Asia Broadband (OTCMKTS: AABB) is moving northbound in a hurry in recent trading as volume and interest have picked up substantially. AABB was one of the biggest runners of 2021 skyrocketing to highs of $0.659 per share in February before coming back down and forming a base at a dime. In December the stock ran again to highs of $0.33 before the latest dip. AABB is among the most exciting stocks in small caps with an enormous investors following including some of the most powerful players in small caps.
Asia Broadband: Traditional Mining Meets Modern Day Alchemy
- Nevada-based junior gold miner acquired five promising new mining properties
- Capitalizing on crypto space to support a unique business model
- Undervalued compared to its junior mining peers
- Little to no value attributed to paradigm changing cryptocurrency and digital business segment poised to drive future value
- AABB is a speculative yet compelling early-entry investment that presents some inherent risks with possible high reward.
The management team at Asia Broadband (OTCMKTS: AABB) is redefining what it means to be a junior miner, bridging together the physical and digital worlds and ushering traditional mining into the modern age via the blockchain. The company is looking to generate profitability by developing shovel-ready resources and then selling the gold directly into the marketplace via its gold-backed cryptocurrency. If this unique, vertically integrated “mine-to-token” business model succeeds, AABB believes they can simultaneously solve the lingering problem preventing cryptocurrencies from being considered more than just a volatile store of value.
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Creating a Store of Value
From the beginning, critics of cryptocurrency have lamented its lack of tangible value and inherent volatility. While that may not be an issue for everyone, there is a growing movement and market among investors hungry for cryptos that provide some form of tangible backing. Enter AABB. In 2020 the company released its gold-back digital currency, AABBg. The token is backed by $30M in bullion held in stores by the company and its price directly tied to the spot price of .1g of gold. The company recently released the mobile version of its own proprietary crypto currency exchange, becoming one of only a small handful of publicly traded exchanges and delivering a major milestone–and potentially significant revenue stream–along the way.
But while the cryptocurrency component may have stolen much of the recent thunder, the company hasn’t neglected its resource-driven roots and has been busy putting the “mine” in “mine-to-token.” In the span of six months, they’ve gone on an asset acquisition binge, purchasing or entering into LOIs on five mining properties at various stages of development and production, all in prolific mining regions of Mexico. They’ve also opened new processing, warehousing and office facilities.
A Compelling Opportunity
The company’s cryptocurrency component generated a lot of buzz and attracted a large, loyal base of shareholders, but AABB is still a relative unknown in this increasingly crowded and competitive field. At the same time, its crypto component has largely obscured its mining progress, which looks promising on paper, but is still in its infancy. The amalgam of crypto-meets-mining makes for a unique, vertically integrated business model but it obscures the investors ability to arrive at an accurate valuation. Investors focusing on gold mining would realize it is trading at the lower end of its potential. Almost no valuation is reflected in the innovation of its gold-backed token and digital assets, which makes this a compelling opportunity as those gain traction.
A Brief History
Like many OTCs, the company that AABB was when it began is not the company it is today. The original company was incorporated in 1996 as Gemini Marketing, but in 2000, after various iterations, took a controlling interest in China-based Shanghai Broadband Network and subsequently changed their name to Asia Broadband. They eventually exited the broadband business altogether. While the ticker has changed hands over time, the name has stuck, and in 2015, the new Asia Broadband entered the mining business with purchase of the Guerrero Gold Mine, in Guerrero, MX, focusing on the production, supply and sale of precious and base metals, primarily to Asian markets. This direct distribution network into the Asian metals markets is a key differentiator in its vertically integrated model.
Sales grew and the company acquired two additional mining properties with the help of a Chinese-based JV partner, Qiangda Investments. In late 2020, they sold the Guerrero mine to Qiangda for $52MM in cash, $30MM in physical gold which now backs the AABBg token.
A Growing Portfolio
With cash and gold in hand, the company shifted its acquisition focus to targets in Mexico that have “high potential mineralization…and offer substantial value-added opportunities rapidly to expand asset values.” They also brought in new management to execute on that plan, capitalizing on the new team’s established global networks and localized knowledge of the Mexican mining, business and political landscapes.
In the last six months, the company has purchased or entered into Letters of Intent on five properties where they feel they have “a comparative advantage of development resources and expertise.” The company seeks shallower mines that have high grade known vein structures. While production volume may not be large, mineralization is high, making production scalable and profitable.
- Tequila – Jalisco, MX, concession # 219165. October, 2021. 75% Joint Venture interest & 100% of current and future gold production from the 66.7 hectare property. Previous findings from the former Timmins Gold returned economic gold grades over appreciable widths from 14 of 18 holes.The property is now producing gold, silver and base metals from its 50 ton per day processing facility with plans to double that production capacity within the next six months.
