaah so you say they basicly suckered institutional investors then, since all the money came from institutional investors? I still dont get those S-1 statements. It states that they own a certain amount after offering, and then i check the Def 14a and it says they still own alot, which is like a month later.


Still seems weird that they manage to get in scientists/executives with such a good reputation then, who have an impressive track record. You would say only shady people with not much of a past would be involved in this.


Fwiw the previous use of this material was different then what they are currently trying to sell it for. The whole thing just seems weird, it would mean that one of the directors is also getting scammed at least (taft). Why are those SEC statements such a pain in the ass to read lol.


Just to summarize some facts here, because im just fascinated by this whole thing. :)


- Zeitoun buys the mine from previous management that were shady, and boots them all out. The fraud was that they were selling it for different purposes, but grossly overstated earnings. New management proceeds to get over 30 million$ in the last 4 years from mostly institutional investors, and zero from regular investors in private deals. A good part of that goes to stock options for the insiders, that are mostly not turned into cash (?) Those fking S-1 statements, i dont understand them (?)


- succesfull value investor David Taft is director, and heavily invests in this, increasing his holding over the years. Both Zeitoun and him put more then a million$ of their own money in this when the price was at 1.60$. Seems like a bad move when you basicly need production to take the stock any higher if its a scam. At a market cap of 160 million $.


- Various experts in the field of flame retardants with impressive track records and careers are involved with this, they all speak highly of this the material in this mine. Current CTO won like 3 science awards in this field I think. Looked it up and they were legit. Some of them left from higher up technical management companies in billion $ chemical companies.


- Geologist of billion$ company searched the globe for such a high quality deposit in the late 90's for imerys, a billion$ company. But didnt find it. He got involved estimating the resource reserves.  I will contact him, because I found his email adress.


- They have sent the stuff to researchers worldwide, and they all think this particular high quality halloysite is very promising. But ofcourse this doesnt mean that much. THey could be retards or made up. Allthough the few I looked up seemed to exist. Still means they could just be incompetent tho.


- company was in exploration and R&D state from 2009 to 2012. Started building a processing plant in 2013 to process this halloysite clay into their Dragonite XR product used as a flame retardant. Plant was delayed, because of a delay in material from the manufacterer. But its finished now.. Isnt it normal for mining companies to be in exploration? No mining company just starts pulling the stuff out of the ground in year 1 or 2. Especially not when its a new market.


- They have various agreements with large billion $ companies to supply this material, and their Iron Oxide. Why would they waste efforts on this if this is not worthwhile? They already sold small quantities to these companies.


- They appointed Rogerio Galante, whos going to be put on the Iron Oxide business. He has 15 years experience in that field in a 12 billion$ company specialized in this, being in senior management. He says the deposit is very high quality, and this is very promising.


- There is 70 million$ of silver and gold found (used to be a silver mine a long time ago i think), but they didnt hype that up anywhere. If this was a scam wouldnt they hype up anything positive? They probably didnt mention this because its not economical to mine it.


Now is this Zeitoun guy a very manipulative sociopath scam artist that he gets all those scientists with impressive careers and track records in on this scam to lie for him to investors? Or is he just honestly trying to get this of the ground, but does he have some setbacks? Not sure what is going on. Seems as soon as they start selling at least several thousand tons then this is an instant buy. But not sure if it will still be cheap enough then. Even if this is a scam then you could buy it and not lose much if you stop believing their story next year. But they still manage to get some new suckers in.

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You would say only shady people with not much of a past would be involved in this.


To clarify:


Let's say you have a 'science project' type business except that you're trying to make money WITH shareholders instead of FROM shareholders.  Examples:




-any tech stock that is bleeding money because it's still in the R&D phase

-a mine with some new metallurgical process (e.g. nickel deposits and high-press acid leaching), e.g. Vale's Goro project


You would want competent people in charge.  If I invest in a mining company, I would want a CEO and head geologist who have participated in developing a profitable mine at least once in their career.  From a business perspective, that would make more sense than having random people run the business.  A career in portfolio management is not a great background... it's not related to mining or developing a new market for a material.


He also worked at SAC Capital... so he may be questionable on the integrity front.  He soon left SAC, so I wonder how competent he was at his job (*employee churn at SAC may be high; read Turney Duff's book The Buy Side).


On the other hand, Zeitoun is not some serial penny stock promoter (and the stock market has a lot of those...).  So I suppose that's a good thing.


2- What some people do is to take a real business that lends itself to stock promotion.  Then they go out, sell stock, and enjoy a six figure salary as the CEO for as long as the company still has cash.  Some of these real businesses go on to make crazy amounts of dough (e.g. Steve Madden)... it's more of the exception than the norm.


That may or may not be the case at Applied Minerals.


The fraud was that they were selling it for different purposes, but grossly overstated earnings.

I've never made that argument, fyi.

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Ok appreciate your opinion. Dont want to  let this turn in some ego arguments :) .


