ZEOX CORPORATION 2010 Investor Presentation
ZEOX CORPORATION This presentation includes certain estimates and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements with respect to anticipated operating and financial performance, growth opportunities, growth rates, potential acquisition opportunities, and other statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “assumes,” “seeks,” “estimates,” “should,” and variations of these words and similar expressions, are intended to identify these forward-looking statements. While we believe these statements are accurate, forward-looking statements are inherently uncertain and we cannot assure you that these expectations will occur and our actual results may be significantly different. These statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. Important factors that could cause actual results to differ from those in the forward-looking statements include the factors described in the “Risk Factors” section of the preliminary prospectus. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. This presentation includes certain non-GAAP financial measures, that are different from financial measures calculated in accordance with GAAP and may be different from similar measures used by other companies. Safe Harbor Statement 2
ZEOX CORPORATION Table of Contents 1.Executive Summary 2.Zeox Overview 3.St. Cloud Mining 4.The New Zeox 5.Industry 6.Management 7.Transaction Overview 8.Contact Information 3
ZEOX CORPORATION 1. Executive Summary
Executive Summary ZEOX CORPORATION Zeox Corporation has gone through a successful restructuring. Revenue Growth Cost Reduction Working Capital Improvement Zeox’s Board of Directors in favor of Merger with St. Cloud Mining Upside In Place on: Mercury Removal Cementation Dolomite Acquisition Program Commenced First Acquisition Ready Other Targets Identified/ 2 In Due Diligence Zeox is seeking $5MM in capital to execute its plan. Situational Analysis 5
Executive Summary ZEOX CORPORATION Investment Thesis Earnings Potential Market Control Best Zeolite Deposits In North America Only Active Chabazite Deposit In The World Greatest Expansion Capability Environmentally Driven Markets Waste Water Radiation Waste Containment Cap & Trade Benefit Management Operational Experience History of Building Companies Management Financial Incentives Aligned With Shareholders Situational Analysis 6
Executive Summary ZEOX CORPORATION Zeox Corporation was formed with the IPO of C2C Zeolite Corporation in Zeox, led by former Chairman & CEO, LuVerne Hogg, commenced: An acquisition program of quality industrial mineral reserves White Cliffs (Diatomacous Earth) Bowie (Chabazite) Burro Creek (Saponite) Ash Meadows (Zeolite) Palo (Sodium Sulphate) An expensive R&D effort Cementation Mercury Removal Nano Clays Situational Analysis 7
Executive Summary ZEOX CORPORATION Hoping that significant orders for down hole mud and the mercury removal product, Zeox invested $3.5MM in a processing plant in Butte, Montana. Unfortunately, Zeox did not realize that extensive testing was required and the plant operated at less than 5% utlization. The company financed its acquisitions and operations with successive private placements of equity. Ultimately, Zeox management was incapable of commercializing its reserves, resulting in substantial operating losses, negative working capital and finally, a change of management. New management led by Gerry Spindler (Chairman & CEO) and Mike Shea (CFO) were appointed on August 24, 2009 and immediately implemented a turnaround plan. Closed Plants Reduced Costs Focused on Increasing Revenue Raised Short Term Working Capital Situational Analysis 8
Executive Summary ZEOX CORPORATION Spindler & Shea’s interest and motivations are as follows: Merging Spindler’s privately held Industrial Mineral (St. Cloud Mining) business into Zeox thus obtaining a public valuation. Realizing the substantial upside potential of Zeox’s reserves and technologies. Becoming the dominant North American producer of zeolite with the only active known Chabazite reserve in the world. Creating a $100MM+ diversified industrial mineral company within 3 years: Organic Growth Acquisitions Situational Analysis 9
ZEOX CORPORATION 2. Zeox Overview
ZEOX CORPORATION Business Overview Zeox Minerals Materials Corp. Canadian Publicly Traded Company Mines Ash Meadows (Zeolite) Bowie (Chabazite) Operating Plants White Cliffs (Diatomaceous Earth) Technology Cementation (Oil Rigs) Mercury Capture (Coal Fired Plants) Market Cap of $12MM (CDN, 01/12/10) Approximately 68MM Shares O/S Zeox Corporation – Post 2009 Restructuring 11
