Frequently Asked Questions
Gedex’s Business Model
Gedex envisions having four primary sources of revenue. First, Gedex will, as is done for traditional geophysical airborne surveys, charge the customer a fixed price for each line kilometer flown over each area surveyed; this is referred to as a “fee-for-service” revenue model. At the conclusion of the survey the customer will have use of the unprocessed data generated from Gedex’s HD-AGG™. Second, typically the client will want Gedex to process and interpret the data collected during the survey; Gedex will charge a separate fee for this service. Third, Gedex will seek to secure royalty (smelter) and/or other equity-like participation in resulting discoveries. Finally, Gedex’s business model contemplates retaining ownership of the data and licensing the data to its survey customers for a designated period of time. Over time, Gedex will accumulate a large proprietary data library that can be further monetized (see Q#4).
While the traditional fee-for-service market is enormous, it pales in comparison to and fails to capture the value associated with the ability to participate in the upside of discoveries which utilize the Gedex technology. As the Gedex system continues to demonstrate its superior capabilities, in addition to charging for kilometers flown (i.e., fee-for-service), Gedex plans to leverage these capabilities by negotiating royalty and other up-side structures into its customer contracts. Probably the most important differentiator is that Gedex’s business model anticipates retaining ownership of all the surveyed data (the customer paying for the survey will only be able to exclusively license the data applicable to their particular survey for a designated period of time), enabling Gedex to build a large geophysical data base that can be leveraged and monetized in a variety of ways, beyond what is negotiated within the individual survey customer contracts. (see Q#4). Traditional survey operators are not configured to accomplish this. While ownership of the underlying survey data by the surveying company is common in the oil & gas industry, such is not currently the case within the mining sector. It will take some time to achieve this in the mining sector, but Gedex believes, given its significant competitive technological advantage, that such a business model can be accomplished.
No. Gedex does not intend to sell its HD-AGG system, but rather will enter into survey contracts with its customers which dictate the terms under which Gedex will perform airborne surveys over areas of interest to them. Included in such a contract is the fixed rate that Gedex will charge for each kilometer flown. This is referred to as a “fee-for-service” contract. In addition to fee-for-service revenue, Gedex plans to include royalty and other up-side structures into its customer contracts (see Q#2). In summary, Gedex has no intention to sell the actual instrument and Gedex personnel will be operating the system at all times during each survey.
While surveys must be performed to obtain the gravity-gradiometer measurements, it is not the surveys themselves that provide value to clients, but rather it is the data collected, processed and interpreted, as a result of the surveys. Gedex intends to retain ownership of all such data and then exclusively license it for a designated period of time to its clients (see Q#2). Over time Gedex will become the repository for a substantial amount of geophysical information, thus building a resource data library which it can leverage and monetize in a variety of ways (e.g., royalties, joint ventures, data sales, etc.). The data library is one of the unique characteristics of the Gedex business model which will create substantial upside for Gedex’s stakeholders.
Gedex already has access agreements in place with several strategic partners, including Rio Tinto, DeBeers and Anglo American which provide for specified levels of usage, measured in line-kilometers per year, and at pre-determined line-kilometer rates. In other words, Gedex already has fee-for-service contracts (see Q#2) in place with these strategic partners. At its current performance level within the existing Cessna aircraft Gedex’s technology can compete aggressively in the current market place. As such, Gedex is actively pursuing early-adopter customers to generate survey and data licensing revenue using the existing Cessna Caravan aircraft. In late August of 2017 Gedex secured the first such commercial customer. The plan is to transition to the Dash-8 (see Q#27) as soon as possible as this provides better system performance (by a factor of 2), higher productivity and thus higher economic return. This is accomplished by allowing more flexibility from the perspective of the size of the survey that can practicably be flown and the distances the HD-AGG™ system can be mobilized. Gedex is currently in active dialogue with a number of mining companies who have verbally committed to utilizing the current system in the Dash-8. Contract discussions are ensuing. Additionally, Gedex has, over the course of the company’s history, developed strong relationships in the larger market of petroleum exploration where industry participants have been kept apprised of our development and are awaiting the deployment of the system into a Dash-8 allowing the system to be deployed globally.
