KeyStone’s Stock Talk Show Episode 260. 

Great to chat with you again – I will kick off the show by revisiting my take on lithium exploration company Patriot Battery Metals Inc. (PMET:TSX) which was universally ripped in the comments on our YouTube channel. We will see where the stock is just under two years after our cautionary stance on the stock. In our YSOT segment, Aaron answers a viewer question on Nikola Corporation (NKLA:NASDAQ), a company focused on developing and manufacturing zero-emission vehicles, particularly hydrogen fuel cell electric trucks for the commercial transportation sector. The viewer notes the stock is up 40% last week, and would like to know if there is anything of substance behind the move. Brett answers a viewer question on Pollard Banknote (PBL:TSX) which serves the lottery instant ticket and charitable gaming markets primarily in North America as one of the largest printers of instant tickets in North America with operations in both the US and Canada. Pollard, recently reported some interesting news surrounding its Joint Venture  in the US iLottery market and Brett will let you know the potential impact near and long-term on the business as well as the current fundamentals. Finally, Brennan revisits his take on Pyrogenisis Canada Inc. (PYR:TSX) which designs, develops, manufactures, and commercializes plasma processes and systems in Canada. The stock was a pandemic high flyer which has crashed back down to earth, Brennan let’s you know how the business is progressing after holding a cautious stance on the stock in his last review.

Let’s get to the show –my cohost, Mr. Aaron Dunn – and the killer B’s, Brett, and Brennan.

Question on Patriot – you reviewed the stock two years ago at $6.70 – it is now at $4.30 – your thoughts. 

Patriot Battery Metals Inc. (PMET:TSX)

I reviewed this company after we received a number of viewer questions on the stock in the summer of 2022 as  its shares ran from the $0.50 range to $7.00 – at the time of the review the shares were $6.70 at the time.

I will preface this brief review by stating what I did the last time we reviewed the stock – at KeyStone, we based our recommendations, even in the small-cap arena on a strict fundamental cash flow criteria.  And we look long-term – we are investing in businesses with strong current growth and a higher probability of growing cash flow long-term – driving share price returns long-term. 

As always, we are happy to see the engagement on these posts – here are a couple of investors disagreeing with my assertion that Patriot remained highly speculative and that there are many risks on the way to creating a viable mine. 

year after and its on 8dollars …. not much of a good prediction you did there

After the stock initially moved significantly higher, we got the obligator comments:

With the stock now down 32% since we gave a negative opinion on stock. I guess I could sit here and try to dunk on this poster, but to be frank, that is not the purpose of our Podcast. What we try to convey here is our investment philosophy, why we utilize it and to try an educate investors as to why we see it as a more successful model. Particularly for investors looking to find try long-term winners – stocks that can truly change their portfolios.

Because that is the blue sky potential that anyone is looking for when the invest in junior exploration companies. We believe and have seen if first hand, that you do not have to take on the level of risk inherent in these type of ventures to achieve the returns…the 10x returns or to at least have the potential to achieve these returns that most investors take on. 

I have been doing this for 25 years and the amount of long-term successful mineral exploration companies if very low and success in picking winners in the sector is more random chance than anything that can be applied with any quantitative or qualitative investment model I would feel comfortable with. 

I hope this slide helps illustrate why we focus on profitable businesses versus speculative resource businesses.

Proof is in the results – over that same 5 -year period, we were recommending a company with great cash flow and earnings growth – and you can see the returns.

Far, far, far, less risk than Patriot and it delivered the returns every small-cap investor is looking for. 

Ok..let’s take a very brief look at Patriot. 

What does Partiot do?

A lithium exploration company focused on its 100%-owned Corvette property in the highly prospective Eeyou Istchee James Bay region of Québec.

What is driving the decline.

Precipitous drop in lithium, despite forecasts of a longer term shortage – which still might occur, but it stands as proof of the unpredictability of commodity prices generally and the inherent risk in investing in stocks based of a volatile commodity.


