Company Overview
Money4Gold Holdings Inc. is targeting major production of gold, silver and platinum by facilitating the broad-scale recycling of jewelry and other items containing precious metals in the U.S and internationally.
Believed to be the first public company in North America to focus on retail precious metals recycling, the Company offers shareholders and potential shareholders an opportunity to participate in an unusually high-growth situation.
A Major Opportunity, Both Nationally and Internationally
The increase in the recycling of precious metals is a powerful trend that many investors have not actually noticed. The recovery of gold by recycling has risen from 14 million ounces in 1997 to approx. 30 million ounces worldwide in 2007. The recycling of silver and platinum has seen a similar scale of growth over this period.
Recycling of gold and other precious metals is doubly important in the U.S. In this country, recycling accounts for a little less than half of total supply, and has been rising for several years. By trend, more than 50% of all U.S. precious metals production is anticipated to come from recycling within the next five years.
Gold, silver and platinum prices are all in strong long-term upmoves. All three metals sell for more than twice their price five years ago. Demand is far outpacing supply.
Despite much higher prices, mine production of gold and platinum is actually declining. Mining is highly energy-intensive, capital-intensive, labor-intensive, cost-intensive, slow, environmentally hazardous and often a political minefield.
Recycling is the second-largest source of gold, silver and platinum supply. Because of supply imbalances, it is increasingly significant to the precious metals markets. Recycling accounts for 23% to 25% of the global supply of gold. In 2007, approx. 30 million ounces of gold came to market worldwide from recycling, an approx. $20 billion annual market.
Money4Gold, a public company since just late July 2008, is facilitating recycling in the U.S. in all 50 states and in the District of Columbia. Perfecting marketing and fulfillment procedures now, the Company also plans first international sales within the year.
Partnering with a Major Refiner
Money4Gold has broken the old business model for recycling precious metals. Historically, individuals brought their jewelry and other items containing precious metals to their local pawn shop or jewelry store. In that instance, they had to accept a minor percent of the inherent precious metals value.
More recently, several websites have opened up that offer gold and other precious metals recycling. This simplifies the process some, and may increase the percentage of actual value to be realized by the seller.
Money4Gold also uses the Internet, www.dollars4gold.com, adding to the convenience, security and direct communication with the seller. But it is the only recycler with a direct relationship with a major refiner – in fact, the nation’s 3rd largest refiner, and the largest refiner of precious metals in the U.S. And this relationship is close. The refinery is a major shareholder of Money4Gold, and has representation on the Board.
With the precious-metals sellers shipping their items directly to the Company’s refinery, Money4Gold is by-passing the middleman, and can offer top payouts to sellers.
Through the Company’s direct refinery relationship, Money4Gold maintains a competitive edge because it is able to provide higher returns to sellers due to several factors:
- The refinery’s primary status
- Efficient, precise sampling techniques and accurate analysis
- Knowledge, experience and technical expertise, and
- State of the art refining facility that ensures efficient and superior processing of all precious metals refining lots.
In summary, a superior opportunity exists for the right management and company to become a major international producer of gold, silver and platinum – and without the many years, the risks and the hassles of mining.
With a significant long-term trend in recycling now underway, Money4Gold – with the right relationship with a leading refiner, and major marketing experience and integrating the power of the Internet – is positioned for very substantial growth for the next several years.
Investment Highlights
The first publicly traded company involved in precious metals recycling
MFGD is producing gold silver, platinum and other metals by facilitating the broad-scale recycling of jewelry, coins, select electronic components and heirloom collectibles as well as and other items containing precious metals in the U.S. and internationally. The Company is likely to be the first public company in North America that provides exposure to potential investors to the rapidly growing retail precious metals recycling.
An innovative business model to leverage the power of Internet and offer better payouts to precious metals sellers.
The Internet is changing the way individuals and groups recycle their precious metals items. Historically, people used to go to their local jeweler or pawnshop for precious metals recycling and take what they could get, usually a minor percent of the real value of the precious-metal content. While this is still done, MFGD now aggregates precious metals items for recycling by marketing their services over the Internet. Thus, the Company’s model of soliciting customers and connecting them directly with refineries eliminates the intermediaries (jewelry stores or pawn shops) who historically took the majority of the margin and offer better payouts to sellers.
In addition, Internet is offering highly efficient levels of personal service and ease of communication and convenience.
Partnership with Republic Metals - one of largest and most respected precious metals refineries in the U.S.
MFGD is one of few recyclers with a direct relationship with a major refinery, Republic Metals, which is also a major shareholder and has representation on the Board of the Company. Republic Metals services all of MFGD’s U.S. based business functions including: assessment of customer materials, assaying, warehousing, refining, and selling.
Republic Metals is a primary refiner of precious metals with over 35 years in business, annual revenues in the range of $2.5 billion. Republic Metals refines and recycles materials from the Jewelry, Mining, Electronic, and Industrial sectors; has the expertise and capacity to handle precious metal lots of any type or size; and is ISO 14001 certified and recognized by the United States Department of Energy for it's commitment to national environmental protection.
Cost savings due to business model particularities
Through direct relationship with Republic Metals, MFGD maintains a competitive edge because it is able to provide significantly higher returns to potential customers and maintain a low cost structure. MFGD has contracted Republic Metals to provide the services relating to assessing the value of the gold, melting it down, warehousing, refining, and selling. MFGD has also outsourced call center operations. By outsourcing these activities, the Company ensures a much lower cost and is able to successfully compete against jewelry stores or pawnshops.