- Bonanza – Nayarit, MX, Concession # 221977, November, 2021. 19.25 hectare property. 100% $6,000,000 split into $2,000,000 cash and $4,000,000 million restricted shares. The property has shown high-grade gold assay results from recent samples and drilling activities with the most significant gold values of more than 10 grams per ton (g/t).
- Zodiac – Buen Pais, MX, Concession, # 218704, March, 2022. 200 hectares. 100% interest. $700,000. includes150 ton/day capacity processing plant. Assays in the geological report revealed high-grade gold and silver values from non-targeted rock samples that were randomly collected. Some of the most significant high-grade gold values were 101.6 (g/t) and 26.2 (g/t).
- Zodiac II & III – Buen Pais, MX, March, 2022 – Letter of Intent on both properties.
- Warehousing and Operations – The company opened a new mining operations storage and processing facility in Buenavista, Jalisco, Mexico, and a central operations office in Mexico, City, MX.
- In 2022, the company discontinued development at their existing properties, Los Reyes and Colima, deemed “comparatively not feasible to justify rapid development.”
Closing on the remaining zodiac properties brings the company’s total footprint to more than 300 hectares (741 acres) in a country that is among the top ten largest producers of gold in the world. In all, the company incurred $1,373,092 in exploration and development costs reported in their 2021 Annual Report. Further geological assessment is ongoing but the company said it was “highly encouraged” by assays from geological reports, core sampling and other data.
$AABB $AABBG.X “In a nutshell, with its growing line of products, Asia Broadband aims to become a world leader in providing a standard of exchange of excellent quality, secure, transparent, trusted, and backed by gold. It's just a matter of time.”
— Jimm Emily Ann StockWatch (@JimmEmily090) May 16, 2022
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From Bullion to Bit
With the ink still drying on their mine deals, their cryptocurrency operations are also just ramping up. The company engaged with Toronto-based Core State Holdings to not only develop the AABBg token but create the digital infrastructure to facilitate its use worldwide.
They launched AABBg in 2020 with the goal to make it “a world-wide standard of exchange that is stable, secured and trusted with gold backing, while having the added benefit of demand-based price appreciation.”
The initial token release was 5,400,000 and the company has since sold more than 470,000 tokens generating $2,719,940 in revenue for 2021.
According to Arcane Research, market capitalization of gold-backed tokens increased by 60% in 2022 to surpass $1 billion. A promising statistic on its own for anyone producing an asset-backed coin. However, AABB feels it has distinct differences that separate its token from the others. First, none of their current peers in the Gold-Backed token space (PAX Gold PAXG, Tether Gold XAUT, e.g.) mine their own gold. AABBs mine-to-token model is truly unique. Second, other gold-backed tokens are designed primarily to facilitate the trading of gold in digital form—they simply take the age-old practice of trading & investing in gold as a store of value and put it on the blockchain. AABBg provides that same ability, but its ultimate goal with their token is quite different. The Company “strives toward cryptocurrency only exchanges and complete independence from FIAT currency.” Rather than just facilitating the trading of gold, AABB aims to facilitate the use of gold as a digital currency – to allow merchants, customers and individuals to transact using the AABBg token, and do so worldwide on their proprietary wallet and exchange.
The company’s cryptocurrency wallet has been available for free on GooglePlay (GOOG) and Apple App Store (APPL) since 2021 and supports more than 400 coins or tokens, with more than 10,000 downloads and an average review of 4.7 out of 5.
The desktop version of the cryptocurrency exchange was released with limited trading pairs toward the end of 2021. Additional pairs were added over time, and the mobile version—in both English and Spanish—was released in March, 2022. The proprietary, decentralized cryptocurrency exchange is uniquely embedded within the wallet itself and is completely fiat-free. It facilitates trades of the AABBg token as well as various other cryptocurrencies. At last count, the company had more than 90 pairings available for trading, including BTC, ETH and XRP as well as so-called meme coins like APE, Doge, Shiba and more. The company plans to have more than 200 pairs available as the exchange develops.
The company spent $752,255 on digital development in 2021 and generated $45,872 in exchange fees on top of token sales. The company’s $2,765,812 in gross profit was driven exclusively by the new digital assets segment, with net income of $1,013,726.
The company has yet to release any official numbers on exchange volume. Based on average daily volume and average pricing of each pair available on the exchange, AABB’s exchange now averages around $1M in trading volume per day, putting it on pace to handle more than $365M in volume per year. Depending on the fee generated at time of trade, that translates into about $2-$7M in annual revenue. Keep in mind, this is prior to any major marketing efforts and just a few months into the mobile version’s release.
