How To Value A Patent: American Manganese

TM Editors' Note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

Investors are constantly on the hunt for new, undiscovered or undervalued opportunities.

In my opinion, the American Manganese story would easily fit this description.

American Manganese Inc. (AMI) trades on the TSX Venture under the symbol AMY and in the U.S. markets on the pink sheets as AMYZF.

The company currently has a market capitalization of approximately C$30.5 million with 150 million shares outstanding. So by many standards a very small company.

Many investors tend to shy away from small companies, particularly if they are trading on the Venture Exchange, but, in my opinion, that would be a big mistake with AMI.

About American Manganese Inc.

American Manganese Inc. is a diversified specialty and critical metal company focused on capitalizing on its patented intellectual property through low cost production or recovery of electrolytic manganese products throughout the world, and recycling of spent electric vehicle lithium ion rechargeable batteries.

Interest in the Company’s patented process has adjusted the focus of American Manganese Inc. toward the examination of applying its patented technology for other purposes and materials.  American Manganese Inc. aims to capitalize on its patented technology and proprietary know-how to become and industry leader in the recycling of spent electric vehicle lithium ion batteries having cathode chemistries such as:  Lithium-Cobalt, Lithium-Cobalt-Nickel-Manganese, and Lithium-Manganese.

"American Manganese inc., has successfully completed proof of concept testing and filed for the US Provisional Patent Application and is presently studying potential downstream benefits to guide the Company’s next phase of work.  The Company has successfully recycled lithium cobalt cathode material, and is working with Kemetco Research Inc to complete recycling bench tests on nickel, aluminum and manganese cathode chemistries and cobalt ores.  Work to date suggests high recovery rates of materials at industry-standard purity levels, ready for reuse."

Mr. Norman Chow, President of Kemetco Research Inc., says:  “There is currently no known commercial technology for large scale recycling of cathode materials of multiple chemistries.  Spent cathode materials represent an ideal resource material to be processed with American Manganese’s proprietary hydrometallurgical process.”  Independent third party examination of the process chemistry concurred that it should be technically viable.

AMI has now filed patent applications to recycle lithium ion batteries and are getting 100% recoveries of lithium, cobalt, nickel and manganese. Many of these commodities could be in short supply in the next few years but AMI will be recovering them through their patent process.

AMI sees the recycling of cathode materials as a significant opportunity for the following reasons:

  • Cathode materials comprise approximately 25% of the value of lithium-ion battery packs.
  • There is increasing demand for cathode raw materials with inelastic supply (namely cobalt) and other raw materials such as lithium, nickel, manganese and aluminum.
  • Environmental regulation, as well as voluntary environmental stewardship by socially conscious companies, is expected to create demand for the recycling of raw materials in the production of lithium-ion batteries.

AMI, will probably become of great interest to those companies producing Electric Vehicles (EV) like Tesla, General Motors, Ford, Volkswagen, etc , battery gigafactories, an Apple or Panasonic or established recycling companies like Albemarle Corp., Glencore Plc, etc.

AMI seems to be in a unique situation for a small/tiny company now possessing the patents which will soon be of interest to the big companies mentioned above.

Recent articles in the mainstream news:

So, how do you value a patent?

I did a quick google search and will give you a few references for those interested in exploring all of the legal and technical specifics but I quickly found that this subject is well beyond the scope of this writer and probably most investors:

I like Rick Rule's approach as a value investor looking for undervalued companies. Rick is President and CEO Sprott U.S. Holdings Inc.  I equate Rick's expression of "Price Is What You Pay, Value is what You Get" to AMI, in that current investors are able to buy the shares at a greatly discounted price and value is what investors will receive in the future via substantially higher prices as the markets and others realize the true value of AMI.

So, how do you value a patent and thus the future share price of AMI?

I have no idea, but suffice to say, it will be substantially higher than the current share price of C$0.20, perhaps by a multiple of 5 to 10 times or more, in my humble opinion.

In full disclosure, I am a substantial shareholder of American Manganese and am somewhat in disbelief, as are others, that the shares still trade around C$0.20. I am in touch with Larry Reaugh, CEO, ...

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