"Patience is a Super Power" - "The Money is in the waiting"
Showing posts with label Canada. Show all posts
Showing posts with label Canada. Show all posts

Saturday, August 16, 2025

If North American consolidation in the REE/Li market is in the cards, AVL looks to be a consolidation lottery ticket!

 

 

Avalon Advanced Materials (TSX: AVL)

Consolidation Driver in the North American REE & Lithium Markets

(Some penny stocks shouldn't be overlooked. I believe AVL is one of those)


1. Strategic Position in REEs

  • Nechalacho Project (NWT, Canada):

    • One of the most advanced REE deposits in North America.

    • 2013 DFS gave an after-tax NPV of ~USD $900M (~C$1.2B).

    • Contains both light and heavy REEs critical for defense, communications, and EV motors.

    • Currently split with Vital Metals (North T Zone) → clear consolidation target for a single operator.

  • AVL’s Basal Zone holds the majority of resources, positioning the company as a natural consolidator or takeover target.


2. Strategic Position in Lithium

https://www.vmcdn.ca/f/files/nob/avalon-advanced-materials-thunder-bay-site-sign-2.png%3Bw%3D960https://www.vmcdn.ca/f/files/nob/avalon-thunder-bay-site-placement-map.png%3Bw%3D960
  • Thunder Bay Lithium Hydroxide Facility (Ontario):

    • 2024 PEA showed C$4.1B after-tax NPV and 48% IRR.

    • Only planned midstream processing hub linking Ontario/Northern lithium deposits with Southern Ontario EV/battery manufacturing.

    • A rare “ready-made” piece of infrastructure for OEMs or lithium miners seeking to capture IRA credits.

  • Lithium Deposits: Separation Rapids (Kenora), Snowbank, and Lilypad → resource pipeline for Thunder Bay facility.


3. Why Avalon is a Consolidation Prize

  • Few companies combine REE + lithium assets in one portfolio.

  • AVL offers both upstream resources (REEs, lithium deposits) and midstream processing (Thunder Bay).

  • Consolidating AVL allows a buyer to secure:

    • Long-life REE supply (Nechalacho).

    • A North American lithium hydroxide plant.

    • Eligibility for U.S./Canadian government incentives under the IRA and Canadian Critical Minerals Strategy.


4. Potential Suitors & Rationale

  • Critical Metals (CRML): Synergy with Tanbreez (Greenland); cross-Atlantic REE strategy.

  • Vital Metals (VML): Logical consolidator of Nechalacho (eliminate split ownership).

  • MP Materials (MP): U.S. REE giant; Avalon secures Canadian REE + lithium foothold.

  • Lynas Rare Earths (LYC): Expansion into North America to diversify from Australia.

  • Lithium Americas / Piedmont Lithium: Thunder Bay plant is the missing midstream link.

  • Tesla, GM, Ford: Direct EV/battery makers securing feedstock & processing capacity.


5. Buyout Valuation & Escalation Potential

  • Current Market Cap: ~C$22–25M (@ ~C$0.04/share).

  • Risk-adjusted strategic value: ~C$300–600M (C$0.50–0.85/share).

  • Likely opening bid: ~C$1/share (~C$637M).

  • If multiple suitors compete: Escalation toward C$1.75–2.10/share (~C$1.1–1.3B).

  • Extreme scenario (Tesla/MP with gov’t backing): Possible bid north of C$2/share if Thunder Bay DFS confirms economics + IRA/Defense contracts lock in demand.


6. Investment Thesis

  • Underappreciated value: Market assigns only ~C$25M to assets with multi-billion NPVs.

  • Strategic location: Canada = politically secure jurisdiction, aligned with U.S. supply-chain policies.

  • Consolidation catalyst: Split ownership at Nechalacho and fragmented lithium supply chain make AVL a natural acquisition target.

  • Bidding war potential: With REE + lithium both on the strategic critical list, more than one suitor is almost inevitable.


Conclusion

Avalon (AVL) is grossly undervalued relative to its assets. From a consolidation standpoint, it represents one of the few opportunities for REE and lithium players to secure a vertically integrated North American platform.

  • Entry today (~C$0.04/share) offers exposure to a potential 25×–50× re-rating if a takeover unfolds.

  • A realistic acquisition could settle around C$1–1.25/share, with upside to C$2/share in a competitive bidding war.


๐Ÿ‘‰ In short: AVL is a textbook “strategic consolidation play” in the REE market, with built-in lithium upside. The mismatch between current valuation and strategic value makes it highly attractive for patient investors — and a natural spark for a bidding war.


