Green Cement and Cannabis offer additional options for Sunrise Resources.
“…Perlite is a particularly effective medium for the cultivation of cannabis, a market rapidly growing in North America – and beyond – as the plant is legalised. Sunrise may appeal to investors seeking exposure to a green commodity and also offer exposure to the cannabis market…”
Concrete tends not to excite, but the sheer scale of demand for a material that, after water, is the most widely used substance on Earth, continues to generate remarkable economic facts and figures.
To borrow the colourful imagery of one article, by the time it takes you to read this sentence, the global construction industry will have poured more than 19,000 bathtubs of concrete. In a single year, enough is generated to cover England. And since the turn of the millennium China has poured more cement every two years than the US did in the entire 20th century.
Not surprisingly, there are increasing concerns about concrete’s environmental sustainability. The mix of materials used to produce industry standard Portland cement is highly carbon-intensive, responsible for 5pc of global CO2 emissions. If the cement industry were a country, it would emit more CO2 per year than any other nation apart from China and the US.
Sunrise Resources (AIM:SRES) is seeking to take advantage of the industry’s gradual turn to sustainability by establishing itself as one of the world’s leading suppliers of pozzolan and perlite, elements in the cement mix that, sourced from naturally occurring volcanic ash and pumice, have a much lower carbon footprint.
As we reported in our last note on Sunrise in November, the company’s primary asset is a 100pc owned CS Pozzolan-Perlite Project in Nevada, permitted for the production of 500,000 tonnes per year of pozzolan and 100,000 tonnes per year of perlite. Sunrise also owns a cluster of Nevadan drill-ready gold, silver and base metal projects, at least one of which has reported highly encouraging results so far this year, opening the possibility of a joint venture exploration programme that could bring in new revenue to support the company’s core business.
Pozzolan is a silica- and aluminium-rich material that was widely used in the classical world. Mixed with lime, it formed cement-like compounds that constructed the infrastructure of the Roman empire – the roads, ports, viaducts, bridges, temples and monuments still standing today. It dropped out of industry standard cement mixes with the advent of Portland cement in the early 1900s, but is back in demand.
Perlite is a glassy volcanic raw material which when heated in a furnace expands into a pale low density material used in various household and industrial applications, including garden pots that aid water retention and aeration, insulation and fire proofing, paint texturing, plaster and concrete fillers, and industrial cryogenic storage vessels.
On coal and cannabis
Sunrise is positioning itself to capitalise on changing dynamics within the American pozzolan and perlite markets. Until the past few years supply has been largely met through the by-produce of coal-fired power stations, notably fly ash. But that supply has fallen dramatically over the past decade due to the rapid closure of coal-fired power plants. Since 2010 half of America’s coal-fired power stations have been closed or scheduled for closure.
Natural pozzolan of the kind Sunrise plans to mine is well placed to meet the supply gap. The company is ideally located to address a particularly acute shortage affecting the west coast pozzolan and perlite markets caused by the closure of the region’s largest coal-fired power station in Arizona. The US pozzolan market is picking up along with the rest of the economy, a recovery set to be super-charged by the $1.9tn green-oriented recovery package that has just passed through Congress.
And emerging trends in the US health market are opening fresh opportunities for perlite producers. The material is a particularly effective medium for the cultivation of cannabis, a market rapidly growing in North America – and beyond – as the plant is legalised. The global legal cannabis market was worth an estimated $12.2 billion in 2018 and is projected to grow at a compound annual rate of 26.7pc. The United States Geological Survey (USGS) science agency estimates there was an 8pc rise in US consumption in 2019, an increase sustained through 2020 due to the new cannabis legislation, and higher demand for horticultural products during lockdown. Sunrise is particularly well suited to help meet this emerging market, specialising in the production of the coarse perlite grades that facilitate the plant’s cultivation.
Moving towards production
Since our last update Sunrise has continued to progress the CS Pozzolan-Perlite Project towards production. Last year the company secured the Project’s mining permits from the US Bureau of Land Management, allowing it to move forward with detailed engineering and financial planning with a view to beginning commercial production this year. Sunrise has published a 27-year mine plan that includes a four-phase pit design targeting production of 14.5 million tons of pozzolan, starting at rate of 100,000 tonnes per year climbing up to 500,000 tonnes per year, and 1.3 million tonnes of perlite starting at minimum rate of 20,000 tonnes per year climbing up to 100,000 tonnes per year.
Last month the company delivered a 500-tonne pozzolan sample to a prospective client, a large US cement and ready-mix company, for commercial trials. In anticipation of positive results, Sunrise has commissioned its own strength testing of mortar blocks made using a 20pc substitution of ordinary Portland cement with natural pozzolan from a sub-sample of the 500-ton bulk sample, with analysis showing mortar strength well in excess of regulatory requirements.
The perlite trials have been delayed, but for seemingly positive reasons: the company testing the sample says it has as yet been unable to commit resources to the trial due to heavy demand for their own horticultural perlite product. Tests are expected to be completed by the end of this month. Sunrise is working with another contractor to fine tune the density of its perlite to ensure it is calibrated to the right grade for prospective clients.
The company has also reported progress with its precious and base metals projects. A week or so ago Sunrise reported encouraging assay and analytical results from the first hole at in drilling programme at Clayton Silver-Gold Project. Core from a 7.92m mineralised interval graded 303 g/t silver and 0.2 g/t gold was recovered, a higher grade than legacy data had suggested. In light of the unexpectedly high mineralisation Sunrise is considering the possibility of finding a joint venture partner for future exploration.
The company got the green light last month from an archaeological and ethnographic survey, allowing a proposed exploration drilling programme at its Bakers Gold Project to go ahead: no sensitive archaeological or ethnographic sites were identified within the three proposed drill areas. Sunrise will drill five reverse circulation drill holes between 100 and 200 metres deep later this month.
In January Sunrise announced the new Sundance Gold Project, located in the central portion of the Walker Lane Mineral Belt, a northwest-trending structural zone host to several productive gold and silver deposits. Nine mining claims have been staked following the discovery of anomalous gold in surface samples and the completion of an initial soil sampling programme.
The company raised money for its current programmes through a series of placings last year worth £1.3m. Its interim results to 30 September 2020 reported a loss of £302,902 for the year (2019: £301,738) and net current assets of £1,048,356 (2019: £7,821).
Sunrise hasn’t yet cast much light on the market, bumping along over the past year and a current share price around .20p and a market cap of around £7.75m. But with the dynamics of its target market turning in its favour, and a fully-funded exploration programme ahead we think this is another value prospect worth following, both for commodities investors and those seeking exposure to the emerging cannabis market.