Gedex has a technology development plan in place to further improve performance through already well-defined enhancements to the current HD-AGG™ system. The first of these improvements should be available for incorporation beginning with the third system (early 2019). Gedex believes it will be able to capture meaningful portions of the existing market with its current system, given the system’s advancements over the currently available technology, but also will be able to create new ones as performance levels of the HD-AGG™ improve through these planned enhancements. The HD-AGG™ will improve the imaging of target lithology and reduce erroneous features producing less exploration risk and thus have a significant positive economic impact on exploration costs. The HD-AGG™ will also be able to identify subsurface structures otherwise invisible to other systems, and therefore continue to greatly expand the market.
This is difficult to estimate. There are now 11 AGG systems flying, and in addition there are approximately 40 airborne gravimetry systems worldwide. The operators are for the most part private, and guard their statistics; public companies tend to publish only the aggregate numbers for all airborne surveys flown by them, including gravity, magnetic, electromagnetic, etc. In the larger context, there are well over 10 million line kilometers of airborne geophysics flown annually and we expect that the community will eventually wish to have AGG surveys flown over much of the same prospective area, given the significant advantages the Gedex system provides the exploration community with our high-resolution data.
Yes. The Gedex HD-AGG™ was designed specifically to detect changes in the Earth’s gravitational field from an airborne platform at very low Noise Levels and high sampling speeds (see Q#16 & Q#17). This transformational leap in performance will identify subsurface structures otherwise invisible to other systems, and therefore greatly expands its utility and market. In fact, the International Energy Agency projects that gradual depletion of the most accessible reserves is forcing companies to move to develop more challenging deposits. New technology will play a critical role to image deeper and more challenging and complex geology, which the Gedex HD-AGG™ is well suited to do. Additionally, over 100 different applications including minerals, petroleum, ground water, and defense/homeland security applications have been modeled by Gedex and others. In virtually every application studied the lower noise of the Gedex system greatly improved imaging of the target lithology with a reduction in erroneous features, which represents lower exploration risk and promises significant positive economic impact.
Offshore oil & gas basins such as the Gulf of Mexico are constantly being re-surveyed using improved and very expensive seismic techniques (the de facto standard in petroleum) in an attempt to improve the imaging below salt and remove ambiguities. In many such areas, seismic images often prove to be inadequate from an exploration perspective. The ability to reprocess existing and new seismic data in combination with the Gedex HD-AGG™ data offers a tremendous value in terms of clarifying the seismic data and removing ambiguities. This can greatly increase the likelihood of successful drilling. In some cases, re-surveying to acquire “better” seismic data may even be prohibited due to cost, environmental or other constraints, in which cases the Gedex HD-AGG™ offers an alternate approach. Even in cases where re-surveying the seismic data is possible, the need to perform such surveys can potentially be avoided by using the HD-AGG™. The area of the Gulf of Mexico, alone, is approximately 500,000 km2. At a line spacing of 200 meters, one Gedex system could take over 25 years to fly the entire area, representing over US$400 million in revenue on a fee-for-service basis. Given there are many other salt and basalt basins worldwide, such as West Africa, the North Sea, the Barents Sea, offshore India and offshore Brazil, the market potential is enormous – estimated at 350 system years of flying or an additional revenue potential of approximately US$5 billion. Of course this is a simple back of the envelope calculation to represent a point. There are other growth markets. Unconventional oil is another prime example. Fracking has dramatically changed the energy industry in the U.S. This onshore activity is very expensive, and the industry recognizes that better subsurface knowledge is more important than originally anticipated. Furthermore, fracking is expected to eventually move global, where, generally speaking, there is considerably less knowledge of the subsurface than there is in the United States. Airborne imaging technology such as Gedex’s, that can supplement existing data, will prove to be an invaluable tool. Finally, there are other longer term growth markets, such as homeland security, space, and mapping the subsurface for ground water.