The three most likely suitors (MP Materials, Lynas, and CRML) would gain by acquiring Avalon Advanced Materials (AVL), and that could push bidding toward the C$2/share mark.


Takeover Case Comparison: Who Benefits Most from Buying Avalon (AVL)?


1. MP Materials (NYSE: MP)

Profile: Largest U.S. REE producer (Mountain Pass, California), backed by U.S. defense and IRA policies.

What They Gain From AVL:

  • Nechalacho REE deposit: Adds a second North American REE source, diversifying away from Mountain Pass.

  • Thunder Bay lithium hydroxide facility: Midstream processing capacity in Canada → critical for EV battery OEM contracts.

  • Canadian footprint: Strengthens IRA eligibility and helps qualify U.S. automakers for mineral sourcing credits.

  • Geopolitical leverage: Control over both U.S. and Canadian REEs makes MP the undisputed North American champion.

Why They Might Pay Up:

  • MP has the balance sheet (US$5B+ market cap) and political support to pay C$1.50–2.00/share for AVL if it locks out Lynas or CRML and secures Canada as a “REE & lithium fortress.”


2. Lynas Rare Earths (ASX: LYC)

Profile: World’s largest REE producer outside China (Mount Weld mine, Australia), with Japanese government support.

What They Gain From AVL:

  • Nechalacho REE deposit: A second production center outside Australia → diversification + North America expansion.

  • Thunder Bay facility: Processing hub ties them into the EV battery value chain — an area where Lynas currently lacks direct presence.

  • Strategic partnerships: Japanese offtakers (Toyota, Sojitz, JOGMEC) could be extended into Canada.

  • Geopolitical insurance: A hedge against China disruptions and over-reliance on Australia/Malaysia operations.

Why They Might Pay Up:

  • Lynas is under pressure to expand capacity in Western-friendly jurisdictions.

  • Could justify C$1.25–1.75/share, possibly more if MP enters the bidding.


3. Critical Metals Corp. (NASDAQ: CRML)

Profile: Developer of the Tanbreez REE project in Greenland, currently advancing a Definitive Feasibility Study (DFS).

What They Gain From AVL:

  • Nechalacho REE deposit: Complements Tanbreez, giving CRML two of the world’s largest non-China REE resources.

  • Thunder Bay facility: Instant midstream processing — CRML’s missing piece for vertical integration.

  • Lithium exposure: Expands portfolio beyond REEs, adding lithium hydroxide production → higher relevance to EV/battery markets.

  • U.S./Canadian critical minerals politics: Strengthens case for DOE/DoD funding, partnerships, and offtake deals.

Why They Might Pay Up:

  • CRML is smaller than MP or Lynas, so financing a C$1–2/share bid would require partnerships or equity raises.

  • But the strategic synergy is enormous — owning both Tanbreez and Nechalacho could make CRML a takeover target itself later.

  • Likely to bid in the C$1.00–1.25/share range, but might stretch higher if MP/Lynas enter the fight.


Who Would Push the Bidding War Toward $2?

  • MP Materials: Most likely, because of financial capacity and U.S. strategic interest.

  • Tesla or GM/Ford (dark horses): If they step in for vertical integration and secure lithium hydroxide, they could shock the market with a C$2+ bid.

  • Lynas: Would bid aggressively if threatened by MP’s Canadian expansion.

  • CRML: May trigger the bidding, but less likely to win against giants without financial partners.


Investment Takeaway

  • AVL’s unique REE + lithium + midstream combo makes it the only Canadian consolidator play with immediate strategic relevance.

  • Base case: Takeover at C$1–1.25/share (C$637M–800M).

  • Bidding war case: Escalation to C$1.75–2.00/share (~C$1.1–1.3B).

  • Extreme upside: If OEMs or governments step in, C$2.50–3.00/share is possible, though less likely until DFS updates are complete.


๐Ÿ‘‰ This is why AVL at ~C$0.04 today looks like a consolidation lottery ticket



the downside is limited, but the upside is multiples higher if a bidding war ignites

Ed Note: Disclosure: We've been acquiring shares in AVL UCU CRML

Related Articles:

REEs are critical to all cutting edge technologies now and early investors should be rewarded! We just took a small position in our 4th REE stock-CRML


Thursday, July 3, 2025

Kraken Robotics in a great position to help supply NATO navies with their sub sea technology - July Update!

 


Did Desjardin just Release the Kraken? - Kraken Robotics Investment and Business Report (June 2025)

Kraken Robotics’ recent momentum as a growing business and investment opportunity, now including these strategic dimensions:


๐Ÿ’ฐ 1. C$100 Million Bought-Deal Financing

  • What’s new: Kraken announced a bought‑deal public offering in June 2025—raising roughly C$100 million with a 15% over-allotment.

