Description

Trecora Resources (TREC on the NYSE) presents an investor with the opportunity to buy a small, growing, recurring revenue business operating in a duopoly at a reasonable price.  This situation exists as TREC is investing in building additional facilities to take advantage of growing demand for its products and services, and some one-time hits to revenues and profitability in 2016.  The capital outlays are nearly done and in late 2016/early 2017 new plants begin to come on line which will cause demand for its specialty products will take a step function higher.  My price target is $29.54, which is a 188% gain on the $10.27 share price as of 9/12/2016.  This is based on a 10 times multiple to my projected 2018 cash flow.  In addition, TREC owns a 33.4% minority position in a copper/zinc/gold mine that is worth an extra $5.68 per share based on a transaction for its shares in July 2016 that I am ignoring in this price target.

Trecora Resources is a specialty petrochemical manufacturer that operates two petrochemical plants with its main facility, South Hampton Resources (“SHR”), located in Silsbee Texas and the other, Trecora Chemical (“TC”) in Pasadena Texas, just outside of Houston.

South Hampton Resources

The South Hampton Resources plant currently generates the lion’s share of TREC’s cash flows.  This plant produces extremely high purity (99.9%) pentanes and hexanes that are used predominantly as a small component in the making of polyethylene, the building block of plastic.  It is also used in the manufacturing of foams and rubbers and by Canadian Oil Sands refiners to help liquefy the bitumen so that it may flow through pipelines. SHR has only one competitor that can produce equivalent quality (99.9% purity) chemicals on a consistent basis, Phillips 66 (PSX) which currently lists Warren Buffet’s Berkshire Hathaway (BRK) as its largest shareholder.  For PSX, this is a very small and insignificant portion of its business and TREC management believes that it has 70% market share of this market.

The list below of SHR’s products and applications comes from Company slides:

No other petrochemical company has the technical know-how to make the high purity pentane/hexane manufactured by PSX and TREC.  This is a relatively small market and helps create a moat around the business.  The other driving factors keeping competitors out of this niche are:

1. Large polyethylene and petrochemical customers are very slow to approve any changes in chemicals used in their manufacturing processes.  Once the target customer is convinced to start testing the higher purity chemicals in its operations, it continues to review the products for long periods of time (approximately 18 months) before it decides to completely make the switch.  

2. Customers must carefully and frequently inspect to ensure that the supplier’s facilities can safely and reliably make the desired products.  TREC even had some customers perform extensive testing of products that were produced from its new manufacturing line “D-train” to make sure that it could be used confidently in polyethylene production and not cause any disruptions.  

3. The customer also must be confident that the producer can supply the chemicals in the amount and time that it needs without disruption.   This service level is one of the key differentiators that allows for TREC to capture more market share than PSX.  In recent years, PSX has gone down for maintenance and had issues restarting its refinery.  This type of delay upsets customers and drives business to SHR, who had been able to fulfill the entire market demand during the disruption and maintained its larger share of the market.

TREC’s customers (shown below) are Fortune 500 companies who manufacture large amounts of chemicals in processes that run 24 hours a day, 7 days a week. This makes the demand for TREC’s chemicals highly recurring.  These companies are very reluctant to have any variation in a chemical that makes up such a small component of the cost of goods sold “COGS” that if not supplied can disrupt their processes.  

TREC’s largest purchaser Exxon Mobil (“XOM”) (source: TREC’s 2015 10-K filing) is listed as a 20% customer, however this is a company that has many different products, divisions and plants that purchase from the Company.  Bloomberg supply chain estimates that TREC makes up only 0.02% of XOM’s COGS, which, as spoken about above, bodes well for TREC since it is not worth it for XOM to risk changing suppliers or spend capital attempting to build its own supply for such a small part of its production.

SHR’s business was very stable during the last downturn, aka the “Great Recession”.  Other than a small dip in 2010, volumes have increased at SHR every year from 2006 until 2015.  For example, in 2007 SHR sold just over 40 million gallons of product and in 2008 that grew to over 46 million gallons.  SHR’s customers are large, low cost producers who were able to take market share from less effective competitors.  The only blip in 2008 was a negative impact TREC’s gross margin due to an attempt to hedge the Company’s feedstock prices, which is the major component in its cost of materials.  From TREC’s 2009 10-K (emphasis in bold is my own):

Cost of Materials increased dramatically from 2007 to 2008.  The Petrochemical Company attempted to maintain, when the market was suitable, a hedge position on approximately half of its feedstock needs, buying financial swaps to protect the price for three to nine months in advance as opportunities arise.  The numbers in the table above reflect the final price of materials, including results of the realized and unrealized gains and losses of the hedging program. Material purchase costs rose by 96.5% from 2007 to 2008.  However, when adjusting for the effects of derivative losses, material costs rose by 65% from 2007 to 2008.