Gedex’s strategic partners include Rio Tinto, DeBeers and Anglo. American. Gedex has formal agreements with each of these strategic partners signed at different points during the HD-AGG’s development. These agreements give each strategic partner various rights, the fundamental one being a priority right to use a specified number of flight hours, on an annual basis, for the first HD-AGG system(s), on a fee-for-service basis (see Q#2). In addition to providing Gedex with funding, many of these agreements have also provided access to intellectual property that has enabled Gedex to develop the HD-AGG system.
Gedex currently has 40 patents of which 29 have been issued and 11 are pending in Canadian, U.S. and International jurisdictions, as well as licenses to IP (know-how and patents) from the University of Maryland (where the use of the patents are exclusive to Gedex), University of Western Australia, and Rio Tinto and the Canadian Space Agency. Gedex also has a pipeline of over 50 inventions and critical know-how it is keeping proprietary. In addition to the multitude of patents Gedex owns, the company also has a great deal of proprietary institutional know-how developed over a decade of research and development which would make it extremely difficult for a competitor to replicate the Gedex system, even if they had access to Gedex’s patent library.
Understanding the AGG Technology
Think of a “teeter-totter” being flown over the ground at 100 meters (approx. 300 feet). Beneath the Earths’ surface there will be “Structures” such as, for example, mineral deposits, or oil/gas reservoirs with densities considerably different than the surrounding geology. As the plane approaches a Structure one side of the teeter-totter will then be closer to the Structure than the other. Gravitational attraction will cause this side to tip downwards towards the Structure. If the flight path is such that the teeter-totter eventually passes directly over the Structure, then both sides will be the same distance from the Structure and the teeter-totter will be level. As the flight path transitions to the other side of the Structure the side which was originally farther away is now nearer to the Structure and it will tip downward. By measuring the amount and direction the teeter-totter tips one can infer the change in the gravitational pull caused by the Structure. The HD-AGG™ system incorporates teeter-totter mechanisms that do just this. As one can imagine, the sensitivity of this “teeter-totter” needs to be incredibly high in order to be able to accurately measure these extremely minute changes in gravity.
It is a unit of measure, like an inch or a pound, and just as an inch is a measure of length and a pound is a measure of weight, an Eotvos is a measure of how much the “pull, due to gravity,” changes over distance. How much the pull, due to gravity, varies over distance is predicated on a number of variables, but the greater the “change in pull” the higher a measured gravity-gradient signal (“Gravity-Gradient Signal”) is in units of Eotvos. This is often referred to as the “strength of the signal”. Just as a kilogram is abbreviated by kg, the Eotvos unit is abbreviated by “E”. The ability to measure a lower Eotvos Gravity-Gradient Signal with a corresponding high Spatial Resolution is important in detecting many of today’s resources (See Q#16, Q#17 & Q#18).
By noise one means spurious readings (collectively, the “Noise Level”) that hide the Gravity-Gradient Signal trying to be measured. As an analogy, think of the snow on older televisions, back when “rabbit ears” were used to receive the broadcast signal. By adjusting the rabbit ears the noised could be reduced and the picture clarified. But at some orientations the snow was so bad that no picture could be seen. In the same way, the Noise Level, also measured and stated in Eotvos, describes an important performance metric for a gravity-gradiometer system — it represents the smallest detectable Gravity-Gradient Signal. A Gravity-Gradient Signal that is smaller than the Noise Level is said to be lost in the noise and cannot be recognized. For example, if a system has a Noise Level of 15 E, it is difficult to detect any Gravity-Gradient Signal below this level. So, if a deposit produces a Gravity-Gradient Signal of only 10 E, for example, it will be difficult for such a system to detect the deposit. Consequently, a billion-dollar discovery could potentially be missed by a system with a Noise Level that is too high.