ZEOX CORPORATION Revenue improvement New Zeolite & Chabazite Customers Mercury Removal Cementation Cost Reductions Butte, MT & Palo Plant Closures Head Count Reductions Reduced Payables MSE/Butte Aggressive Discounting Payables reduced from over $3MM to $1.2MM Improved working capital Short Term Funding from Imagin Minerals Private Placement Restructuring Steps 12 Business Overview
ZEOX CORPORATION Revenues have been increasing led by zeolite sales at Ash Meadows and Bowie Chabazite sales, primarily the down hold cementation product, Zeofume. Other large oil services companies are actively testing Zeofume as a replacement for silica fume. Our mercury removal product, AZI, is a proven technology and based on Bowie’s unique Chabazite. In final stage tests with one multi-billion dollar company Other large companies, primarily activated carbon providers, are testing AZI will compete or complement “Activated Carbon” products with the advantage of not negatively impacting the resultant fly ash that Power companies sell to cement producers. Zeox’s Chabazite is the only zeolite that has been proven to remove mercury in coal fire plants. Zeox controls the only active Chabazite deposit in North America and possibly the world. Business Overview Positive Momentum 13
ZEOX CORPORATION Ash Meadows (Zeolite) 40MM tons of proven Reserves Average Selling Price of $150 - $175/ton Mining & Processing Costs $30-$60/ton depending on size of grind & order Bowie (Chabazite) Upper Bed (Zeofume and Water Filtration): 1.3MM tons of proven Reserves Average Selling Price of $500 - $600/ton Lower Bed (Mercury Removal): 880,000 tons proven, 1.1MM probable Average Selling Price $600 - $800/ton Mining & Processing Costs $100-$300/ton depending on size of grind & order Technology Mercury Removal Zeofume Business Overview Core Assets/Resources 14
ZEOX CORPORATION 3. St. Cloud Mining
ZEOX CORPORATION Business Review North America’s Largest Producer of Natural Zeolite Three Business Lines: Zeolite Reclamation Aggregates Dolomite Acquired in 2002 Increased Production From 12,000 tons (2002) to 31,000 tons (2008) 2008 Revenues and Gross Profit of $9.4MM and $2.6MM, respectively St. Cloud Mining 16
ZEOX CORPORATION St. Cloud Mining Financial Summary St. Cloud Mining (000's) Revenues: Industrial Minerals2,9053,4512,9902,870 Aggregates4093,4831, Reclamation5,8511,9715, Other Total9,2508,9359,4273,839 Gross Profit2,9772,4172,6421,322 EBITDA1,2591,2131,
ZEOX CORPORATION St. Cloud Mining Delivering Results - Mining 18 Production and Prices Increases Sales Segments Animal Feed 60% Ag./Horticulture 30% Filtration 10% Total100%
ZEOX CORPORATION St. Cloud’s Reclamation Business was founded to leverage the skilled employee’s mining talents. Historically has performed reclamation services for Freeport McMoran, and state managed AML (Abandoned Mine Land) sites. Established commercially proprietary technology for mine shaft closings. As the result of the drop in copper prices, Freeport dramatically reduced it’s reclamation activities starting in Q3, As a response, St. Cloud to refocused the business and leveraged its operating capabilities with its zeolite and dolomite deposit’s. While still bidding on reclamation contracts, the division is also focused on bidding on “Post Closure” Water Treatment for mines. Developed first substantial contracts with new clients (RTZ & Barrack) Achieved “Certified Contractor” status in five new states. Current Backlog is $1.7MM with the majority of contracts won in Q St. Cloud Mining Reclamation – A Transition Year 19
ZEOX CORPORATION High quality aggregates have contributed as much as $3.4MM in revenues (2007). The majority of historical revenues were for improvements on rail lines for Union Pacific. The rail improvements have been completed and St. Cloud is focused on increasing revenue to projects in the area, including those that will be recipient of stimulus funding (e.g. roads, bridges and border fence projects). St. Cloud has developed a Dolomite Quarry with Aggregates, south of Deming, New Mexico. The property has crushing capacity and a grinding plant. The dolomite qualifies as a magnesium mineral source in animal feed diets and its location should provide a cost advantage to other competitive dolomite products. St. Cloud Mining Aggregates/Dolomites 20
ZEOX CORPORATION 4. The New Zeox