If TREC did not have these hedges in place, the company would have had petrochemical gross margin of nearly $21 million in 2008 instead of its loss of -$1 million.  To make sure this does not occur again the Company has instituted formula pricing for approximately 50% of its customers instead of utilizing a hedging program.  This reduces risk and provides natural hedging for TREC and its customers.

Trecora Chemical

Trecora Chemical is a plant that was purchased in late 2014 to sell specialty polyethylene waxes and custom processing services.  Since acquiring the plant, TREC has significantly improved the purity of the waxes produced to levels that have allowed it to become the third entrant into certain niches of this market.  Similar to the pentane/hexane business at SHR, the purity of waxes takes some time to have its  quality tested and approved to be used in high volumes by customers.  One of the major markets that use these types of waxes are hot melt adhesives.  These adhesives must melt at a very narrow range of temperatures and are mainly used to seal shipping boxes (think Amazon) and automotive carpet.  The largest producers of adhesives in the world are companies such as 3M, Henkel and Huntsman.  Once again, similar to TREC’s customers at SHR, these are very large, slow moving companies that take quite a while to approve any new supplier.

To demonstrate this point, the following three Company comments show the length of this process for receiving approval to ship large quantities of waxes to TREC’s customers.

First, during TREC’s business update call on October 2, 2014 after it acquired TC, a question is asked about whether the selling process is as long at TC as it is for SHR.   Here is Simon Upfil-Brown’s (TREC’s CEO) answer:

“I think some of them can be fairly lengthy too, John. I'm not 100% sure on all of the markets. But I know of some of the markets they go through a lot of testing to make sure that you're not messing up their process. So, it might not be quite as long as ours, but some of the markets are of the 18 months’ timeframe plus.”

Second, here is an update about six months later from TREC’s 1Q 2015 conference call about TC’s progress, approximately 18 months post acquisition:

Finally, here is the update about 20 months later from TREC’s 2Q 2016 conference call about some additional progress at the TC plant:

TC also does custom processing (also known as tolling) at its plant in Pasadena Texas, which is located right in the heart of the Houston petrochemical industry.  Around the facility you will see many of the world’s largest chemical Companies.  ChevronPhillips, LyondellBassell and Dupont are just a few of the companies with facilities in the vicinity.  These companies use TC to run small batches or test production runs of new chemicals instead of hiring additional employees and building out the infrastructure necessary to do so on their own.  The custom processing and wax manufacturing at TC are complementary since equipment not being utilized for a custom processing client can be used for the production of additional quantities of wax.  A main focus of management is to maximize the utilization of its equipment to produce value for the company.  Custom processing typically has higher margins when compared to wax, so it usually takes priority over wax production unless there is a large wax order that must be processed.

The type of custom processing done at TC is very stable during downturns as well.  As customers exit plants and/or reduce production, they still want to sell their higher-margin products and look to companies like TC for tolling services.

TREC’s SHR plant also does custom processing for customers.  However, the difference between TC’s and SHR’s custom processing is that at SHR, the projects tend to be longer term in nature and have longer runs when compared to TC.  An example of a custom tolling project at SHR is Gevo Inc’s (GEVO) bio jet fuel.  SHR built and operates the Hydrocarbon Biorefinery for GEVO and charges it a fee for the services.  SHR never takes ownership of the feedstock or finished inventory.  This slide from from Gevo’s investor presentation shows the plant and the end markets for its products:

Of note, on June 7th, 2016 Alaska Airlines flew the first two commercial flights using GEVO’s renewable jet fuel.  

SHR recently added a new customer, Anellotech, for custom processing and has finished installing and setting up its production line for this product and should soon start generating service fees.  You can read more about the Anellotech deal at the following link:  

http://goo.gl/mSW9Ca

The custom processing at TC and SHR work well together because it allows TREC to start off with small custom projects at TC and move them to SHR if they become more viable to run at larger scales.  It creates a great ecosystem for TREC to have a soup to nuts custom processing business which can help utilize employees and equipment which would otherwise remain idle.