In gravity gradiometry, one is often trying to measure very small Gravity-Gradient Signals so the Eotvos value of the Noise Level is a critical metric of performance.
“Spatial Resolution” refers to the number of independent measurements taken over a given distance. A higher Spatial Resolution system means that the distance between each measurement is smaller. In order to achieve this, the measurement must be taken more frequently as the aircraft flies over the ground. A gravity-gradient system with higher Spatial Resolution allows for the ability to detect smaller targets. In other words, if there is a lack of Spatial Resolution, it is possible that a major deposit could be missed because it lies in between measurements. Again, potentially, a billion-dollar discovery could be missed by a system with too low a Spatial Resolution.
In gravity gradiometry, one is often trying to detect very small-sized deposits so Spatial Resolution is another critical metric of performance.
In fact, this relationship is significant when comparing competing gravity-gradient systems with the Gedex HD-AGG. Generally, there is an inverse relationship between the Noise Level of a gravity-gradient system and its ability to increase its Spatial Resolution. Typically, one can lower the Noise Level (and thus detect weaker Gravity-Gradient Signals) only if one also decreases the Spatial Resolution by smoothing the data. What makes Gedex’s HD-AGG system unique in today’s marketplace is its ability to measure Gravity-Gradient Signals from deposits at a lower Noise Level (40% lower than existing systems), while maintaining an industry leading Spatial Resolution (5 times the Spatial Resolution of existing systems).
Because of their airborne nature, all commercial AGGs have been mounted, as payload, in a variety of dedicated aircraft, some fixed wing, some helicopter, some of single-engine design and some with twin engines. To address the largest market segments, maximize profit margin and asset utility, while also adhering to customer’s flight and safety requirements, Gedex will deploy the HD-AGG™ system in a fixed-wing, twin-engine Dash-8 aircraft (see Q#29). While conducting a survey a fixed-wing aircraft will typically fly 100 meters over the ground at approximately 125 knots (143 mph/ 231 kph).
As in virtually all cases, the more information one has the better decisions one can make. Thus, the use of other exploration tools (e.g, seismic, electromagnetic, etc.) in conjunction with AGG measurements usually improves exploration decisions, such as where to drill. In some instances, however, an AGG system offers a unique capability to detect subsurface geological structures where other exploration tools are ineffective.
Comparing Competing AGG Systems & Gravity Surveys
At present, there are eleven (11) operational systems all under-pinned by Lockheed Martin’s room-temperature technology, which is based on declassified military gravity-gradiometers historically used in submarines: five (5) operated by CGG (French-based company) two of which operate in helicopters and three of which operate in fixed-wing aircraft; four (4) operated by Bell Geospace (US-based company) all of which operate in fixed-wing aircraft; one (1) operated by Austin Bridgeporth (US-based company) which operates in a fixed-wing aircraft; and one (1) operated by Xcalibur (South African-based company) which operates in a fixed wing-aircraft. Austin Bridgeporth is also currently working with Lockheed on a prototype system still underpinned by the same Lockheed Martin room-temperature technology with similar limitations (see Q#22). Finally, Rio Tinto, in conjunction with the University of Western Australia, is in ongoing development of an AGG system known as VK1 that is similar to Gedex’s in the use of cryogenics (see Q#23) but is otherwise limited by the overall system design, and is intended for small aircraft.
There are a number of companies offering AGGs today (see Q#21), all with slight variations in their offerings. That said, each and every one of them use technology licensed from Lockheed Martin which operates at room temperature. Current non-Gedex AGG systems suffer from high aircraft Noise Levels (see Q#16) which can both obscure important signals and generate spurious features. This limits the value these systems can add to geologic imaging and potentially could lead to erroneous interpretations and costly mistakes. The Gedex HD-AGG™, which utilizes cryogenics (see Q#23), was designed specifically to detect changes in the Earth’s gravitational field from an airborne platform by minimizing aircraft Noise Levels and utilizing high sampling speeds, which improves Spatial Resolution (see Q#17). This represents a transformational leap in performance that will identify subsurface structures otherwise invisible to other systems (see Q#18).
