Trading of BacTech Environmental Corp. (BAC:CSE;BCCEF:OTC;OBT1:FRA) shares resumed Monday after being halted Friday when the Ecuadorian government prematurely announced news of a new Investment Protection Agreement (IPA) with the green tech company that gives it a big tax break.
The agreement, signed last week in the capital of Quito, includes guarantees for the company's property rights, free transfer of profits abroad, freedom of import and export operations, international arbitration for disputes, and a 12-year exemption from income tax.
It's not the first such agreement for Ecuador. It signed a similar one last year with Australian major SolGold Plc (SOLG:AIM).
"They want development," Chris Temple, editor and publisher of The National Investor told Streetwise Reports. "They want to make sure that foreign capital especially is comfortable (in Ecuador), and knows it has a home."
BacTech President and Chief Executive Officer Ross Orr said he called for the stop in trading so the company could catch up and issue its own news release, which it did on Monday. When the dust settled and trading resumed, BacTech shares were up 15% at close.
The IPA's terms cover $95.5 million in plant construction and gold production activity through 2024 and additional investments and expansions, BacTech said.
First used commercially at the Fairview gold mine in South Africa in 1986, bioleaching technology has been in limited use since the 1980s. It uses naturally occurring bacteria to process metals and makes it possible to work with lower-grade ore and extract metals from tailings sites as wells as mines.
How do the bacteria eat rocks? Orr says picture a brick wall where sulfur is the mortar holding everything together in the rocks. The bacteria they use chew and oxidize the sulfides. Once the mortar is gone, the wall comes crashing down.
"They think the project is quite positive for the economy and for what they're trying to do, which is attract investment. It's another message from the government of Ecuador that they are open for business."
—BacTech President and Chief Executive Officer Ross Orr
In March, BacTech found out that Ecuador had approved the construction permit for its plant near Ponce Enriquez quicker than expected. The company expects it to start production in Q1 2023.
"They think the project is quite positive for the economy and for what they're trying to do, which is attract investment," Orr told Streetwise Reports. "It's another message from the government of Ecuador that they are open for business."
The tax savings also will be a boon for BacTech, he said.
"It allows the company to reinvest money that would have gone to taxes back into the project," Orr said.
There are dozens of small mines in the Ponce Enriquez area that produce significant amounts of arsenic along with gold. The 50-tonne-per-day plant would be capable of treating high gold/arsenic material and producing 1.75 ounces of gold per tonne of feed for about 30,900 ounces of gold per year, the company said. There is potential for expansion as the total availability of materials in the area is estimated to be 250 tonnes per day.
The project would have pre-tax earnings of approximately $10.9 million and a two-year payback period, according to data from EPCM Consultores.
The company said local miners also will make more money. It intends to return their compensation back to previous levels before a price reduction imposed by Chinese buyers due to recent import levies on arsenic/gold concentrates entering China.
Temple said that once the plant is constructed and starts producing cash, it's going to be "a domino effect" and others will see the benefits of bioleaching.
"The company will have people banging its door down for it," Temple said. "This company has still got tremendous runway in front of it."
BacTech Environmental Corp. has a market cap of CA$18.84 million and trades in a 52-week range of CA$0.06 and CA$0.17.
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