The slide below shows an overview of the Custom Processing business from TREC’s investor presentation:

Value addition from Capital Projects

TREC is in the midst of a large outlay of capital for a number of new projects which should create additional shareholder value.  I will go over each one separately.

1. D-Train at SHR

D-Train is the name of the new chemical manufacturing line that SHR finished constructing in late 2015.  The project cost $30 million and was completed on-time and on-budget.  D-Train increased SHR’s permitted capacity from 7,000 barrels per day to 11,000.  While the permitted capacity increased by 4,000 barrels, D-Train actually can produce at higher capacities as the Company announced that it has shown 6,000 barrels per day of throughput when both A and C Trains were down for maintenance and testing of other potential products.

The catalyst for the development of D-Train is the significant amount of polyethylene capacity coming online in the US over the next few years.  This market is the sweet spot for SHR’s products. The high purity pentanes produced by TREC and PSX are used by facilities that use a specific method to produce polyethylene.  Now that SHR has the capacity to provide for the upcoming demand of these high purity pentanes, it doesn’t make sense for a potential new competitor to build capacity as well.  The long lead time to get approved by customers (at least 18 months) and low volumes over that time period make it unlikely for a competitor to take this risk.  I believe that all of the new polyethylene capacity coming online is from companies that are already TREC customers.  During the 2Q 2016 conference call, TREC’s CEO mentioned that he expects the volume from these facilities to be in the order of 6 to 7 million gallons per year.

In addition to the demand from polyethylene plants that are coming online, SHR also is expecting a large oil sands customer to come online in the middle of 2017.  During the 2Q 2016 conference call TREC’s CEO said that he expected to get approximately 10 million gallons a year of incremental volume from this second oil sands mine customer.  This equates to approximately 650 barrels per day or nearly 6% of total permitted capacity at SHR.  I project that SHR makes approximately $1.50 per gallon in gross margin above its feedstock cost on the prime product that it sells.  For a high volume customer like the oil sands miner, I am assuming that this gross margin will only be $1 per gallon above feedstock cost.  Other than the cost of feedstock, the incremental cost to producing the additional 10 million gallons is energy and transportation, which both are not very material.  The additional EBITDA to TREC should be approximately $10 million annually from this new oil sands customer, coming on by mid-2017 and potentially earlier.  

The demand from the new polyethylene capacity coming online should over the next couple of years add over $9 million annually in incremental EBITDA since SHR will be selling 6 million gallons at approximately $1.50 per gallon above feedstock prices.  The margin from these customers tends to be higher since they order much lower volumes than the oil sands customers.

The main risk for D-Train is if the demand for SHR’s high purity pentanes does not arise as expected.  If the polyethylene plants do not increase production and the new oil sands customer doesn’t take expected volumes, then the D-Train manufacturing line and the rest of SHR’s plant will likely not be run at higher utilization rates.  This will not affect EBITDA relative to historical run rates as these plants do not require meaningful additional labor if production is not increasing.

However, TREC has mentioned that it is testing the production of some new chemicals for customers.  The construction of D-Train has allowed the Company to test new chemicals on the A-Train manufacturing line now that it has the additional capacity.  TREC has completed a pilot trial, started a large volume trial and also mentioned plans for beginning another campaign in late August on its 2Q 2016 conference call.  None of these products are factored into my estimates or the Company’s estimates for payback on D-Train.  These new products would help fill capacity at SHR, increase EBITDA and speed up the expected payback from the D-Train project.  Here is what TREC presented on the 2Q conference call:

Below are a few points summarizing D-Train taken from TREC’s 2016 B Riley Conference investor presentation:

TREC has a history of projecting demand growth for its products and expanding its plant to fulfill such growth.  In late 2008, SHR completed a large expansion project and expected it to take 3 to 5 years to grow into the extra capacity.  Former CEO Nicholas Carter mentioned in a press release at the time:

“Our South Hampton facility expansion began full startup on October 7, 2008 and we have been running 3600 barrels/day. Through the end of October we have used 30% of the additional capacity that the expansion provided. Demand remained strong for most products through the first nine months of 2008, and the process ran at 90.5% of capacity per calendar day which is close to maximum capacity when time lost for maintenance, weather interruptions, and mechanical failures are considered. With the addition of the new facilities, the utilization percentage will fall as the Company expects it will take three to five years to market the full availability of product."