Very simply, AGGs based on cryogenic technology can make use of superconducting physics to provide superior noise performance and measurement resolution compared to any existing operational AGG based on room-temperature technologies. Cryogenics is one of the components (see Q#24) that makes Gedex’s system uniquely superior in performance to the existing room-temperature systems.
The HD-AGG™ comprises three major hardware subsystems—the instrument, the cryostat, and the isolation mount—plus measurement and geophysical post-processing software, which is used to generate “clean” geophysical information through the removal of noise from the signals measured by the instrument. The instrument includes multiple Niobium teeter-totters, which operate at cryogenic temperatures, created and maintained by the cryostat, essentially an advanced thermos which contains a reservoir of liquid helium at 4 degrees above absolute zero. To reduce the impact of turbulence-induced noise in flight, the cryostat, in which the instrument is housed, is placed within a very-high-performance vibration isolation mount, and then affixed to the floor of an aircraft. All the hardware and much of the post-processing software are unique and proprietary to Gedex and cannot be purchased “off the shelf” (see Q#11). Gedex has invested over US$100 million developing the various subsystems and post-processing software.
Gedex has spent over a decade mitigating the technology risk associated with the HD-AGG™ system. Recent validation tests, flown over known geology, have produced performance levels which we believe exceed (i.e., have lower Noise Levels than) all other fixed-wing AGG systems currently in use. These results have been achieved utilizing Gedex’s Cessna Caravan aircraft which is not an ideal survey aircraft. However, once the Gedex system has been moved to the Dash-8 (see Q#27) survey aircraft it has been determined that, because of the Dash 8’s superior airfoil design, a factor of two improvement in performance levels can be expected vis-à-vis those currently achievable in the Cessna Caravan. The expected Dash 8 performance levels will challenge the performance levels currently claimed for the much more time-intensive and expensive helicopter-based systems. Historically, because of their ability to hover, and fly lower to the ground, with less turbulence, helicopter-based systems’ performance levels have exceeded the performance levels achieved in a fixed-wing aircraft.
Gedex has given this question much thought and evaluation and from an AGG instrument perspective, the Dash-8 is superior, both operationally and technically, to the 25 other aircraft evaluated by Gedex. Operationally: it is a twin engine aircraft, which enables survey flights over water out of the sight of land; it has excellent range and a high cruising speed (easier to mobilize and shorter time to and more time on survey); historically, it is a very reliable aircraft (lower operating costs); there are many Dash-8s available in the marketplace; spare parts are abundant; pilot and aircraft mechanic availability is good; the certified fuselage life, even for used aircraft, exceeds Gedex’s requirements; it is known to be able to fly into rugged airstrips and has a high-wing design which reduces the likelihood of foreign-object damage, primarily from unfinished runways; test-flights performed by Gedex in the Dash-8 demonstrated good handling at survey speed and altitude; and, it is operated globally. Technically: because of its airfoil design, it experiences lower vertical vibrations in-flight, which, for a given turbulence, reduces the noise in the AGG measurements by a factor of two, compared to Gedex’s Cessna Caravan development aircraft (a single-engine aircraft); this was verified by performing a fly-off between the two aircraft both of which were instrumented to measure just this noise; the crew and operator are separated from the AGG by sufficient distance, eliminating “noise” in the AGG measurements caused by crew and operator motions; the location of the fuel tanks minimizes the “noise” introduced into the AGG measurements as they drain; it is a nose-wheel design rather than a tail dragger, which better matches Gedex’s AGG design; and, the payload capacity of the Dash-8 permits the possibility of incorporating other exploration tools, into a multiple survey platform, which enables data fusion under the same operational and flight conditions, a major asset when trying to combine disparate measurements from different geophysical survey technologies.