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Zinc One – Your Ultimate Choice To Ride The Bull Market In Zinc

 

* Zinc is turning the corner where supply won’t be able to meet demand, hence prices are heading even higher
* Large mines have been closed down and there’s nothing in the pipeline to replace that production shortfall
* Underground zinc mines/projects are looking at 5-8% grade, Zinc One’s Bangará Mine is >20% Zn starting right at surface. This is the equivalent of a gold mine with Au 15gr/t grade
* People – Nothing is more important and CEO James Walchuck is a company builder and mine builder – he builds mines for a living

Zinc One – A Junior With A World-Class Mine

Zinc One Resources (TSX-V: Z OTC: ZZZOF) is a fairly new zinc company that was launched on January 24th, 2017. Right out of the gate Zinc One announced an acquisition of a world-class asset, the former producing Bongará Zinc Mine.

The move to acquire the Bongará Zinc Mine, including the Charlotte Bongará Zinc Project, will put Zinc One Resources (V.Z) on the map of imminent zinc producers.

Bongará is a former producing, very high grade mine in Peru that was closed down in 2008 due to low zinc prices. The land package also includes the Charlotte Bongará zinc project and this is the first time these two adjacent projects have been owned by the same operator which makes this even more attractive.

In fact, these two projects combined offers an incredible opportunity to identify a very high-grade resource along a 4km-long trend.

Grades – There’s nothing like this

A normal zinc deposit runs around 5-8% Zn, and that’s true for many of the deep underground deposits that are around today. Bongará has over 20% Zn with sweet spots of even more than that, up to 25-30% Zn.

And here´s the beauty of this story – it sits right at surface. The Bongará project is one of the highest graded zinc mines in the world that is located in a great jurisdiction. It will be mined by open pit and there’s very little overburden, basically just use excavators and truck it to the processing plant.

So, what does open pit mining really mean? Well, it’s the absolute best way of mining with potential hurdles easier to handle. More importantly, it’s the cheapest way of mining. We like low cost and low cost is how you make money.

“We don’t know of any other deposit that is out there right now, in the world, that is mining with these kinds of grades” – Jim Walchuck, CEO

So how much is 20-25% Zn grades? What is it worth? How much is it in terms of gold equivalents?

The resource is worth around US$640/tonne or the equivalent of 0.5 oz/t of gold  (15 gr/t Au). There are very few mining operations in the world with these attributes, even fewer that are open pit mines.

Bongará is a unique project and it could fit well in the portfolio of any mid-tier mining company. In fact, as Zinc One moves Bongará closer to production, there’s a real risk/possibility of Zinc One being taken over.

Potential for the stock Z.V

Zinc One is well-funded having closed a $10-million financing a few months ago. After it’s all said and done, we are looking at approximately 98m shares outstanding, or a ~45 Mcad market cap.

We know things don’t happen overnight, but now with the acquisition finalized and lots of money in the bank, Zinc One should very well motivate a market cap of anywhere between 100-200 Mcad, probably even higher than that as the bull market in zinc moves spot prices higher.

That indicates a potential upside of at least 2-5 times from today’s levels. It’s our guess that Zinc One will become a “zinc-market-darling” over time as there aren’t that many “pure” zinc juniors out there. Even fewer of them are of any higher quality and with the fundamentals for zinc being so strong, we are thrilled to have Zinc One as our core zinc holding.

In comparison to Zinc One, one can look at Arizona Mining. Formerly known as Wildcat Silver, this poor management tried to market their flagship project as a silver project back in the day when silver was hotter than zinc. Arizona has exactly three times (!) as many shares out as Zinc One and a market cap of almost 900 million (seriously!?). On top of that, at least from our point of view, Arizona is poorly run and might also have very big issues with their metallurgy. If we were into shorting, we would seriously consider shorting Arizona Mining and go long Zinc One Resources.