Approximately 5 years later, in 2014, demand for pentanes from SHR had nearly filled capacity and steps were taken to expand again by building D-Train which came online in late 2015.  The quote from the former CEO, and current Chairman of the company, shows that TREC has a good grasp of the demand for its chemicals and a track record of successful expansion, which I believes gives management credibility for the current one as well.

2. Advanced Reformer at SHR

When SHR makes its high purity products for its customers, it also creates byproduct that has little added value when compared to its feedstock.  The feed that it receives from its suppliers has a wide range of component makeup and since 2014 prime gallons as a percent of total gallons has fluctuated from between 70%-80%.  The remaining 20%-30% of byproduct hurts margins since it is abundant and has little value to buyers.  In the past year, TREC has mentioned on multiple earnings calls that the market for its byproduct has had a glut and it has sold at prices below feedstock for some quarters.  For example, in 1Q 2016 TREC sold its byproduct for 13 cents below its feedstock cost compared to about an even cost in 1Q 2015.  This is where the Advanced Reformer unit comes into play to help SHR.

Below is a summary of the SHR Advanced Reformer taken from TREC’s investor presentation:

The Advanced Reformer Unit will turn the byproduct that is currently created during SHR’s chemical manufacturing process into upgraded products that TREC expects to sell at 35 to 50 cents per gallon above its feedstock cost.  These upgraded products are called Aromatics and more specifically are Benzene, Toluene and Xylene (“BTX”).  

SHR sold 87 million gallons of product in 2015, of which I approximate that 64 million gallons were prime, leaving 23 million gallons of byproduct.  If all of this byproduct would have been converted at an additional 35 cents per gallon of margin it would add over $8 million and at 50 cents per gallon it equates to $11.5 million in additional gross margin.  Nearly all of this gross margin flows to EBITDA.

In the company’s investor presentation, it mentions that it will convert 30-40 million gallons per year of byproduct to higher value aromatics.  It is very possible that TREC may be able to purchase additional byproduct at cost on the market and convert it to higher value aromatics.  Remember that asset utilization is key to this business and if SHR can find a way to run the Reformer at full capacity and keep margins, it should do so.  In the low-end scenario of converting 30 million gallons at 35 cents per gallon, that would add $10.5 million in gross margin.  In the high-end scenario of converting 40 million gallons at 50 cents per gallon, that would add $20 million in gross margin.  Additional costs should be very minimal as the chemical process doesn’t really involve any additional labor, but mostly utilizes additional energy, which is immaterial in cost.

In its’ investor deck, TREC says that the reformer will add approximately $13m per year in EBITDA, cost $46m, have a 3-year payback and be completed in the 2nd quarter of 2017.  During the last conference call, CEO Simon Upfil-Brown talked about the risks of this unit:

“The advanced reformer unit depends more on things like BTX prices; benzene, toluene, xylene prices. We were pretty conservative in our estimates there. So, you know, I don't think there's a lot of risk, but you never really know what's going to happen to BTX.

One of the theories is that as they require lower and lower sulfur in the gasoline pool, the refiners are going to have to hydrogenate harder, which means they are going to have less octane in their gasoline, which means they're going to have to add octane to the gasoline and toluene especially, but also xylene and some benzene is often used to increase octane.

So there is some concern that BTX might be tight. So, you know, that could in fact help that unit, but that's probably the biggest risk. We don't see any technology risk with the advanced reformer because it's been run in a number of places already very, very effectively.”

I decided to take a look at weekly BTX prices and compared them to TREC’s feedstock, natural gasoline.  My analysis shows that the lowest spread between the lowest of Benzene, Toluene and Xylene versus Natural Gasoline since January 2013 is 71.6 cents per gallon, with the average at 136.6 cents per gallon, and most recently at 99.2 cents per gallon.  This compares quite favorably to the 35 to 50 cents mentioned earlier when valuing the reformer.  When Mr. Upfil-Brown mentions in the 2Q 2016 conference call that they “were pretty conservative in our estimates there”, he wasn’t joking.

