Draslovka CEO Brůžek reports the first orders for groundbreaking method that makes gold mining cheaper

03/22/2023 - E15

INTERVIEW

The Kolín-based Draslovka is stepping up its global expansion and is gradually approaching the mass industrial deployment of its promising technology for glycine leaching, a process that extracts metal from ore in special tanks through chemical reactions. After launching a number of pilot projects, Draslovka's chief executive Pavel Brůžek Jr. revealed for the first time that the company has already won its first commercial contracts, for two smaller African projects. "This clearly shows where it can lead in the case of significantly larger miners. Without us, this mining would not have started at all," says Brůžek.

Your company has recently announced that it has acquired its first official customer, namely Barrick, which will test your gold recovery technology by leaching glycine. How long will that take?
It's the first official partner, but there are actually many more. It was crucial for us that we reached an agreement with Barrick, which is a company that ends up being the largest or the second largest gold miner in the world every year and owns eighteen gold mines. This is obviously a significant milestone for us, it validates the thesis that our product is globally significant. We are further along in our testing with some miners, some of them are already at the phase of industrial use, but these are smaller companies than Barrick.

Does that mean you and the others are even closer to industrial application?
For the medium-sized players, we are quite far along, for some of them we are already at an advanced stage of testing, and for the really small ones we already have two industrial applications. That means a purely commercial relationship where the miner uses our technology. These are smaller commercial projects in Africa that would not have gotten off the ground at all without this technology because they would not have worked out financially. These are mines that would not be economically feasible by default, would not exist at all, and with our technology, they can make a profit even with the turbulence that the gold market went through last year. It's a beautiful demonstration that glycine can make even previously unprofitable gold minable. This clearly shows where it can lead for larger miners by orders of magnitude.

So without you, this mining wouldn't have started at all, it started only on the basis of your technology?
That's right.

What kind of income do you get from that?
Considering the size of the mining operation there, it is not a big deal, millions of crowns a year.

And you've already got some revenue for the pilot projects?
Yes, but they are also relatively small for now. Basically, they are set to cover costs and make a really small profit. We're still setting it all up, we want to attract the customer. We don't want to say, try this and you'll make a profit in five or ten years. We want to convince them by offering them a better deal today.

When do you get to the industrial phase for the more significant projects?
We have about 20 mines underway, half of which may reach the near-pre-industrial or industrial phase this year. The pre-industrial phase means that we get to a point in a given project where the technology is tested and it is decided whether the company will deploy it industrially.

So you're confident that you'll have an industrial deployment with a major customer by the end of this year?
Yes, I'm convinced of that. The implementation programme takes about six to twelve months. So if we start testing now, we can be in the industrial phase within a year. In a few cases, we're further along than Barrick.

What revenues do you expect from this business next year?
There is a big difference in the terms and conditions among customers, everyone is satisfied by something different. This means that for some of them you can afford to offer higher prices at the beginning and for others we have to be very careful. The mining business is very conservative, it hasn't changed for decades and it doesn't look for new things. The big players are willing to pay more for the license and initial implementation, then they benefit from lower operating costs. Others, on the other hand, can't afford the higher upfront costs, so they pay a higher price on an ongoing basis.
This brings me back to the beginning in how significant a step entering a new business is. We don't want to concentrate only on the supply of chemicals, but we want to benefit from know-how, licenses and offer service as a package. And we want to do it in such a way that the miner, and not only the miner, but everyone around him, also makes a profit because the technology is more efficient and environmentally friendly.

Back to the question you ran away from. From what you say, it seems to be a billion-crown business. Is that right?
100% in crowns, and we believe in dollars as well.

And when?
I would say that in crowns it will be billions already in 2024.

How likely is it today that this technology will indeed be not only the common but also the preferred option for metal leaching?
Honestly, we believe it 100%. It's not really a fairy tale, but thousands of hours of pilot tests, lab experiments and the like. The possibilities of failing are minimal today. Rather, we're now thinking about whether we can optimize the technology even more and how to set up our business model so that we're not too aggressive, but we're also not leaving excessive money on the table. And there's another interesting level to this. As a miner, if you take a step towards a leaner and more efficient technology and it turns out to work, there's not much going back. Shareholders, regulators and climate activists would have you on your hooves. Consider that you are saving raw materials on the one hand, because you need less cyanide and chemicals overall, you are increasing the recoverability of the rocks, and on top of that you have a much cleaner output, so you are reducing the cost of detoxifying the rocks. And that's business, all these benefits also go hand in hand with a sustainable approach to the environment.

So what is the biggest risk that implementation will not happen at all?
I would say the mindset of miners, who are often not inclined to risk transformations. When Draslovka is the only provider of a given technology that has been licensed for fifteen years, a lot of players are understandably afraid that they might get caught in the trap of being left without another mining option. We have therefore had to take these concerns into account in our contracts. But it's not that we have a monopoly on the market, the alternatives are there and some - like us - are coming up with innovative ways. Glycine technology alone is simply the most efficient and actually the best solution for sustainable mining.

Isn't there a risk that someone will copy the technology or come up with something similar?
Our patents are valid in 57 countries, and they are written in such a way that we believe they cannot be circumvented. The fact that the technology is likely to be abused in countries where patents are not much respected is unfortunately likely, but we are not that concerned. The global market potential is so enormous that the market of some underdeveloped country is marginal. We need to remember that we are primarily concerned with the miners, not with specific countries. And the biggest miners are usually listed on the stock exchange, so they really cannot afford to illegally circumvent patents.

What do you mean? I would expect the composition of the substances you use for leaching to be fairly easy to identify.
It's not quite like that. When we acquired Mining & Process Solutions (MPS), the company that developed the technology, it had more than a decade of research under its belt at Australia's Curtin University. Maybe it looks like I'll add glycine to cyanide, and lo and behold, I can start extracting previously unprofitable gold. It's really not that simple, there's a huge amount of know-how involved, even outside of patent protection.

How to understand that such a miraculous technology, as you at least portray it, was not reached for by a global player, but by the Kolín-based Draslovka? What are its weaknesses?
I understand the question. But who should actually reach for it? For the last fifteen years, the mining industry has been portrayed as something undesirable, no one wanted to put a penny into it, it was seen as an investment slush pile, and banks were scared of it. Everyone was looking for value elsewhere. 

Pavel Brůžek (41)

- He graduated from the University of New York in Prague and received an Executive MBA from the Joseph M. Katz Graduate School of Business in Pittsburgh. 
- He started his career in Draslovka, where he worked his way up from the position of assistant to the management of the company. 
- In 2019, he became chairman of the board of bpd partners, Draslovka's co-owner. Draslovka is also owned by the Brůžek family through B3 Holding and funds managed by the US company Oaktree Capital Management.

Author: Ondřej Souček