Stockprowler.com | 5/30/00

Last week's pick, Stake Technology Ltd. (STKL:Nasdaq), announced on Wednesday, May 24, that the company had once again been named to Profit Magazine's "Profit 100" annual listing of Canada's fastest growing companies. Stake Technology ranked in 5th place up from 16th in 1999. Management projects that revenues will exceed $100 million (Canadian) in FY2000. STKL closed at 1 1/4 on Friday…

Tirex Corporation (TXMC:OTC:BB)

Corporate Web site: http://www.tirex.com
Shares Outstanding: 145 million
Estimated Public float: 70 million
Market Capitalization: $53.6 million
Closing Price Friday: $0.37

Tirex Corporation of Canada has developed what may be the best tire recycling system in the world. The patented TCS-1 system freezes scrap tire pieces through a proprietary thermodynamic freezing chamber using compressed air cooled to 170 degrees below zero (Fahrenheit). The frozen tire pieces are then processed through Tirex's patented fracturing mill separating the rubber from the steel and fiber and producing crumb rubber suitable for regrinding into rubber powders of varying degrees of fineness. In addition, the process recovers clean steel wire and fiber cord, which can be recycled. The TCS-1 system uses no chemicals and produces no pollution.

Most conventional systems used today to produce rubber crumb feed whole tires into chopping, shredding, grinding, or pulverizing mechanisms, or a combination of any two or more of such mechanisms. Because the entire tire is subject to these operations, the steel which makes up the beads as well as the steel wires embedded in the belting and the fiber components of the tire are also chopped, shredded, and ground. In both conventional cryogenic and ambient systems, this initial chopping and shredding is done at ambient temperatures (room temperature). Tires, however, are designed to be tough and durable at these temperatures. The difficulty in chopping or shredding the tires at these temperatures is compounded by the fact that all of the steel in the tire is also being chopped and shredded.

Because of the toughness of rubber at ambient temperatures and the fact that steel, as well as the rubber and fiber, are being chopped or shredded, very large and powerful equipment and substantial amounts of energy are required to tear tires apart using conventional cryogenic or ambient systems. Moreover, since tires are so tough and durable, they have to be shredded in stages. The shredding operations will consume a total of approximately one thousand horsepower or more. Because of the foregoing requirements, the machinery which is used to construct conventional cryogenic or ambient systems has more bulk than the TCS-1 Plant. Moreover, there is great wear and tear on the cutting edges of the chopping and shredding mechanisms, which causes the cutting edge to require constant maintenance, repair, and blade replacement. In addition, conventional cryogenic systems use liquid nitrogen to cool the rubber before subjecting it to knife or hammer-mill operations. Liquid nitrogen is an expensive coolant, costing approximately $.04 per pound of tire. As a result of the foregoing, initial capital outlays for the equipment and continuing energy and maintenance costs are high.

The initial operations will chop or shred a complete tire until it is reduced to chips ranging in size from about 2 x 2 inches to 2 x 6 inches. These chips can be used as "TDF" (tire derived fuel") and possibly as fill to assist drainage. Unless destined for these limited uses, the chips are normally then fed into a second shredder, which reduces them to 1 x 1 inch or 1 x 2 inch pieces. They are then fed into a knife or hammer mill where they are reduced to rubber "crumb" consisting of particles of rubber, approximately 1/8 to 1/2 inch in size. Finally, these pieces are pulverized into a coarse powder or crumb in a hammer mill. At this point, some of the steel will have been broken into small pieces of wire, free of rubber, but much of the steel will remain embedded in the rubber pieces. In addition, since the fiber will have been subject to the chopping, shredding, and/or pulverizing operations, much of it will have been broken, and its thread or cord-like configuration destroyed. The broken, pulverized fibers will have formed a "fluff" which entraps and holds both rubber and steel particles. In order for this crumb to be useable, the steel will have to be separated and removed. The use of strong magnets removes the free steel pieces, but such magnets also remove all of the rubber particles in which the rest of the steel is embedded, resulting in a loss of up to 15% of the rubber. To avoid losing the substantial amounts of steel-bearing rubber which were magnetically removed, and to obtain a finer crumb (the coarse crumb has very few uses), the crumb must be subjected to a second re-grinding, which may or may not be cryogenic. This is normally done in a knife mill capable of disintegrating the crumb into smaller particles or in a hammer-mill. In using a hammer or knife-mill for this operation, however, the following problems arise: (i) running at an efficient speed, the fiber fluff (which is contained in the rubber crumb) may clog the mechanism; and (ii) the action of the hammer or knife-mill will heat the rubber to the point where it will become so soft that instead of being pulverized into a powder, it will simply be softened and mashed and thereby will further clog the mechanism.