3. Hydrogenation/Distillation Unit at TC

TC has since its acquisition by TREC in 2014, been working on analyzing, permitting and building the Hydrogenation and Distillation unit.  Mr. Upfil-Brown mentions the risks associated with this project during the 2Q 2016 conference call:

“With the hydrogenation and distillation unit, that depends on us finding the right projects that fit the capabilities. We have opened very extensive list at this point, all of which we're working on, all of which the customers are very interested in laying claim to that -- to that capacity, but, you know, you never know when the time comes along will they actually sign the contracts and commit.

I don't expect that to be an issue, there is a very limited capacity for high pressure hydrogenation on the Gulf Coast here. And I don't think we will have any difficulty selling that capability.”

To limit some of the risk of selling custom processing capacity for this equipment, TC can also use this new equipment for some of its own wax manufacturing as well.

When I look for other hydrogenation units in the US, I can only find low-pressure hydrogenation units, while TC’s unit will be a high pressure system.  TREC management claims that to their knowledge, there is only one other company that offers high pressure hydrogenation for custom processing and it has been sold out for many years.  I think that TREC’s management has a good sense of demand that this project will receive for custom processing and I expect the project to begin generating $6m in annual EBITDA in 2Q 2017.  The slide below from TREC’s presentation shows the unit:

4. B Plant (BASF facility acquisition) at TC

TREC recently purchased an adjacent chemical plant.  Originally it was part of TC but it was sectioned off and sold by the previous owners.  TREC bought it for a bargain price of $3 million, which includes a potential earn-out.  It was owned by Fortune 500 chemical manufacturer BASF.  BASF ended up owning this asset after it was included in a large acquisition that included many other plants.  In the photo below, you can see the plant that TC purchased on the bottom-right.

The info below was taken from TREC’s presentation during the 2Q 2016 conference call.  The Company expects to earn between $4 and $6 million in annual EBITDA from this asset by 2018 as shown in this slide below from the 2Q slide presentation.

This transaction could be viewed as a steal.  TREC took a bargain purchase accounting gain on its second quarter income statement of $11.5m after making this acquisition.  Due to the plant’s small size, the only other bidders for the asset were scrappers.  TREC’s bid, while below scrap value, was useful to BASF due to an agreement by TREC to toll for BASF when needed.  

Here is Mr. Upfil-Brown discussing the risks of the B-plant acquisition and hitting its EBITDA targets:

“B Plant depends on custom processing capabilities that require things like reactors and Wiped Film Evaporators and you know, we have -- even I mentioned on TC, there's a lot of interest in those capabilities and we seem to be doing more and more trials and signing up more and more contracts. So, you know, that does depend on people coming along with their custom processing requirement for those capabilities. But, you know, that one also, I think is very doable.”

Also, just like other custom processing equipment at TC, B Plant can be used to make waxes as well.  Below is a photo of B-Plant showing waxes being produced and stored:

Value of TREC’s Chemical Business

TREC’s highly recurring business is poised to increase EBITDA markedly over the next few years due to the projects mentioned above.  Below you can see a slide taken from TREC’s 2Q 2016 Conference Call showing these various capital projects and their corresponding annual EBITDA and time frame estimates.

Two other material catalysts are not mentioned in the slide above.  First, the demand from a new oil sands customer coming online in 2017 which should add approximately $10 million in incremental EBITDA starting in the middle of 2017.  The other is the sales growth of high quality waxes made at TC, which could increase TREC’s EBITDA by about $8 million annually.  Like D-Train, this will likely take a few years to develop.

By the middle of 2017, most of the projects and catalysts should start to positively affect TREC’s financials to the tune of between $32 and $38 million in incremental annualized EBITDA.  This does not include the full $6 to $8 million of projected EBITDA from D-Train or the $8 million from TC’s high quality wax sales, since timing on those is less predictable.  Assuming that those cash flows take 4 years to materialize, and they ramp up evenly over those 4 years, I assumed that they add approximately $3.5 million in incremental EBITDA in 2017 and an additional $3.5 million in 2018.

So for the full year 2018, TREC should have incrementally added a total of $39 to $47 million in EBITDA.  Here is a breakdown:

These various projects are all built into my financial model that I created to project TREC’s financials going forward.  Below is a summary of the results of my model that takes these projects into account with slightly more conservative estimates.  For projection purposes, I used stable commodity pricing.  I included elevated capital expenditures of $60 million spread out over the next four quarters before dropping back down to maintenance capital expenditure levels starting in 3Q 2017 (In $ Thousands):

Based on the comparable companies listed below, I feel comfortable using a 10 times EBITDA multiple to value TREC.