Executive Summary ZEOX CORPORATION North America has very few Mid-Tier industrial mineral companies. Management’s vision has been to build a $100MM+ diversified North American industrial mineral company. We believe the combination of Zeox and St. Cloud provides the platform. Zeox (TSXV : ZOX) brings to St. Cloud: High Quality Reserves/Deposits (Only Chabazite deposit in U.S.) Publicly Traded Entity Significant Product/Revenue Upside (Cementation & Mercury Removal) St. Cloud brings to Zeox: Operating Management with Mining Experience Operating Business Mining Equipment Liquidity Platform For Growth 22
ZEOX CORPORATION The New Zeox Zeox Minerals Materials Corp. St. Cloud Mining Canadian Publicly Traded Company Mines Ash Meadows (Zeolite) Bowie (Chabazite) Winston (Zeolite) Hooper (Aggregates/Dolomite) White Cliffs (Diatomaceous Earth) Operating Plants Ash Meadows. Deming White Cliffs (Diatomaceous Earth) Winston Technology Cementation (Oil Rigs) Mercury Capture (Coal Fired Plants) Zeox Corporation 23
ZEOX CORPORATION Dominant Zeolite producer with platform for growth. Lowest cost producer. Provides a broader product offering for both companies. Variety of zeolite qualities/properties Chabazite Dolomite Reclamation & Construction Diatomaceous Earth Aggregates Increases geographic reach Capitalize on Zeox’s Intellectual Properties & Research Base Allows shareholders of both companies to participate in the upside potential of a growth company. The New Zeox An Acquisition Benefits Both Companies 24
ZEOX CORPORATION The New Zeox Not All Zeolites Are Equal Multiple Uses, Products, & Brands 25 IMAGINZEOX Agric. Feed Water Filtration Soil AmendmentSpec. Chemical Odor ControlCement Air Filtration
ZEOX CORPORATION The New Zeox = 3 Complementary Attributes 26 IMAGINZEOX ManagementReserves/Deposits Dedicated Sales StaffTechnical Knowledge Mining KnowledgePublic Entity Mining Equipment Diversified Revenue Base
ZEOX CORPORATION 5. Industry
ZEOX CORPORATION Natural zeolites are hydrated aluminosilicates. There are over 40 natural zeolite minerals with similar structures and molecular makeup, all with its own particular attributes. Commercial zeolite deposits in the U.S. are located in Arizona, California, Idaho, New Mexico, Oregon, Texas and Wyoming. Zeolite is used commercially because of its: –Unique absorption –Ion exchange –Molecular sieve –Catalytic properties The major end markets for zeolite are: –Animal feed –Horticultural applications –Waste water and air filtration Industry What is Zeolite? 28
ZEOX CORPORATION Industry Tons Produced Globally Global Zeolite Production In Tons 29 Countries producing large tonnages often use them in low-value applications. Ready availability of zeolite and shortage of competing minerals are factors for large scale use.
ZEOX CORPORATION Industry Tons Produced Domestically Domestic Zeolite Production In Tons 30 Majority of production is for high value add products. U.S. is leader in developing new applications. Source: Imagin Minerals
ZEOX CORPORATION There are only a few producers of zeolite in North America of any size. As the market leader, and low cost producer, the New Zeox has competitive advantages over other zeolite producers: UAMY: Owns Bear Creek which is situated on a mountain top and its operation is limited by winter weather. Additionally, Bear Creek’s management does not rely on distributors. Zeotech: Poor quality reserve with high clay content with market limited to commodity products such as cat litter. Material for its water filtration customers is purchased from St. Cloud. St. Cloud’s and Zeox’s zeolite deposits are the highest quality in North America and offers a variety of different characteristics (e.g. high & low sodium). This product suite will ensure that our material is part of any new product testing. New products and/or applications using zeolite include, cement, radiation treatment, mine waste water, air filtration, rubber compounds for tires, and various other applications. While the current market for US zeolite is 60,000 tons, this is expected to grow exponentially. Industry Competitors - Zeolite 31
ZEOX CORPORATION Industry Dolomite – Dominant Player is MinAd MinAd Dolomite Production In Tons 32 Dolomite is used in dairy cow feed to meet magnesium requirements Market is dominated by MinAd ( 80,000 tons/ $10MM Revenues) St. Cloud recently commenced production of Dolomite St. Cloud has a substantial freight advantage in the Texas Pan Handle. Source: Imagin Minerals