As we have explained earlier to our subscribers, large zinc mines have already or are on their way of closing down and this supply shortage isn’t going to be met with any “quick fix”. Spot prices are currently sitting around a very healthy $1.38/lb, zinc is in a bull market and we think it’s going a lot higher. Don’t you just love this chart below?!

Meeting the management

On several occasions we have had the pleasure of meeting with Zinc One’s CEO, James (Jim) Walchuck. This guy is truly a hardcore mining guy with a vast experience of building companies and putting together the right teams. Mr. Walchuck is an experienced mining engineer with 36 years in the mining industry under his belt. He left us with an impression of being a calm and structured man but with his mindset to build a fast growing and aggressive zinc company. Jim’s background is the one of being an operator – we know he will by assets that can be put in production.

In the mining business, nothing is more important than the people running the company. Without great people, it doesn’t really matter how good of a project the company has. Jim Walchuck and Zinc One is a perfect match.

“The goal of Zinc One is to have this mine back into production in 24-36 months” – Jim Walchuck, CEO

Gecko Research meets and talks to CEO Jim Walchuck

We urge everyone to listen to Jim as he discusses the Bongará project and its advantages to other projects.

Zinc One is put together by well-connected and well-known people in the mining industry and as this new story unfolds, it will get a lot of attention in the market. We have been buying shares both in the recent financing as well as in the open market.

We own shares in Zinc One and we have done our due diligence. It’s time you do yours.

Gecko Research sends out a Weekly Update to our subscribers. It’s a free publication where we write about what we do with our own money. Don’t forget to read our disclaimer.

New Investment Idea – Hello Pal (CSE: HP)

Jan 3, 2017

Introductory Remark

The article below is the exact newsletter that was sent out to our subscribers on Tuesday, July 19th, 2016. We would like to take the opportunity to get readers who are not yet subscribers to have a feel for what we are doing at Gecko Research.

Our newsletter is free and easy to sign up for, just make sure that you add ‘info at geckoresearch.com’ to your contact list to ensure that our emails end up in your inbox.

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Introduction

Many of you are probably caught by surprise now as we normally are thought of as being a resource newsletter and while that is true, it’s also far from the truth. We make investments in order to make money, it’s as simple as that, and when we see an opportunity we like we act on it. At the end of the day it’s all about risk vs. reward and today we are introducing a tech company that offers great reward in our mind.

Ten days ago we travelled to the beautiful city of Hangzhou in China (this >9 million people city will host the next G20 Summit on Sept 4-5, 2016) to see for ourselves what Hello Pal was all about. Not only did we get the chance to meet the friendly and welcoming staff of Hello Pal, we also had the opportunity to meet with one of Hello Pal’s largest shareholders. We went to the offices of New Margin and sat down with its Managing Partner Mr. Hans Xu.
Mr. Xu is one of the largest shareholders of Hello Pal and his/New Margin’s participation is a large part of our investment decision.

It’s mind-boggling how large the upside can be if Hello Pal turns out to be a success. We are not saying this will be the next Snapchat or Twitter, but Hello Pal most definitely has all the components to reach its own level of success. And for the next 12 months or so, we see very little risk which we will explain more about.

Hello Pal (CSE: HP / OTCQF: HLLPF / Frankfurt: 27H)

To invest money in an app are in many cases a “fly or die” scenario, either it won’t go anywhere or it will fly to the moon. So while these investments are quite risky, we would suggest that Hello Pal isn’t as risky due to the participation and backing of its largest shareholder New Margin.

