- Mining technology company Chrysos Corporation expects to go public this month after a roughly $180 million IPO and shareholder sell-off
- It brings to market CSIRO’s X-ray sample analysis PhotonAssay technology
- PhotonAssay promises to reduce carbon emissions and hazardous waste generated by the centuries-old fire assay process
The biggest resource IPO of 2022 isn’t a gold mine or lithium stonk.
It’s a mining tech stock that hopes to pave the way for the bold modern technology needed to propel the notoriously conservative sector into the 21st century and green energy transition.
Chrysos Corporation (ASX:C79), which grew out of technology developed by CSIRO in a commercialization partnership with RFC Ambrian, has become a contemporary disruptor in laboratory analysis.
It has rights to a technique developed by Australia’s main science agency called PhotonAssay.
The method, which has found favor with major gold miners and attracted famed Australian mining services company Ausdrill as an early investor five years ago, X-ray bombards drill samples to assess gold and other metal grades.
Faster, cleaner, safer and more non-destructive, Chrysos’ bad luck is that its PhotonAssay method will replace fire assay, a method of mineral analysis that has been used for 500 years.
It seems a matter of divine providence that the man tasked with bringing Chrysos to market is a nickel hydrometallurgist named Dirk Treasure, who says he has used PhotonAssay in all but one over time A handful of special applications displace sees.
There are currently 8 PhotonAssay units in operation, of which 33 are under contract for delivery by 2024. According to Treasure, the market goes well beyond that.
“We would fully expect to replace the fire test in virtually all of its uses,” he told Stockhead.
“There are some obscure areas where we wouldn’t ditch fire assay, it has a lower detection limit than we do, but realistically we’re getting at 10 parts per billion, 0.01 grams per tonne.
“They are at well below economic mining grades at this point.
“We estimate the market for PhotonAssay to be around 610 units and believe that we can capture virtually all of the market share.”
An ESG-friendly solution?
Chrysos has returned 2 million gold samples since launching its first commercial unit in 2018.
Beginning as a quick turnaround option for non-JORC resource activities such as grade and process control, it has since gained acceptance as a method of analysis for resources and reserves prepared to both the Australian JORC code and the Canadian N43-101 standard .
It fits well with the investor community’s emerging obsession with the environmental, social and governance credentials of mining companies and their suppliers.
According to Treasure, each sample transported from the fire assay to PhotonAssay will displace 450g of CO2 production and 300g of hazardous lead waste.
PhotonAssay units are also installed on-site at large gold mines. If these mines have the capacity to run their electricity-dependent solar and wind operations, that doubles to 900g of CO2.
“We’re not proving a new value proposition to the industry,” says Treasure.
“We’re replacing something they’re already doing, which is a non-discretionary expense for the industry.
“We are replacing a technology that is labor intensive, polluting, slow, uses a lot of consumables and so on.
“For every single sample that we replace with a fire sample, we reduce carbon emissions and the production of hazardous waste. For us, this ESG advantage of the technologies is a direct benefit of this substitution.
“If you then look at the size of the target market and our current penetration, we are removing carbon and hazardous waste at a low rate compared to what we will do once we start dominating the market.
“Every single new unit we deploy removes tons and tons of carbon dioxide that fire testing would otherwise produce.”
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Pioneering technology
Chrysos is seeking to raise $65 million in its IPO from new investors at $6.50 per share, with existing shareholders including CSIRO also selling $118.5 million worth of shares.
Existing shareholders will retain 78.7% of the company.
It is listed with a projected market capitalization of US$637 million and is considered one of the best commercial investments by the state-funded scientific organization.
“For the CSIRO, we want to make sure this is what they’re doing to get the most money from each investment,” Treasure said.
“I think WiFi is their biggest investment to date. So if we can make them more money than WiFi, then that’s the goal.”
Treasure said the value proposition for Chrysos is that it takes something that’s already been done in the industry and improves on it.
Additionally, it has established itself as a supplier to major labs like ALS (ASX:ALQ) — which bought Ausdrill Perenti Global’s (ASX:PRN) minanalytical business last year, SGS and Intertek — rather than as a competitor.
Treasure says he doesn’t see Chrysos as an analytics company, but as a mining technology company.
“What made it easier for us is that mines cannot operate without analysis,” he said.
“You can’t build up reserves, you can’t mine anything, you can’t process it. You cannot make a product without knowing your gold content at every point in the process.
“So for us, we’ve probably had an easier ride than some of the other technologies, but there are a lot of very, very interesting technologies in the pipeline that are proving their value proposition.
“And for Chrysos, as we move forward, we’re going to keep an eye on these companies in the same way that I would say this will be the mining industry.”
According to Dirk Treasure, PhotonAssay could almost entirely replace fire assay. Image: Ross Swanborough/Chrysos
There’s a lot going on out there
The mining industry is operating at an incredible pace these days, with exploration spending reaching near-record highs amid a boom in commodity prices.
According to S&P Global, global drilling spending increased 35% to $11.2 billion in 2021, with total exploration budgets expected to increase an additional 5-15% in 2022.
Laboratories have been unable to cope with the influx of work, a situation exacerbated by labor shortages and supply chain issues due to Covid, with assay turnaround times stretching into months in some cases.
Chrysos’ listing comes at a time when lab analysis firms are exploding on the back of the boom, with ALS shares up almost 25% over the past 12 months. Back in March, ALS, fueled by its geosciences division, increased its FY22 NPAT forecast by 6.3% to $260-265 million.
Treasure says Chrysos’ technology will not fix the residue seen on the lab door.
But there may be benefits for miners with the weight of accommodating a machine in an on-site lab.
Unlike X-ray fluorescence, a handheld X-ray technology used to assess base metal grades at exploration sites, PhotonAssay can assess gold grades (not just proxies) with a high degree of accuracy.
“It’s an amazing time when it comes to tailings in the industry and it must be very difficult for these miners because as much as XRF can provide you with some sort of base metal grade and/or elements that can be indicative of gold in the sample, it’s like no quantitative analysis of gold can give you,” Treasure said.
“What we’re going to do is we’re going to increase the capacity and thereby reduce the backlog, but when you have the unit in the lab you don’t get that instant turnaround time.
“Having on-site means that the more miners they take and bring directly to site, they have complete control over their turnaround times.
“I would say I don’t actually know exactly what the turnaround time for PhotonAssay is in WA right now, but I would say it’s still two to three weeks.”
Is there more to come?
Chrysos is the first company to be publicly listed by RFC Ambrian, a natural resources management consultancy that has shifted to mining-oriented venture capital investments in recent years.
The listing comes as RFC intends to close a $75 million VC fund aimed at finding and supporting other technologies that will help modernize and improve the industry’s ESG metrics.
Chrysos is currently scheduled to be listed on May 6th.
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