Abakan Inc.: Nano-Composite Coatings with Huge Upside

Click here to read the Midas Letter Feature on Abakan Inc.
James West interview Andrew Sherman (1st Clip) and Robert Miller (2nd Clip) from Abakan Inc. (OTCQB:ABKI), principles of a company based in the U.S. that develops next-generation, nano-composite coatings for pipelines, ships, bridges, ports, railways, planes – just about any steel that is used in high stress or corrosive environments.

NOTE: James West owns 100,000 shares of Abakan at average cost of $1.02 per share.

TRANSCRIPT:
JW: I’m James West, and this is Midas Letter Money. Over the counter bulletin board in the United States is that dangerous place for investors to try to make money. But I think I found a company that’s going to make investors a lot of money in the future, and that’s because I’ve spent over a year and looking at the deal. My next guest is Robert Miller, CEO of Abakan Inc., which trades on the OTCQB under the symbol ABKI. Robert, welcome to the show.

RM: Thank you very much for having me on.

JW: Why don’t you tell us a little bit of what exactly Abakan does?

RM: Abakan has taken control of the research and development company that specializes in nano materials. So when you add nano materials to regular other coatings like nickel or rare earth metals, they have specialty performance that would increase the performance of a magnitude of like 10, 20, 30 times better performance.

JW: So it if I recall correctly the company’s called MesoCoat, and you actually apply this coating to high performance corrosive environments steels such as—what are the applications?

RM: We apply our coatings to low performance cheap carbon steel, so X65’s the most common, we apply coatings for corrosion protection, for wear protection, sometimes for a combination of both.

JW: Now what industries do these coatings have applications in?

RM: Interesting, when I first approached them they said that they apply to numerous industries so we focused on a few, oil and gas, and that’s for corrosion resistance and we’re going after the oil sands, mining, and heavy equipment

JW: Okay, now you got some fairly heavy hitting industrial partners already who are deploying your technology. Can you give us an example of that?

RM: We’re in Stage Two of two stages with Petrobras. We came out of stage one with pretty incredible results of 1/6th the corrosion rate of our competitors, so that’s with Petrobras. And with Petrobras, are ten of the top twelve oil majors in the world – they’re called super majors, so they’re all watching. The other companies like Exxon said we’re 90% approved when Petrobras puts us in the field. They’ve—with some of the biggest heavy equipment manufacturers we’ve done joint development agreements with, that when we hit Milestone One, we’ll announce them. We’ve dealt with five of the biggest oil sands majors in Canada, the three majors from Canada, Suncor, Syncrude, third I can’t mention. The other two American giants that are in Alberta have some very heavy needs coming up very quickly, so it’s a really exciting time for us.

JW: Okay, so Abakan has right now, it’s a sixty million dollar market cap fully diluted give or take. What you see the market size for the applications of the coatings are you talking about in, say, one year’s time?

RM: One year’s time is quick, and that’s a good question. Oil majors operating in the north slope of Australia, so Australia’s sour, offshore they have four very big fields, sour oil and sour gas. They’ve come to us saying, can we bid in 2012 for a project that they want coatings in 2013—that project we would need a partner.

JW: Let’s say for the whole market for applications and oil pipeline, what the global market size right now?

RM: Two billion a year just for oil and gas but it’s growing– it’s projected to triple since all the major fields are all sour or hot or high pressure. With those three, they need very expensive coating, high performance coatings.

JW: So essentially all the sweet oil in the world is pretty much done for and now we’re going to be producing from high sulphidation, high corrosion, high temperature, high pressure fields.

RM: Some of them have combinations. For example the Gulf of Mexico’s medium sour, so they’ve approached, the big players there, you know who are, they approached us for bidding next year, 2012, for projects they want coatings in thirteen. But these markets, these are minimum orders of thirty million, maximum orders per single project, single portion of the project, is 200 million in coatings.

JW: Now for an investor who may be a little bit nervous about investing in OTC bulletin board deal because there’s history there, what are your plans for obtaining a listing on a senior exchange?

RM: The rules are we need one year’s full working capital. That would be for us about eight million dollars, so an eight million dollar financing, we do an audit, it takes a month to do an interim audit, then we make an application two or three weeks later, and it’s four to eight months to list on NASDAQ, that’s our intention. I myself have done that several times with companies that I was the director or largest shareholder of– that’s all on our website, I guess.

JW: Why don’t you give me some examples of companies you’ve taken from zero to hero?

RM: Asiaamerica Equities, as an individual family, I was the largest shareholder. The stock went from fifty cents to 48 dollars, but George Soros took it up from 24 to 48. Crystallex International, a lot of people know that company. I was founder, raised the first twenty million dollars, went into positive cash flow and has 21 million ounces, seventeen million proven, the stock went to eleven dollars. And I did Nanovation Technologies, I did a Y2K deal, that I was the director, financier for the listed NASDAQ.

JW: So you’ve got a track record. Well, Bob, that’s really fascinating, we’re gonna keep track of Abakan’s developments and try to watch you build your market share there, and we wish you well in moving to the NASDAQ. I’d like to thank you for joining us today.

RM: Thank you very much.
JW: If you’d like to learn more about Abakan, you can visit their website at abakaninc dot com, that’s a-b-a-k-a-n inc dot com. If you’d like to hear about companies like Abakan at an early stage of the value curve, visit Midas Letter dot com. I’m James West, this is Midas Letter Money.