Promising project – high risk:  the quality, size, and growth potential of their flagship Corvette project, located in the highly prospective James Bay region of Quebec – the company is well thought of.

Patriot does not meet our minimum criteria for investment – cash flow from current operations.



Pyrogenisis Canada Inc. (PYR:TSX) 

Price: $0.78

Market Cap: $134.2 Million

PyroGenesis designs, develops, manufactures, and commercializes plasma processes and systems in Canada. It offers:

  • DROSRITE, a process for enhancing metal recovery (aluminum and zinc industries).
  • PUREVAP, a process to produce high purity metallurgical and solar grade silicon from quartz; and PUREVAP Nano Silicon Reactor, which is designed to transform silicon for use in lithium-ion batteries.
  • Plasma torches for replacing fossil fuel burners.
  • Plasma arc waste destruction systems for waste destruction.
  • And the company also provides engineering and manufacturing expertise.

Slide 2

I have covered Pyrogenisis on the podcast back in October 2022 and in June of 2023 when the stock traded in the $1.06 range. And at that time I concluded that the company “had potential” but to us the business was yet to validate its business model as it continued to post declining sales and lacked profitability, cash flow or even adjusted EBITDA….

And as I said, “someone could speculate on the business”, but to us at KeyStone, we do not believe that a long-term successful portfolio is built on speculating on potential catalysts while a company continues to burn cash.

Slide 3

So let’s first look at the financials to see if the company has fundemantally improved from a year ago when I covered it last…

  • Revenue was up 34% to $3.5M, but the increase is primarily due to the depressed revenue that it generated in Q1 2023. As if we look back to Q1 2022 the business did $4.2M in revenue…..
  • Net Loss was $(4.4) million or a loss of ($0.02) per share, compared to a loss of $(6.1) million or $(0.03) per share in Q1 2023.
  • The company still isn’t able to produce Adj. EBITDA profitability either…. losing $(3.2) million in Q1 2024, compared to a loss of $(5.8) million last year.
  • And cash flow from operations was also a loss of $(2.8) million compared to a loss of $(6.5) million for the same period last year.
  • SOOOOO, the company continues to burn through cash…. And looking at the balance sheet, its cash balance is down to $170K with debt and leases of $10.6 million providing a net debt position of $10.4M.

Slide 4

Given the business is burning cash.. how has it been keeping the lights on????

As you can see, the company had a net cash position of $23 million in Q1 2021… but over the years, the company has moved into a net debt position. So the company has been draining its cash balance, has been taking on more debt, and has been issuing more share. Now up to 179 million common shares outstanding..

And given the dwindling cash balance, debt on the balance sheet and lack of profitability, I assume the company will need to issue shares once again to keep the lights on.

Slide 5

Looking at the company’s backlog, as at May 2024 it was $28.1M which is “expected to be recognized over a maximum of 3 years”, and this is down a few million from the same period last year.

And because of the lack of Net Income, EBITDA and cash flow, we can only value the stock off of revenue, which right now it trades with a trailing P/S multiple of about 10x… which is down from 11x from a year ago when I covered the stock last.

Now if we expected that all of the “backlog” can be realized in 2024, the company would still trade at about 4x forward 2024 sales.. But again, backlog is expected to be realized over a max period of 3 years… so this is likely aggressive.

Slide 6

At this point… the risk continues to outweigh the potential reward for an investment. And we would continue to classify the stock as speculative given it continues to lose money, now has a net debt position and will need to service its debt (while it can’t generate cash flow), and will likely have to issue more shares to keep the lights on.

Now again, for the Pyrogenesis speculators, this is not to say that the stock will not do well over the next 3-5 years… and I hope for you that the stock does do well. There could be a significant contract announced and potentially an inflection point in the business’ revenue and profitability…. But to us this is just SPECULATION on what could be… and for our Growth at a Reasonable Price investment philosophy, we would not recommend the stock to our clients.