Proven management team
The Company has assembled a strong management team that brings a collective 30 years experience in online and offline direct marketing and a proven track record as founders of successful early-stage development ventures.
MFGD’s CEO Hakan Koyuncu, is also the co-founder and CEO of Leadcreations.com, LLC, one of the leading internet-based lead generation firms. The core philosophy of each company pioneered by Mr. Koyuncu, which have all reached multi-million dollar annual revenues under his direction, is to acquire as much specialized knowledge of each market and then apply the best technology and most innovative strategy to conquer it.
MFGD’s Chairman, Scott Frohman has over a decade of extensive entrepreneurial experience in building and driving professional early stage businesses. His prior experience includes founding and serving as Chief Executive Officer of National Lead Services, Inc., which was acquired by Seisint, Inc. and spun-off as part of eDirect.com which was later acquired by Equifax in 2003.
Solid outlook from management
MFGD is well positioned in precious metals recycling market to report strong growth in customer base and revenue. The Company launched its business in Q3 2008 in a test phase with strictly Internet marketing. All test-marketing results have been regarded as exceptional successes by the company’s management. With the completion of $2.4 million financing in September 2008, MFGD is ready to proceed with print, TV and radio advertising in Q4 2008 to achieve meaningful revenue already the year end of 2008.
As a result the Company expect to report revenue in the range of $2 million for the second half of 2008. For 2009 and 2010 the Company expects revenue to grow at triple-digits rates. At current growth rates, MFGD could turn to profitability during the first half of 2009.
Favorable industry outlook
Precious metals are experiencing sustained rising markets and prices because demand is strongly outstripping supply, both nationally and internationally. Gold, silver and platinum sell for more than twice their price five years ago. In addition, gold, silver and platinum are increasingly expensive to mine. Despite a solid price hike, less gold was produced in 2007 than in 2006, and less again is anticipated to be produced in 2008.
Recycling plays a key role in these markets accounting for roughly 25% of the global supply of gold each year. Scrap recovery of gold has risen from 14 million ounces in 1997 to approximately 32 million ounces in 2007. Recycling is the second-largest source of gold, silver and platinum supply. Because of supply imbalances, it is increasingly significant to the precious metals markets.
Industry
There is a shifting market trend, mining versus recycling, slowly taking place in the global precious metals market.
Mining costs have escalated due to significant increases in fuel, energy, labor, and transportation costs. Additionally, global environmental regulations specific to the mining industry have become increasingly stringent over the last decade. One of the results has been a decrease in overall global output in many precious metals derived from mining operations. However demand for precious metals remains constant or has increased (dependant on metal type). Couple this with overall market conditions, and standard supply / demand curves, it becomes easier to understand why precious metal prices have increased significantly over the last 12 months.
The United States Geological Survey tracks precious metals utilization, output, and overall sector utilization on an annual basis. The trend line provided by the USGS in their 2007 estimates shows a clear percentage increase in recycled precious metals versus newly mined precious metals, as source material for a variety of industries.
For example, the USGS stated in their 2007 estimates that gold from recycled sources equated to 90 tons, or approximately 47% of reported United States consumption. This indicates a domestic market of around $3 billion annually in recycled gold. Mined gold equated to approximately $5.1 billion, creating a total estimated combined market of $8.1 billion in “new” gold entering the domestic market. Estimated uses were jewelry / arts 84%, electrical / electronics 8%, dental / other 10%.
The USGS further reported an even starker contrast regarding silver. In 2007 United States domestic silver production equated to approximately 1,200 tons from the ground (traditional mining). This compares to roughly 1,600 tons derived from recycling. This indicates a domestic market of around $1 billion annually in recycled silver, and approximately $750 million in newly mined silver, equating to a domestic market of $1.75 billion for 2007.
Between these two recycled precious metal categories, the gross estimated market value is around $4 billion in the United States annually and growing. For newly mined gold and silver, the United States market value is around $5.85 billion. Total market estimates combined places the domestic consumption market at $9.85 billion annually.
It is important to note that Money4Gold also provides recycling services for other precious metals such as silver, platinum and palladium.
Money4Gold, occupies a sub-set for this overall recycled metals market. Although we currently only operate in the domestic United States markets, we are reviewing international expansion opportunities on an ongoing basis.
In our primary segment, we recycle old and broken jewelry. From a long term standpoint, and with gold and silver as the primary foundation for domestic jewelry production, the USGS figures provide a strong indicator for our future basis for “raw material” inflows. Over 80% of available gold and silver consumed in the United States annually is utilized in the production of jewelry and related artistic items. By and large these items are sold to general consumers. A subset of these items will become “old,” unwanted, or broken each year. We give those consumers a method to monetize those assets, while also providing the resulting recycled material back into the overall market.
Based on the total domestic consumption figure for the United States of $9.85 billion, approximately $7.88 billion in metal value is utilized to make jewelry each year. Once this jewelry is sold to the consumer, this overall metal value becomes one significant component of our company’s potential domestic market value.
The above calculations only describe the newly purchased / sold materials (jewelry and associated items) which enter the consumer market each year. However, the overall number of consumer-purchased items in total circulation increases each year as new items are produced and enter the market. This additional potential inventory spans the entire physical life of that individual consumer.
Over the lifetime of an individual consumer, 100% of their precious metal items they purchase will be passed to another party. Much of this will be passed onto other family members; the balance will be sold into the secondary markets where Money4Gold, Inc. resides.
