From the Wires
Applied Minerals, Inc. Issues Letter to Shareholders
By: Marketwired .
Nov. 19, 2012 06:32 PM
NEW YORK, NY -- (Marketwire) -- 11/19/12 -- Applied Minerals, Inc. ("Applied Minerals" or the "Company") (OTCQB: AMNL) issued today the following letter to its shareholders attributable to its President and CEO Andre Zeitoun:
Dear Fellow Shareholders:
It is my pleasure to provide you an update of the events of a busy 2012 for Applied Minerals. It is my hope that this letter will assist in providing you a thorough understanding of the Company's developments and accomplishments that have occurred over the last year, as well as offer some insights into the trends and opportunities that continue to shape our future.
While there are many ongoing commercial developments taking place, I would like to highlight a few key markets where our efforts to date have created major growth opportunities for our company. These developments have been the result of our intense R&D efforts over the years, which are now becoming commercially validated by our customers.
Our mission has been, from the start, to develop the highest and best uses of our unique halloysite resource to deliver value-added, eco-friendly solutions to industries in need. These are applications where we feel our product is, or has strong potential to be, the best available solution to the market based on three criteria: performance, pricing and environmental sustainability.
There is ever-increasing regulatory pressure being placed on manufacturers to reduce their carbon footprint by producing environmentally sustainable products. These pressures have created the daunting challenge of developing natural alternatives that can compete with the performance and price of the traditional chemical-based products. Behind this challenge lies our opportunity and it is the driving force behind our company's innovation mission. While there is still much work to do and challenges to face, we are confident that our company and its stakeholders are uniquely positioned to greatly benefit from this industrial transformation.
Technical and Commercial Developments
Flame Retardant Plastics
The growth in flame retardant demand is being driven by a trend toward more stringent safety and flammability standards. In spite of this increasing demand, widely used brominated flame retardants have come under increasing regulatory scrutiny due to the presence of the chemical decabromodiphenyl ether (deca-BDE) and its associated health risks. In response to these health concerns and the desire to maintain an eco-friendly image, product manufacturers have been phasing out the use of brominated flame retardants and replacing them with mineral-based alternatives, which are expected to realize above-average demand gains through 2014.
Mineral-based flame retardants, such as Alumina Trihydrate (ATH), phosphorus-based additives and Magnesium Hydroxide (MDH), represent roughly 65% of the total volume of flame retardant additives consumed. The required loading level of these additives needed to achieve acceptable flame retardancy in a polymer is very high (typically 65% for ATH and MDH), which can meaningfully impair the mechanical performance of the polymer. As a result, the use of these additives is limited to certain polymers and applications.
The limitations of ATH, phosphorus-based additives and MDH present a significant opportunity for our Dragonite products for the following reasons:
New Product Innovation Breakthrough in 2012
We have determined that Dragonite can replace 50% - 75% of ATO in a plastic while retaining the required Flame Retardancy Rating. We believe the cost differential between Dragonite and ATO would induce a manufacturer to replace a portion of its ATO with Dragonite. The global market for ATO is approximately 140,000 mt. We were invited to present our findings at two major FR industry conferences this year. This exposure resulted in significant interest from both end users as well as potential strategic partners. Many samples were sent for immediate evaluation by interested parties. Our findings have already been validated by two major ATO end users and have led to commercial scale-up samples with commercialization planned in early 2013. We have been approved as suppliers by both companies.
Quantification of the Flame Retardant Market Opportunity for Applied Minerals
Nucleation/Cycle Time Reduction of Molded Plastic Parts
In addition to a decrease in manufacturing costs, loading a composite part with Dragonite-HP at 1% wt increases the part's strength and modulus by 20% while also improving surface appearance. This means higher quality parts can be produced at a reduced price. This improvement in strength and modulus offers the potential for additional cost savings as it enables a manufacturer to take the process one step further and "thin wall" its parts, resulting in the use of less resin, which, in turn, results in even further reductions in cost.
One of our current injection molding customers is one of the largest manufacturers of lawn and garden tools in the US. There have been several additional customer validations of this technology during 2012 with numerous molding companies in commercial manufacturing scale up trials. Lastly, our product has recently been validated by a major polyethylene resin producer who is in the planning process of a commercial scale trial with our product.
The polyethylene market is 50 million tons per year. We are targeting 5% market penetration, which, at a 1% usage rate, would result in 25,000 tons per year of demand for our product.
New Commercial Development: Nucleation of Foamed Plastics
Dragonite eliminates this trade-off. Adding just 1% Dragonite to a foamed plastic raises its strength and modulus by 20%, allowing the part to be lightened considerably. This translates into a cost reduction through both lower resin use (resulting from the lightweighting) and a decrease in manufacturing cycle time resulting from the Dragonite additive.
We have teamed up with a leader in the plastics foaming field to commercialize a product that combines our Dragonite with their foaming agent. As a result, the company recorded its first commercial sales of this product to Kibbechem in 2012 with plans for rapid commercialization of this product in 2013. The product has been sampled to a number of customers who are at different stages of testing the product. The results to-date of their testing have been favorable. We were invited to present our findings at the PolymerFoam 2012 conference, which has also led to great exposure of the benefits of our product in the target market.
While we are in the process of quantifying the potential market opportunity for our products in this field, we expect that it will be potentially meaningful as the lightweighting trends seem to be gaining more and more market attention. We plan to report back to our shareholders as we learn more about this exciting market opportunity.
Corporate and Mine Development
Resource Development and Exploration
Dragon Mine Production Plant Expansion
Update on the Launch of Our Iron Oxide Pigment Products
Western Mine Iron Oxide
Dragon Pit Area Iron Oxide
We have determined that the quality of our in-situ iron oxide resource, as well as finished products, meets ASTM D3722. This globally accepted specification covers dry and wet ground naturally occurring iron oxide; dry and wet ground calcined naturally occurring iron oxide; and mixtures of these with synthetic iron oxides. These pigments are suitable for use in paints, coatings, and many other applications.
Iron Oxide Pigments - Domestic Production and Use
We feel that our iron oxide resource is a highly valuable one for the following reasons:
About Applied Minerals, Inc.
Information provided and statements contained in, and implications that can be drawn from, this letter that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended Section 21E of the Securities Exchange Act of 1934 as amended and the Private Securities amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this presentation and the Company assumes no obligation to update the information included in this presentation. Such forward-looking information, statements, and implications include, generally speaking, information concerning our possible or assumed commercialization of Dragonite and our iron oxide, the development of markets and our penetration of markets, an expansion of the list of customers and industries that may purchase our products or develop products around it, and increase in demand for our for our products, strategic alliances and partnerships. Such forward-looking information, statements, and implications also include information about our future results of operations, including descriptions of our business strategy. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see Item 1A, Risk Factors, included within our Form 10-K for the year ended December 31, 2011, which was filed on April 15, 2011. Although we believe that these forward-looking statements are based on not unreasonable assumptions, commercialization, development of markets and our penetration of markets, expansion of customer lists, and increases in demand for our products are dependent on many factors that are out of our control and there is no assurance that they will occur at all or if they occur, to what extent and when they will occur. In addition, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.
Cautionary Note to U.S. Investors - The United States Securities and Exchange Commission permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this letter, such as "measured," "indicated," and "inferred" "resources," which the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 10-K which may be secured from us, or from our website at http://www.sec.gov/edgar.shtml.
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