I disagree somewhat with your statement that the CEO is not suitable. Didnt he attract alot of talent so far?


Last CTO:


Maybe im easily impressed, but that seems like a pretty impressive career. Seems like he laid the ground work. ATO is the stuff that current costs 11k$ per ton. His notes on AMNL:


Applied Minerals Inc.

februari 2011 – april 2013 (2 jaar 3 maanden)Greater New York City en omgeving, Verenigde Staten

New applications, technical marketing, IP and product development of Halloysite, a unique nanotubular clay into plastic, coating, adhesive, thermoset and elastomer applications. Examples of new applications introduced:


- Reinforcement for thermoplastics, thermosets and elastomers

- Halogen free FR (used alone or as a synergist)

- ATO replacement (lower cost plus better properties)

- Plastic foam enhancer (lower density, better mechanicals)

- Productivity booster (injection molded and extruded parts)


Wrote brochures, presented at conferences, created the Dragonite Handbook, the definitive guide to the properties and applications of the mineral Halloysite. Mineral processing optimization and new surface treated grades. Attained GreenScreen rating and received food contact status for use in plastic.


Co-ordinated work with consultants, sales people and hundreds of prospective clients globally.


current CTO, seems like he is hired to sell it with his connections in the industry:



And then there was the geologist at Imerys. The guy in charge of the Iron oxide business also seems very suitable. And then he also attracted some scientist to run the processing facility who also has an impressive career.  It just looks like he went into this, bought the mine and a bunch o f stock, and is now attracting people with the right skills to execute this. And I dont think you need much mining experience to mine this stuff. This is not some narrow copper vein.


And fwiw he left the same month that evidence was presented tot he court about insider trading in SAC capital. Not sure what that is saying.


Either the first CTO is lying about the potential or he is incompetent. Looking at his credentials, he either has to be lying or its true. What motivation would he have to make shit up and tarnish his reputation for some 100 million$ OTC stock?

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And fwiw he left the same month that evidence was presented tot he court about insider trading in SAC capital. Not sure what that is saying.

According to Turney Duff's book, SAC was doing insider trading since the Internet bubble days.  They made a killing when they shorted the whole market right before Nortel missed earnings.


I'm saying that the culture at SAC may have been questionable for a very long time.


2- The CTO is probably a good person, does his job honestly, and I could imagine him being hard working.  I don't think that he'd be tarnishing his reputation for working for Applied Minerals.  (In the same way that it's ok to have worked for webvan or some other failed Internet Bubble company.)


The question is whether or not the business has a positive expected return.  Remember that Halloysite has been around for a very long time.  This is pretty much a science project because they are trying to generate new markets for the material.

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I think it is better to wait this one out then. I supose as soon as they manage to sell at least several thousand tons in the first half of next year we can see the economics exactly.


Regarding ROA, cost of mining similar clays is 100-150$ per ton. Those clays only bring in several 100$ per ton, so ROA isnt anything amazing there. Then there are other flame retardant clays selling for about 5-600$ per ton. But you need alot of those, and are not practical in alot of situations. That is why you still need ATO flame retardants. Costs have shot up for those, and most of them come from china. They are trading for 11k$ per ton.  They claim they have sold their Dragonite for 3-5k$ per ton in small quantities for R&D. Which is suposed to replace ATO completly. As backed up by that chris dearmitt CTO guy. It needs to be processed into dragonite tho. But i doubt that will cost more then 8-900$ per ton. The plant is suposed to be able to produce 40k tons per year of the stuff.


I supose you could try contacting Mitsui plastics pretending to be a company who needs a flame retardant clay and see what they say.


One red flag i discovered is that they increased the amount of issuable shares to 200 million from 120 million. Which worries me a bit. Another thing that worries me is if they are legit they try to hustle the stock away from stock holders for a lowball price and take it private.


It still strikes me as really weird that a director with 25% , who bought most of the stock when it was at like 30-50 cents in 2007 and 2008 wouldnt exit, but only buys more. You would say he would ask any of the experts involved to verify if this isnt a scam. How the hell is he going to offload 25% of the stock? He could have made a 400% gain like a year ago selling stock, but instead he bought more at that price.


And to add about the high margins, Imerys has 12% operating margins, they mine, process and sell the cheap kaolinite clay, and other clays. That sell for up to several 100$. The mining process here is basicly the same, except they can sell it for several thousand.

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  • 3 months later...

It dropped in  price  a bunch. The guy who holds like 25% just bought 500K$ more with his own money. He is a smart value investor with like a 20%+ annual return over a long period. He is on the board, and obviously has more information then we do. Other Directors havent been cashing in their options. All the insiders are increasing the stake, and if it does what i think it will do this thing should be worth ALOT more. Why the hell would be buy more if he holds this much already?


My poker background is screaming buy, but my valueinvestor principles dont allow me :( . It fking bothers me lol. There is so much indirect evidence now that this is a gold mine waiting to explode.

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