To avoid these problems, the hammer or knife-milling operations can be conducted at low feed rates, which will reduce the foregoing problems, but which may not be economically feasible. Conventional cryogenic systems deal with this problem by using liquid nitrogen to cool the previously chopped and shredded material before feeding it into the hammer or knife-mill. Some ambient systems do not freeze the rubber, but instead inject liquid nitrogen directly into the mill to keep the rubber from softening. Knife-milling or hammer-milling operations will create further problems because all of the fiber and steel, which is mixed in with the rubber crumb, will have been ground up and pulverized along with the rubber, with the following results: (i) The steel components of the tires will have been ground or pulverized into a fine powder, which cannot be allowed to remain as a contaminant in the rubber powder if the rubber is to have any economic value. The steel must therefore be removed magnetically. However, the fine steel powder will be thoroughly mixed in with the rubber powder. The magnetic action, which is meant to pull out the minute particles of steel, will necessarily also draw out substantial amounts of the surrounding rubber particles. Losses of rubber powder resulting from the magnetic removal of the steel powder are estimated to amount to approximately 15% percent of the total rubber powder produced. Such wastage adds substantially to the cost of useable product yielded by these systems. The steel powder is not useable for any purpose and has no economic value. It must be transported and deposited in landfills, which again adds to the cost of any useable product produced. (ii) The thread or cord-like configuration of the fiber will have been disintegrated into the cotton-like "fluff" described above. This fluff will attract and hold significant amounts of the powdered rubber and steel. Separation of the steel and rubber particles from the fiber fluff is nearly impossible because the fine particles are trapped in the entangling strands and adhere to them. It is estimated that up to 15% of the rubber powder will be trapped in the fiber fluff and drawn out with it. The fluff has no current economic value and actually constitutes a liability because it must be transported and disposed of, usually as landfill. The wastage of up to 15% of the rubber powder, which results from losing the rubber which is trapped in the fiber fluff, together with the additional 15% percent of the rubber powder which clings to the pulverized steel particles when they are removed magnetically, brings total losses of rubber powder to approximately 30% percent, which is reflected in a concomitant increase in the cost of the product produced.

Current shredding operations recover on average twelve pounds, or 75 percent, of the rubber contained in every twenty pound tire. All of the fiber and steel, and the balance of the rubber components of each tire are, in most cases, not reclaimed, for the reasons described above. The result is a loss of approximately eight pounds of unrecovered, unrecycled rubber, steel, and fiber, representing 40% of the constituent materials of the tire, which must be transported and disposed of in landfills or other solid waste disposal facilities.

Tirex Corporation has entered into a licensing agreement with Ocean Equipment Manufacturing and Sales Co. for the U.S. market. Tirex will receive 16% of the gross income from the TCS-1 systems sold or leased by Ocean Equipment and a 3% royalty on crumb rubber produced by Ocean Equipment. In addition, on December 14, 1999, Tirex announced the signing of a Memorandum of Understanding with the Shandong Hongli Group from the People's Republic of China to purchase one TSC-1 cryogenic tire recycling system for $2.25 million dollars (US). The Memorandum also includes an understanding that the parties will negotiate a long term agreement with the Hongli Group for the exclusive right to market and manufacture the TSC-1 system in the People's Republic of China. On May 26, 2000 Tirex was host to a delegation from the Embassy of the People's Republic of China. At the conclusion of their visit, a statement was released.

Tirex is poised for rapid growth. The TSC-1 system is highly efficient, recovering virtually 100% of the rubber in tires processed with the system. The system is less expensive to operate than any existing cryogenic tire recycling system because it does not use expensive liquid nitrogen. It requires less maintenance and consumes substantially less energy than other conventional systems. Factor in that the price of crumb rubber is increasing due to exploding demand for it in ever increasing uses and products… TXMC closed at 37 cents Friday up nearly 40% on the day with 1,438,100 shares traded.

Good trading… Stockprowler