Silex Systems Limited
Recommendation
You don’t get much more ‘blue sky’ than Silex Systems. Of its two main divisions, one is developing a new way of enriching uranium for the nuclear power industry and the other hopes ‘to establish ... [its] ... technology as the world’s leading utility scale solar power generating system’.
But it does appear to be doing everything right. Its ‘Separation of Isotopes by Laser Excitation’ (SILEX) process appears to be much more efficient than current technologies at enriching uranium; it has all the necessary approvals in the US; and its partner Global Laser Enrichment (a joint venture by GE, Hitachi and Cameco) has been cleared to build a commercial-scale SILEX enrichment facility in Wilmington, North Carolina. GLE is signing up customers before it begins construction and has so far signed letters of intent with Exelon, Entergy and Tennessee Valley Authority.
Under its deal with GLE, Silex stands to receive a royalty of 7%-12% on revenues generated from the technology (on top of various milestone payments). The Wilmington facility is expected to produce up to about US$600m worth of enriched uranium per year. The total enrichment market is currently worth over US$6bn a year and is forecast to grow to US$20bn by 2030.
The solar power technology uses 15 metre dishes to focus the Sun’s light onto a special kind of solar cell. This has advantages over the traditional flat panel approach, because the dishes are easier to move to track the Sun, the cell can be much smaller (reducing the need for expensive materials) and it can be actively cooled (improving efficiency and longevity).
In June last year the company successfully completed a 600 kilowatt test facility at Bridgewater in Victoria, assisted by a grant from the Victorian Government, and it has signed a deal with Diamond Energy to supply power to the local grid. It is now building demonstration plants of around 1 megawatt (about 30-40 dishes) at Mildura in Victoria, Nofa in Saudi Arabia and California in the USA, with completion expected this calendar year. The next stage would be a 100 megawatt plant at Mildura.
Silex has two other divisions: Translucent, which makes ‘rare earth oxide’ semiconductors with applications in power electronics, LEDs and solar cells; and Chronologic, which provides precision timing equipment for use in testing and data acquisition. As with SILEX and Solar, these technologies are due to move to commercialisation over the next few years.
The company had $72m in the bank at the end of December, which should give it enough time to take its technologies through to profitability if successful.
So how do you value all that? Well the answer is with great difficulty – hence the need for a large margin of safety – and hence the lack of a positive recommendation in the absence of one, as now. But Silex has some interesting technology and if you already own it, there are plenty of reasons to HOLD.