Financial Research and Quantitative Trading Strategies for TSX Venture Investors

IZ.V - Swing Low.

February 6, 2019

International Zeolite (IZ.V) is an international marketer and supplier of natural zeolite and zeolite products. We initiated coverage July 2017, with additional notes on September 2017, February 2018, and July 2018. Zeolites are known for their absorption capacities for multiple industries.

 

- Agriculture: Odor control in composting, fertilizer in greenhouse, animal health and hygiene, as well as, a feed supplement.

- Aquaculture: Fish farming, aquariums, and transport, removing nitrates, nitrites, and phosphate to maintain water quality.

- Water treatment: Filtration, minimizing runoff, removing micro-organism (ammonia) and heavy metals (Cu, Zn, Ni, Pb).

- Industrial: Road salt replacement, absorbent for oil spills and radioactive waste containment, and gas separation.

 

Since our last note, the following releases have been issued.

 

Sept. 11 - Commences In-Field Fertilizer Research in India. Start of Phase I of its field research program with Ichaana Indo-Can Zeolite as partner and Professor Jayashankar Telangana State Agricultural University ("PJTSAU") based in Hyderabad, India. Hyderabad India is world's second largest consumer of agricultural fertilizers. Inadequate absorption of water soluble fertilizers cost India US$1.6-1.8-billion annually.

 

The research design and implementation protocols are concentrated initially on the usage of zeolite for the optimum absorption of Urea, a water-soluble nitrogenous fertilizer. Phase I of this program will focus on rice paddy crops — addressing the efficacy and efficiency of nutrient delivery with an objective of optimization of Urea usage in Indian agriculture.

 

Sept 25 -Filed an NI 43-101 Technical Report dated September 17, 2018 for its Bromley Creek Property. The higher the Cation Exchange Capacity (CEC) number the greater the capacity to absorb deleterious solutions and odors. 

 

Oct. 1 - Amends Terms of Share Purchase Warrants. Extended the expiry date and decreased the exercise price of 2,9M warrants. The new expiry date will be November 9, 2019 with a reduction from $0.75 per share to $0.50 per share.

 

Oct. 2 - Update on British Columbia Zeolite Properties 

 

Bromley Creek: The report states the measured resource estimate within the zeolite quarry area is adequate to meet current requirements. Future work on the property is also proposed. Sun Group: "A property of merit and further exploration is warranted". 

 

The Company has has seen an increase in demand from the agriculture sector for our current products for animal feed. Recently there has been a new demand for our zeolite in the absorbent and bulk road salt replacement markets and water filtration.

 

Oct. 4 - Earth Innovations Secures New Distribution in the USA. Orgill Inc. will supply products in the USA under its brands ecoTraction™ and ecoTraction PRO™. Orgill is the world's largest independently owned hardlines distributor providing access to over 75,000 products to retailers across North America and in more than 60 countries throughout the world.

 

Additionally, and subsequent to the May 11, 2018 announcement, the Company’s Earth Innovations is pleased to confirm that it will be participating as a Special Order Sales (SOS) vendor with Lowe’s Companies in the United States.

 

Oct. 23 - Update on Application of its Zeolite in Indian Agricultural Sector. The ongoing agricultural research undertaken indicates visibly identifiable changes observed between the control crop (without zeolite), and the zeolite infused crop.

 

International Zeolite is in the process of pursuing technologies to commercialize the manufacturing of zeolite coated urea.

 

Nov. 5 -Halted: Late Filing of 2018 Annual Financials British Columbia Securities Commission issued a cease trade order (the "Cease Trade Order") against the Company and securities have been halted from trading on the TSX Venture Exchange ("TSXV"). The delay in filing of the 2018 Annual Audited Financial Statements is principally related to the Company's acquisition of the private company Earth Innovations Inc.

 

Dec. 17 - Resumes Trading; Files Annual & Q1 Financials Interim Financials and Management Discussion and Analysis reporting an increase in gross sales of $193,000 compared to Q1 of the previous year. These figures include a 130% increase in sales at EII during the quarter versus the 2017 period, prior to the Company's acquisition of EII.

 

Jan 2 - Grant options: 1,6M stock options to directors, officers and consultants at $0.105 cents.

 

Jan. 14 - Receives Positive Poultry Barn Test Results. Results quantify the benefits of IZ.V's  poultry additive in turkey feed. Stage II of Trials now underway for broiler chickens readies the company for commercial marketing to feed mill. 

 

Dr. Lloyd J. Weber, Doctor of Veterinary Medicine conducted a live trial using International Zeolite’s poultry additive (Z-Lite Feed CFI Registration #991198): “It is my opinion in the Ontario marketplace that marketing to a feed mill is more critical than marketing to an individual producer. The key measure of success of this trial is the litter moisture. The moisture results are significant and were observed by the feed producers and their nutritionist and sales representative. Dry litter keeps the birds healthy and happy.”

 

Jan. 28 - International Zeolite to Post Record Sales for July - December 2018.  Results for the first half of fiscal 2019 indicate wholesale revenues from EII's flagship products, ecoTraction™ and ecoTractionPRO™, in excess of $468,000 for the six-month period ending December 31, 2018.

 

EII is on track to meet or exceed last year's sales for the current quarter (January to March 2019). and further expects to add several new retail and commercial distributors for the 2019 and the 2019/20 seasons for both its ecoTraction™ and Smell Grabber product lines.


Ichaana Indo Can Zeolite

The initial multi-conditional acquisition announcement (March 26) never materialized. Instead, an MOU for agricultural and poultry research ensued (Sept 11) with preliminary results delivered on Oct 23. While the results were positive, it was not welcomed. The day of the announcement the stock reach a 52 week low ($0.065). What was expected by the market (closure of the acquisition) was not delivered. 

 

Earth Innovations Incorporated (EII)

The increase in US distribution with Orgill and special order sales with Lowes (Oct 4) were noted. Despite the late filing which led to six week halt, the resumption of trading (Dec. 17) was met with positive earnings for Q1. In addition, the higher revenue guidance (Jan 28) and the further expansion of the retail and commercial distribution network for 2019 were welcomed by shareholders. In fact, this was a turning point for investor sentiments.

 

Miscellaneous

The filing of 43-101 on the BC properties (Broomley Creek and Sun Group) were important in determining supply. However, it is not clear what the overall plans are for these. In addition, there has not been discussion on the Arizona (KMI Zeolites) and Cuba supply sites to date.

 

Otherwise, the Poultry Barn Results (Jan 14) were no doubt a celebrated achievement for IZ.V. As indicated by the lead investigator: "It is my opinion in the Ontario marketplace that marketing to a feed mill is more critical than marketing to an individual producer." That may seem minor, but it is a significant finding as it will guide IZ.V's effort in marketing its products.

 

Summary

IZ.V lost half of its value in the past six months. The story seems related to managing expectations. Overall, releases were perceived to be incoherent (ad hoc) and not part of a comprehensive plan. The October 23 reaction is vivid example which no amount of insider purchases was able to counter. 

 

In addition, the recent significant earning announcements have not increased valuation.  Investor presentation and roadmap for 2019 are yet to be communicated. While IZ.V's commitment to the commercialization of zeolites are not in doubt, the manner in which it articulates its path is. 

 

If IZ.V wants to get back the market's attention, it will need to do better to convince it - For now, it swing low.

 

 

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions. 

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