Giving TREC a 10 times EBITDA multiple and adjusting for my estimated levels of debt and cash by the end of 2018 gives me a projected share price of $29.54 for TREC’s petrochemical business.

Temporary Issues caused the EBITDA decline in 2016

Petrochemical volumes in 2016, particularly in the second quarter, have been down at TREC due to some of its customers having one-time issues. There was a large uncontrolled fire in the Canadian Oil Sands during May, which caused many operations in the area to shut down.  No equipment was damaged in the fire and operations resumed back to normal levels eventually after taking a maintenance shutdown throughout June and into July.

In Latin America, a local supplier came back online and reduced prices to gain market share.  This was actually a plant sold by TREC in 2005.  This company gets its feedstock from Pemex, which provides very inconsistent quality.  This plant has sporadically come on and off over the past few years and hasn’t been able to keep producing consistently.  TREC had this same identical issue with the plant coming online a few years ago to take away some temporary volume.

Another customer had a major maintenance turnaround in late Q1 and Q2 to improve its long-term efficiency.  TREC expects to retain most of this customer’s reduced volume going forward.  

A potential longer term drop in demand came from a Canadian Syncrude customer that shut down its facility earlier this year due to an explosion which caused deaths at its refinery.  It is unclear when or if they will start up operations again, but it would seem likely that it will at some point since the upfront investment for such projects is high while the marginal cost of running the equipment is minimal.  Here is a link to the latest news on Nexen’s plant:

http://calgaryherald.com/business/energy/cnooc-nexen-energy-cutbacks-at-long-lake-oilsands-site-cap-years-of-trouble

TREC has at times experienced similar issues in the past, however these upsets are usually temporary in nature and orders pick up from other customers to fill demand.  Here are Mr. Upfil-Brown’s comments during the 2016 2Q conference call:

“As I noted earlier, while prime product volume was lower at South Hampton, it is not evident or any systemic problems with our business. Based on our current visibility, we expect to resume annual growth volume in mid-2017.”

Ownership of minority stake in a copper, zinc and gold mine adds more value and optionality to TREC’s stock price

Trecora Resources also owns 33.4% of the Al Masane Al Kobra Mining Co. or “AMAK”, a zinc, copper and gold mine located in Saudi Arabia.  On July 20, 2016 an announcement was made that new shares were issued to one of the current owners, Arab Mining Co. “Armico” at a value of $5.33 per AMAK share.  This puts an updated value to TREC’s ownership of 26,085,000 AMAK shares at $139,085,220.  Converting that to shares of TREC, based upon 24,506,846 shares outstanding gives TREC a value of $5.68 per share for AMAK.

AMAK is currently shut down and the company hired new management to come in and renovate to improve production efficiencies and precious metal recoveries.  TREC expects AMAK’s operations to be efficient enough to be profitable even in a low commodity pricing environment.  The mine is expected to restart operations in 4Q 2016.

In late 2015, AMAK was able to obtain additional leases to expand its mining area which includes some potentially valuable gold deposits.  Currently exploration studies are being done to obtain more proven and probable reserve information.

I view AMAK as nice potential upside for TREC’s stock.  Due to Saudi law, within 2 years of profitability, AMAK must IPO which may be a nice exit opportunity for TREC to sell its interest in AMAK.  Potentially TREC can get a higher valuation than the $5.68 that was paid for by Armico in the recent share issuance.

Conclusion

TREC is benefitting from a petrochemical renaissance in North America caused by plentiful and cheap natural gas and oil supply and looks to take advantage of the expansion projects coming online over the next few years.  With total capital expenditures of nearly $100 million on four projects, I project that TREC will add approximately $40 million in incremental EBITDA by 2018 which should drive the company’s stock to nearly $30 per share excluding the value of its’ investment in AMAK.

Catalyst

TREC is benefitting from a petrochemical renaissance in North America caused by plentiful and cheap natural gas and oil supply and looks to take advantage of the expansion projects coming online over the next few years.  With total capital expenditures of nearly $100 million on four projects, I project that TREC will add approximately $40 million in incremental EBITDA by 2018 which should drive the company’s stock to nearly $30 per share. In addition, TREC owns a 33.4% minority position in a copper/zinc/gold mine that is worth an extra $5.68 per share based on a transaction for its shares in July 2016 that I am ignoring in this price target.