Investment Highlights

  • Hello Pal was recently launched and already achieving high numbers of registered users with no marketing and thousands of new users registering daily
  • Recent oversubscribed financing and no debt with low burn rate.
  • Launching aggressive PR and user acquisition campaign. Expansion of technical and marketing team
  • Major Chinese shareholders with substantial financial backing and deep business and entertainment networks
  • Messaging has emerged as the new frontier of social on mobile and apps built on messaging platforms have high user retention and engagement
  • Rapidly growing language learning market particularly in mobile E-learning

People
Many people can come up with a great idea, but if you don’t have the right people to execute the idea, it’s at risk of becoming a failure. KL Wong, founder and CEO of Hello Pal, has an impressive CV to his name. KL, a Malaysian born, studied and worked in the UK for 10 years. He graduated with a law degree from Cambridge University and started off his career as a lawyer at Clifford Chance (world’s largest law firm) in the UK and Hong Kong. KL is fluent in English, Mandarin and Cantonese, and has a working knowledge of Malay and French. He is currently learning Japanese and Korean.

In 2008, shortly after the birth of his daughter Felicity, KL founded BrillKids Inc., creator of the multiple award-winning early childhood education program Little Reader. Having already one internet success under his belt, KL Wong knows what it takes to make Hallo Pal his next success.


Money, Valuation & Listings

Hello Pal first got listed on the CSE (Canadian Stock Exchange) on May 13th of this year after closing an oversubscribed placement of C$1.8m. Most of this money will be used in large part for user acquisition in order to aggressively increase the user numbers further.

Apart from a strong investor demand, Hello Pal also has the backing of New Margin, one of the top three Venture Capitalists in all of China with more than US$3B under management. New Margin has invested more than $1.7B in more than 160 companies of which over 40 have gone public in domestic or international stock exchanges. That track record speaks for itself and as the Chinese are well-known for their patience and shrewdness, we don’t see a lot of risk in the next year at least as New Margin will support Hello Pal going forward.

In the world of apps & internet the upside is virtually unlimited which makes for great risk/reward. And although the risk is also there, we don’t see it as very big in the first year or so because of the backing and strong connection to New Margin. Hello Pal will not have an issue finding new money as they go forward.

Hans Xu, whom we had the pleasure to meet on our trip to China, is a key managing partner at New Margin. Not only that, he is personally one of the largest shareholders in Hello Pal. For someone with Hans’ connections, influence and investment experience, Hello Pal must be a small investment in comparison. That tells us a bit on how big the potential in Hello Pal is.

Now why would a multi-Billion VC firm invest and support a small start-up app? What’s better than a quote from Hans Xu himself on the matter:

“Hello Pal is one of the best app ideas since I saw QQ* which is now worth billions”

Fully diluted, Hello Pal has 70m shares which at 40 cents give the company a Mcap of 28 Mcad. With what’s known today, that feels like a fair valuation. At the same time one must recognize that Hello Pal is a fairly new company and unheard of by most investors. As milestones are met and the app grows, we think the industry will be forced to discover and recognize Hello Pal. The potential for exponential growth is absolutely there and if that happens, we want to be invested.

Hello Pal’s main listing is on the Canadian Stock Exchange under the symbol ‘HP’. To make things easier for international investors, Hello Pal has established secondary listings on the OTCQF under the symbol ‘HLLPF’ and on the Frankfurt Exchange under the symbol ’27H’.

*QQ is a chat application for Facebook

 

What is Hello Pal?
Hello Pal has several layers which makes it very useful for a large audience even though their needs might be slightly different. This is also a large part of why we think Hello Pal has a great chance of success.

Hello Pal was launched on Android in May 2015 and on IOS in November 2015. By June 1st (seven weeks ago) Hello Pal had more than 700,000 downloads from more than 100 countries without having been promoted at all. It’s amazing what word-to-mouth can do if the app is good, but imagine what could happen when the company soon starts to actively promote Hello Pal in order to expand the user base.

Hello Pal is a free social language learning app where phrase books, vocabulary lists, translation tools and an integrated social network all combined turns Hello Pal into a great language learning tool.

As a user, you don’t need to know a single word of Chinese, Russian, Thai and Spanish etc. in order to instantly communicate and make new friends. By using Hello Pal’s partner matching system, you can connect with people all over the world, without the barrier of not knowing their language. The best way to learn a new language is by speaking it and that’s exactly what Hello Pal will let you do.