ZEOX CORPORATION Mercury removal of coal fired plants is served by several large activated carbons companies all of which are testing AZI: ADA BASF Norit Calgon Carbon Market is estimated to be $400 million. Due to emerging environmental regulations, this market is expected to continue to grow. Out of the 1,000 US plants, 250 have the suitable Electro Static Percepitation (“ESP”) system and saleable fly ash characteristics that will benefit from AZI. A 250 megawatt plant will need 1 million pounds per year for each boiler. Many plants have several boilers. AZI can replace Activated Carbon in totality or be blended to increase mercury capture from 90% to over 95% without impacting the fly ash. Industry Mercury Removal 33
ZEOX CORPORATION Cement: Carbon footprint of increasing concern to producers. Pozzolans will be a factor in reducing emissions. Down Hole Muds: Prevents premature hardening of the cement Allows drill companies to use less expensive/lower grade cement Improve performance at deep depths. Increased use of horizontal drilling requires greater amounts. Zeox’s Down Hole Mud (“Zeofume”) utilizes Bowie’s Upper Bed Chabazite Sells between $500-$600/ton. New Hires have given us an ability to participate in other companies research. Industry Cementation 34
ZEOX CORPORATION Animal Antibiotic – US Congress is currently discussing limiting the treatment of animals with antibiotics as a normal supplement. If regulations are limited, ranchers will consider zeolite as a normal supplement to help animal health and improve weight gain. Drinking Water – An estimated 125 US municipalities have arsenic levels above requirements. The treatment plants are either ignoring the requirement or blending other potable water to reduce arsenic levels. Zeolite is proven filtration floculant to remove arsenic. Concrete - Zeolite has pozzolanic qualities that improve concrete. This is being tested by several commercial and residential concrete companies. Construction/Reclamation – There are numerous Abandoned Mine Land (“AML’s”), particularly in the Southwestern states, that have mine water problems. The sites are either bonded by the mining company or have been taken over by the government. St. Cloud has the mining and construction experience to build and monitor simple treatment systems (e.g. settling ponds) at a cost of a fraction of a cent per gallon, providing substantial annuity revenue and income. Industry Other Opportunities 35
ZEOX CORPORATION Industry Opportunity Summary 36 Management Sees Substantial Organic Growth Opportunity: Applications Reserves Minerals 2-3 YEAR GROWTH SUMMARY AVG. TONS PRICE TOTAL Markets Cattle Feed10,000$125$1,250,000 Other Animals30,000$125$3,750,000 Cement30,000$500$15,000,000 Concrete35,000$105$3,675,000 Filtration15,000$160$2,400,000 Mercury Removal15,000$600$9,000,000 Dolomite30,000$150$4,500,000 TOTAL$39,575,000
ZEOX CORPORATION Management is constantly reviewing acquisition opportunities. The North American market is characterized by large strategic operators and numerous privately-owned niche industrial mineral companies that: Older ownership with no succession plan. Defined business niche with long time customer base Barriers to entry Acquisitions Under Consideration: $5MM revenue mineral company with $1.3MM of EBITDA. Complementary product offering, synergistic location. Cash transaction with earn out provision. $4MM ore property with $400K EBITDA. Customer base is cement oriented and could provide cross sell opportunities. Stock transaction. Industry External Growth Opportunities 37
ZEOX CORPORATION 6. Management
Executive Summary ZEOX CORPORATION Mr. Garold (“Gerry”) Spindler Wealth Of Operating Experience Previous CEO of Large Public Companies Pittson Coal Cyprus Amax Coal UK Coal St. Cloud Extensive Mining & International Experience Ability to Lead and Build Mr. Michael Shea 25+ Year Corporate Finance Experience Bank of America, Citigroup, GE Capital Investor Interface Mergers & Acquisitions Restructuring Background 39
ZEOX CORPORATION 7. Transaction Overview
Transaction Overview ZEOX CORPORATION Market Reaction 41 Market Reaction was favorable to change of management (8/24/09) Current Share Price Includes Acquisition Potential Share Price holding despite sell side pressure from Hogg & Logician Market waiting for details of the contemplated Merger
ZEOX CORPORATION 8. Contact Information
ZEOX CORPORATION Garold “Gerry” Spindler CEO (203) Michael Shea CFO (203) Business Overview Contact Information 43