Now this Youtube comment from ee7369 that was posted on my last update a year ago addressed the fact that I mentioned “the business has yet to be validated” due to the lack of profitability. He said that he finds this funny given that by avoiding the stock while it continues to burn cash, WE WILL HAVE MISSED THE MAJOR INITIAL RUN… This is something we hear over and over again, but by building your portfolio with stocks like Pyrogenisis that continue to lose money, take on debt, and dilute shareholders – its a great way to destroy capital.

And to respond to this other comment from “Thoughtful Aquarius” – One could analyze a company’s qualitative factors for days on end, but at the end of the day, growth and profitability are what drive shareholder returns. And until the company can prove that its on track to validate the business model and grow earnings per share… we believe that it’s a good idea to avoid the business.



YSOT Pollard Banknote PBL


Pollard symbol PBL on the TSX serves the lottery instant ticket and charitable gaming markets primarily in North America. It is one of the largest printers of instant tickets in North America with operations in both the US and Canada. The company also serves the US iLottery market through its JV NeoPollard, of which it owns 50%.


The stock is trading down 11.6% year to date at $29.09 a share with a market cap of $787 million. The company does offer a small dividend of $0.05 a quarter at a yield of 0.7%, not substantial but was increased from $0.04 in the prior year, so the stock could eventually become appealing for the dividend if growth continues to occur.


The stock did tumble 10% or so in late June, and this can be attributed to Neogames the company Pollard has a JV with being awarded the iLottery contract for New Hampshire, outside of the two companies JV. This comes after NeoGames was acquired earlier this year, and likely signals the shift in Neogames strategy when it comes to its joint venture with Pollard. While the New Hampshire contract in isolation isn’t the most significant the overall amount of profit and sales provided by the joint venture are, and as additional contracts end Pollard will likely be competing against its former partner. Ultimately at this time, this can be seen as an increased risk level.


Switching to the company’s financials for Q1, 2024.

The company’s sales were materially flat at 126 million, but gross profit increased to 21.5 million from 17.7 million. Gross margin increased to 17.1% from 14.1%.

The increased margin was primarily due to the result of increased licensed products, retail merchandising products and eGaming system sales, as well as higher instant ticket margins due to increased pricing. Increased ticket pricing is expected to increase throughout the remainder of the year.

Moving down the income statement we can see the equity investment income of $12.2 million, this is from the JV with Neogames for various iLotteries, it has seen strong growth in the last year, from 8.2 million. The $12.2 million is what is at risk as the various state iLottery contracts expire over the next decade. Pollard will likely try to compete for these contracts through its own iLottery software which it acquired in 2021 with Next Generation Lotteries for $50 million.

The resulting net income is $6.9 million up from $4.8 or $0.25 per share up from $0.18. Overall strong year-over-year growth


Shifting to the balance sheet the company holds cash of 6.6 million, has long term debt of 111. million and leases of 19.9 million resulting in a net debt position of $125.5 million. The resulting trailing net debt to adjusted EBITDA ratio is 1.3 times, which is fine given the long-term contract-based sales.


Shifting to valuation, the company has a trailing GAAP P/E of 23.8 times, and an EV to adjusted EBITDA of 9.5 times. Neither of these are particularly cheap even with the good bottom line growth over the past year, that is due to margin expansion on the consolidated financials plus the JV equity income which is now at risk. Margin expansion is great to see but to really support a higher valuation you want to see top line growth as well.


While the impact of the NeoGames acquisition will likely negatively impact Pollard, it will take place over years if not decade as various contracts expire and there is no guarantee the JV will come to an end as there has been no anouncment. So risk is higher, but by no means its an existential risk to the company. But we do need to consider that in the valuation of the company, which isn’t an extreme discount.

The company has historically traded at a p/e of 30 times, so it is lower than that but risk is higher as well given the risk to the JV, so its hard to justify a premium valuation with heightened risk. If top line growth is able to return to the historic low double digit average in tandem with the physical ticket sale margin growth, a case can be made for taking a long position as the business will likely perform well over the long term.

However, it is not a screaming discount, and is likely just on the lower range of fair value given its recent share price decline.

For now I would Monitor the company for a better risk reward trade-off.




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