  • Why it’s positive:

    • Bolsters liquidity, enabling aggressive expansions or debt reduction.

    • Supports continued investment in acquisitions and manufacturing scale-up.


๐Ÿงช 2. Acquisition of 3D at Depth (Closed April 2025)


๐Ÿญ 3. Nova Scotia Subsea Battery Facility

  • What happened: Plans for a high-energy SeaPower™ battery plant in Halifax slated for late 2025 krakenrobotics.com+2krakenrobotics.com+2krakenrobotics.com+2.

  • Why it matters:

    • Strategic location: Halifax—Canada East Coast Navy HQ and major NATO port—offers logistical and defense synergies.

    • Defense reach: Perfect staging for contracts, including those with NATO navies. Infrastructure and proven naval partnerships are already in place.


๐Ÿ“ˆ 4. Robust Q1 2025 Results & Backlog

  • What happened: Q1 revenue was C$16.1 M with 62.7% gross margin, C$58 M in cash (up sharply YOY), and C$94.6 M in working capital.

  • Why it’s positive:

    • Confirms improved profitability, operational efficiency, and a strong cushion for growth.


๐Ÿงญ 5. Growing Bookings & Service Expansion

  • What happened: Since Q4 2024, Kraken received ~$45 M in subsea battery orders and ~$3 M in sonar bookings.


  • Why it matters:

    • Reflects sustained demand in defense and offshore energy sectors.

    • Validates product-market fit across diverse offerings.


๐ŸŽฏ 6. Defense & NATO Engagement

  • What happened: Ongoing contracts include $50 M+ for Royal Canadian Navy mine hunting systems in Halifax and past contracts with NATO navies (Australia and UK).


  • Why it’s important:

    • Halifax facility aligns geographically with Kraken’s East Coast naval customers.

    • Strengthens NATO interoperability and trust amid global naval tensions.


✅ 7. Comprehensive Subsea Ecosystem & Diversification

  • What’s evolving: Kraken now offers sonar (KATFISH™), LiDAR (SeaVision + 3D at Depth), subsea batteries (SeaPower™), and RaaS.


  • Pipeline inspection through Kraken Seapower
  • Why it’s smart:

    • Reduced reliance on a single revenue stream.

    • Offers integrated solutions for underwater defense and infrastructure clients.


๐Ÿ“Š Summary Table

StrengthDetails
Financial PowerC$100M financing + C$58M cash = strong investment capability
North American ReachU.S. operations via 3D at Depth + Halifax manufacturing
Defense EcosystemHalifax ties to RCN and NATO; major contracts secured
Tech PortfolioIntegrated sensors + power + service delivery
Proven DemandOrder backlog and major contracts affirm market traction

๐ŸŽฏ Why This Update Matters for Investors

  • Global Expansion: A U.S. footprint hedges geopolitical trade risks, unlocking access to American contracts.

  • Strategic NATO Positioning: Halifax location and facility align with allied naval operations, reinforcing defense supply chain credentials.

  • Integrated Tech Stance: Offers deep-tech defense clients everything from data to power, buoyed by recurring service demand.

  • Financial Firepower: Strong capital reserves enable execution of strategy without dilution or debt stress.


In combining financial strength, geographic diversification (Canada + U.S.), purpose-built naval infrastructure, and a full-stack subsea solution, Kraken Robotics has elevated its status to more than a sensor company—it’s now a strategically aligned defense-tech enabler with actual commercial momentum. These developments make it a more compelling long-term investment.

Here’s a deeper look into Kraken Robotics (PNG/KRKNF) covering contract timelines, valuation considerations, and the competitive landscape:


๐Ÿ“… Contract Timelines & Execution

  • Royal Canadian Navy Remote Mine hunting & Disposal System (RMDS)

    • Awarded: December 2022, with formal kickoff in January 2023.

    • Acquisition phase: 24 months, through end-2024, followed by a 5‑year integrated logistics support (ILS) program ($40 M acquisition + $10 M ILS) .

    • Operational readiness: RMDS installations expected fully operational in 2025 .

  • KATFISH Sonar System for Royal Danish Navy

    • Integration began in 2023, achieving full operational capability in early 2024.

    • Sustenance contract spans 7 years with potential extensions up to 21 years .

  • NATO Vessels Upgrade Contract

    • Roughly US $9 M follow-on deal secured in late 2022 for additional KATFISH units, tentacle winches, and autonomous launch-recovery systems (ALARS) .



๐Ÿ“ˆ Valuation Snapshot & Market Outlook

  • Analyst price targets: Average 12% upside to CA $3.40 (range CA $3.28–$3.68) over the next 12 months .