The app is absolutely free and on top of the main Hello Pal app, there are also six separate phrase books available for downloading (Chinese, English, French, Spanish, Japanese and Korean).

hp_programmersProgrammers working in the offices of Hello Pal, Hangzhou, China.


Going forward from an investment perspective

We learned that Hello Pal has an average of 3,500 downloads/day and that number has been steady for months. Assuming that the growth continues in the same pace, roughly 105,000 new users are added every month. By end of August or early September Hello Pal should be able to have north of 1m downloads, an even more impressive milestone when one considers that this has been accomplished with little money spent on marketing.

In order for the company to start monetizing Hello Pal (creating revenue), we have asked around and the general opinion is that at least 2m users is required. If we assume that marketing efforts along with increased peer-to-peer recommendations speed up new downloads, that 2m mark could be accomplished 6-8 months down the road. It’s our opinion that once that 2m hurdle is achieved the investment risk is significantly lowered and if >3m downloads is reached, we may have a home-run on our hands.

When the 1m mark is reached it does not only give Hello Pal plenty of time to further develop the app, Hello Pal is also sending a clear message that they should be taken seriously.

Just five weeks ago, Hello Pal surprised us a bit when they were able to hire Daniel Kou as their Chief Technology Officer. For a small start-up to attract such a respected and experienced person as Daniel Kou is very impressive to us. Daniel’s experience ranges from app development, system architecture design and programming to project management and product design, and includes 8 years working at Huawei Technologies as Chief Architect of several key product lines.

daniel_kouHello Pal Appoints Former Huawei Chief Architect Daniel Kou as Chief Technology Officer.

In the picture above, Daniel Kou is presenting to us the next product coming out of Hello Pal, the Hello Pal Travel app. Out of the whole idea ‘Hello Pal’, the company intends to develop three apps; Hello Pal, HP Travel and HP Language Learning (we are not sure of the name yet).

The bottom line when developing social apps like Hello Pal is to get enough users to be able to monetize; implement in-app purchases such as translation services, stickers, games and much more. We have bought an initial position and we are prepared to be patient with your investment, but we will always be part of the possible trigger that when dealing with the internet and apps, things can explode overnight. As targets are reached and progress is made, risk is lowered and our investment should appreciate.

learn_travel_date

Paper
The only point we would like to make here is short and concise, Hello Pal is not a mining company in the need of 10-12 years and 200m to build a mine. Their cost structure with offices in the Ukraine, Hangzhou and Hong Kong is tight and we don’t see future financings as very dilutive. In fact, since we assume that most of the cash in future financings will go towards expanding the user base, this will be extremely accretive for shareholders.


Conclusion

Going back to the Introduction above:
“It’s mind-boggling how large the upside can be if Hello Pal turns out to be a success. We are not saying this will be the next Snapchat or Twitter, but Hello Pal most definately have all the components to reach its own level of success.”

We would like to add to that an even more important component, at least for the next 6-12 months before the app gets more established, and that is the participation of New Margin. Their presence provides Hello Pal with help to industry collaborations, secure future financings and in general provide their industry knowledge and expertise.

Our investment in Hello Pal is something that may require some patience on our part, which is not a problem for us. At the same time it’s an exciting feeling to know that a tech company like Hello Pal can virtually explode to the upside under the right circumstances.

 

Downloads

Gecko Podcast: Interview with Founder and CEO Mr. KL Wong

Hello Pal Investor Presentation (pdf)

Hello Pal News Releases

Hello Pal Quick Tour (YouTube)

Hello Pal Tutorial – The Basics (YouTube)

Hello Pal Tutorial 2 – Text and Voice Messaging in a Foreign Language (YouTube)

Hello Pal Tutorial 3 – Helping Your Pal When Receiving And Sending Messages (YouTube)
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