For comparison, Binance, the largest exchange in the world, generates more than $17B in 24-hour volume, Coinbase (COIN) around $3B. The top-ten cryptocurrency exchanges are bringing in as much as $3 million per day in profit, according to Bloomberg. While AABB’s exchange may be a long way from those astronomical numbers, early usage without any marketing is encouraging. According to Nomics.com, average daily volume for an exchange is just over $2B, the median around $250M. Even if AABB were to hit the lower 25th percentile, they could still see around $65M in volume per day, generating almost $120M in yearly revenue based on a conservative .5% trading fee.
FinTech, E-Commerce and Additional Digital Revenue via PayAABB
Two months after El Salvador announced it would accept Bitcoin as legal tender, AABB established a satellite office and subsidiary there to serve as their Central and South American operations hub. AABB feels they’re token presents a compelling alternative to offset the volatility of Bitcoin, and plans to primarily target retailers.
The company has yet to divulge exactly what it has in store, but has hinted at a new digital asset offering, PayAABB, that could go well beyond El Salvador and instead bring crypto e-commerce capabilities to the global retail masses. PayAABB will offer plug-ins to popular e-commerce sites like Shopify (SHOP) and WordPress. The PayAABB merchant platform and payment gateway will also facilitate crypto payments via messaging applications such as WhatsApp, social media sites and email as well as invoicing, loyalty/reward programs, broker modules and crypto-backed loans.
As El Salvador has shown, merchant & mass adoption of crypto as a functional currency is hampered by Bitcoin’s volatility and transactional inefficiency. PayAABB aims to resolve these issues by providing a holistic digital platform that can be quickly set up within the retailer’s existing Web or Point Of Sale (POS) systems and allow businesses and merchants to accept all forms of cryptocurrencies in store or online. Retailers can then utilize the company’s exchange as part of the PayAABB suite to reduce their volatility and protect their profits by converting their Bitcoin or other accepted cypto into a stable coin such as AABBg. In addition to the added stability, they could see additional profit if the price of gold goes up post-sale. When PayAABB is formally rolled out, it not only quickly enables retailers to offer crypto e-commerce capabilities, but opens the AABB exchange, wallet and token up to an established and tech-savvy user base and the gargantuan global e-commerce market.
The company also plans to enter the NFT space and “has been in discussions to create multiple NFT marketplaces for unique digital content categories.” They also announced a licensing deal with fellow OTC company KYN Capital Group (KYNC) and are looking to expand their network of business clients and contacts as another revenue stream.
Lastly, the company stated they were “in discussions to explore the creation of a cryptocurrency mining facility in El Salvador powered by geothermal energy.” No additional information has been provided, but cryptocurrency mining presents a unique and profitable revenue stream on its own, let alone when it’s vertically integrated into their existing model using geothermal energy.
There are currently 2,500,000,000 authorized shares (AS) and 2,468,944,960 outstanding (OS). In 2021, the company not only paid a 45-1 restricted share dividend, but retired 120,000,000 shares. Despite the share reduction, weighted average shares increased by more than 900M since last year, though the AS has remained unchanged year-on-year. The company is also no stranger to convertible debt, but has stated the initial capital of the largest in-force convertible note was critical at the time and they maintain a professional relationship with the noteholder, Whitecastle Capital Corp. Per the financials, the outstanding balance on that note is $701,416.
With an authorized share count almost maxed out, this outstanding debt and its potential for continued dilution or share restructuring likely gives many existing and potential investors pause. The company has previously indicated they would retire additional shares, but has yet to announce any formal plans or timeline. In late April, the four directors of the company paid a combined $2.8M for the purchase of 28 million non-convertible, preferred shares at a par value of $0.10 per share. Each share has 100 voting rights and equal participation with common shares for all future dividends. The Company President and CEO, Chris Torres, purchased $2.4 million of the total issuance. The entire $2.8 million share sale proceeds will be allocated to the company’s capital expansion programs.
Like crypto, the stock has seen its share of volatility. Following the announcement of its crypto plans in 2020, the stock soared, running from .06 to more than .60 in just four trading days and generating a lot of buzz in its wake. It has since settled in a range with the current 50-day MA hovering around .10. Per available data, the stock has seen an average of 35% daily short interest.
Valuing a New Business Model
At today’s numbers, the company is sitting with a Market Capitalization hovering around $185,000,000. AABB’s earnings per share (EPS) is up 191% year-on-year, from .012 to .035. The company has a trailing price to earnings (P/E) ratio around 3.5 vs mining industry average of around 10.7 as reported by SimplyWallStreet.com. The company’s PEG ratio is just .02, vs an industry average around 8.9 according to Zack’s.