  • Intrinsic value vs market price:

    • Simply Wall St: Fair value ~CA $3.28, placing current price ~7% below fair value .

  • Key metrics:

    • Trailing P/E around 38× (Yahoo Finance), forward P/E not yet meaningful .

    • P/E ~42× vs industry avg. ~31× (Simply Wall St) .

    • EV/EBITDA ~28× vs sector avg. ~18× .

  • Growth: Earnings projected ~8% annually; last year saw ~136% growth .


๐Ÿ† Competitive Positioning

Strengths:

  • Integrated solution platform: Combines advanced sonar (KATFISH™, AquaPix™), subsea LiDAR (SeaVision + 3D at Depth), batteries (SeaPower™), AUVs, and RaaS—enhancing defensibility.

  • Long-term contracts:

    • Danish results show FOC achieved and a multi-year sustainment contract .

    • Canadian RMDS creates 7+ years of recurring revenue .

  • Global adoption: 

  • Deployed across the U.S., U.K., Australia, Denmark, Poland—plus mounting interest from NATO .

Risks:

  • High valuation relative to peers: Premium multiples imply investor expectations for continued growth.

  • Execution risk: Meeting ambitious contract delivery timelines across multiple large-scale programs.

  • Geopolitical dependency: Much revenue tied to defense budgets, which can be cyclical.


๐Ÿงญ Investment Implications

MetricInsight
Cash flow & marginsLarge multi-year contracts with sustainment provide stable, predictable revenue.
Geographic diversificationU.S. and NATO footprint hedges trade/tension risks; Halifax location aligns with naval operations.
Valuation debateDisagreement between growth-based models (Simply Wall St) and DCF-based (Alpha Spread); current price sits between fair-value estimates.
Catalysts
  • RMDS ramp in 2025

  • Further U.S./EU contracts via 3D at Depth presence

  • Continued deployment of KATFISH on NATO-MCM vessels |

Conclusion: Kraken’s strategic positioning, recurring revenue pipelines, and expanding global engagement present a compelling growth narrative. However, execution reliability and valuation premiums warrant careful monitoring—especially given its ~40× P/E.


Here’s a refined look at how NATO’s new 5% GDP defense‑spending pledge bolsters Kraken Robotics’ strategic positioning—and why it matters:


๐ŸŒ NATO’s 5% Defense Commitment


๐Ÿ“ฃ What This Means for Kraken Robotics

  1. Boost in Core Defence Procurement

    • With NATO countries winding up core defense budgets, there's greater emphasis and funding available for equipment like sonar systems (e.g. KATFISH™), underwater LiDAR, power systems, and autonomous platforms—all in Kraken’s portfolio.

  2. Infrastructure Spending Tailwinds

    • The additional 1.5% of GDP aimed at dual-use infrastructure—ports, bridges, cyber, and shipyards—aligns perfectly with Kraken’s Halifax battery plant and its sensor systems used for marine infrastructure monitoring and readiness.

  3. Special Defense Focus on Canada & Allies

    • Canada (currently ~1.3% GDP on defense) is expected to scale up significantly. Kraken’s Halifax facility—on the East Coast naval hub at a major NATO port—is primed to capture more contracts as defense budgets grow.

  4. Leverage European/NATO Industrial Expansion

    • As NATO boosts its defense-industrial base under this plan, Kraken stands to benefit from increased R&D and procurement contracts across the alliance, particularly in the U.S., Canada, and Europe.


๐Ÿ“ˆ Strategic & Investment Implications for Kraken

AxisPositive Impact
Revenue GrowthLarger NATO defense budgets widen pipeline opportunities for sonar, LiDAR, batteries, AUV deployments, and sustainment contracts.
Geographic & Industrial PushKraken's U.S. and Canadian build-out is well‑aligned with NATO’s spending surge, increasing its positioning as a key supplier.
Valuation UpsideGiven Kraken’s high multiples (P/E ~40×), securing new, credible NATO contracts supports earnings growth and validates premium valuation.
Execution RiskWhile budget increases help, Kraken must still deliver projects on-time and scale its capabilities to meet heightened demand.

๐Ÿงญ Bottom Line

NATO’s 5% GDP commitment is a paradigm shift in defense spending—a ramp-up that directly plays to Kraken Robotics’ strengths:

  • Its full-stack subsea offerings — sonar, LiDAR, batteries, AUV deployment — become increasingly relevant.

  • Its Halifax and U.S. footprint aligns with infrastructure investments and defense-alliances.

  • With large-scale defense budgets unlocking in the coming decade, Kraken is uniquely positioned to capitalize.


Related NATO defense‑spending news