The price of gold as well as the AMC (AMC) / Hycroft (HYMC) deal has brought some renewed attention on Juniors. For those new or traditional mining & metals investors looking for new targets, AABB is trading roughly seven points off the industry average P/E and more than eight points off the average PEG and is undervalued based on most other metrics. With one property now producing, additional projects in the pipeline, the ability to ramp into production quickly and a vertically integrated business model that should yield greater margins, the company presents a limited downside entry opportunity based on its mining portfolio and future potential alone. The company’s ability to tokenize the gold almost as soon as it leaves the ground and generate additional profit each time it trades on the exchange is a unique revenue source no other junior miner can currently claim.
Comparison to peers in the Fintech and cryptocurrency space is more difficult and that lack of comparables may make investors skittish.
COIN, the largest publicly traded exchange, has a trailing PE ratio around 13.
AABB is often compared to fellow OTC fintech Voyager Digital (VYGVF). At their last report, VYGVF had a market cap of $1.14B, with $164M revenue–a +4,518% increase–and a forward looking P/E of 9.4 at time of writing.
VYGF, COIN and others are all revenue-generating, proven business models that have what many consider the most important determinants of value in that space–users and funded accounts. Cryptocurrency companies and fintech startups also often enjoy wildly optimistic and inflated valuations seemingly based on hype alone. AABB is generating revenue, but it does not (yet) have the hype and they don’t (yet) have the users. They also have provided no forward looking guidance on future earnings or specific long-term objectives. Based on those metrics and a lack of insight into where the company is headed, when it comes to their digital assets, AABB’s current share price may, in fact, be a relatively fair valuation of where many investors think the company is today, but it is not indicative of where they could be tomorrow.
While its digital assets may be difficult to value, they are now generating revenue and the potential for that revenue to increase significantly–and the valuation along with it– is what makes it such a compelling opportunity. AABB stock ran 900% when it simply announced its crypto intentions. That run had hype, but was also reflective of the investment community’s interpretation or prediction of future value at the time. While the hype may have died down, the company has done nothing but deliver since. A similar run today would push the share price closer to $1.00. Generating that type of momentum this time around could happen quickly again via a significant catalyst but it could also be driven less by hype and instead more organically by a few quarters of increasing revenue, user growth and positive forward-looking guidance.
The elephant in the room is dilution; however, the balance of power has shifted toward the company as the share structure reaches its maximum capacity. Savvy investors have reason to be leery, but should also realize this shift in power could reap substantial returns upon the announcement of a debt restructuring. Their launch of PayAABB and the successful execution of their El Salvador strategy could be the proverbial icing on the cake that finally makes their digital assets an integral part of their current and future valuation.
For all these reasons, to investors in both the mining and cryptocurrency spaces or for those not afraid to take some added risk, the entry point is low, the downside limited and the potential for reward is high.
AABB has disrupted more than 100 years of traditional gold mining whereby gold is mined, processed and eventually sold off to a refinery to make its way into the market. For almost all junior miners, this is the business model. Valuation is based primarily on a discounted formula of what is proven or confidently estimated to be in the ground and what it can fetch after various items are factored in.
In less than two years, AABB has effectively vertically integrated the entire process and ushered it into the digital age. Gold can now be mined, produced and sold directly to the end user. Anyone can now use gold as a digital currency to pay for goods and services anywhere in the world without the spectre of volatility. All of this and more can be done right now, seamlessly, anonymously, via one application on your smartphone.
The mine-to-token business model is unique, but even traditional valuations based on a simple gold-in-the-ground formula reveal a very undervalued stock. Investors seem to be struggling with the lack of audited financials that an uplisting could cure and the company has stated uplisting to a major exchange is a primary corporate goal. Investors also seem to struggle with a name that belies the innovative junior miner behind it, though the company has embraced the ticker in branding for its digital assets and has a subsidiary, Asia Metals.
There are also new entrants to this model like Osceola Gold (OSCI) which seem to be jumping on the bandwagon by recently announcing their own plans for a stable coin. Others, with bigger pockets and more resources, could follow suit, so AABB needs to capitalize on their first mover advantage. As of late, AABB’s management’s strengths are primarily focused on finding new, attractively priced gold assets to bring under the AABB umbrella. The commencement of new production runs this year could represent major catalysts to come and the company is well funded with a strong balance sheet to see it through. We will be updating on AABB when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with AABB.
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Disclosure: we hold no position in AABB either long or short and we have not been compensated for this article.