Good morning, everybody. Our next presentation is Abaxx Technologies. Abaxx is a developer of software tools that enable commodity traders and finance pros to communicate, trade, and transact in Canada. Abaxx trades under the symbol ABXXF. With us from management are Josh Crumb, founder and CEO, and Matt Mackay, the Corporate Development.
Thanks. Good morning. Good to be here. We just did our Q3 call this morning, so I had to scramble over here, but everything's on time. We made it. I just have to come down a notch so I don't speak too fast now. Yeah, as mentioned, I'm the founder and CEO. Maybe I'll just start with a very quick background on myself and the company. I'm a mining engineer by background. I started in mining, from engineering to development, M&A, with the Lundin family in Canada. I then went to Goldman Sachs, where I was the head of metals research and strategy on the global macro and commodities team in London. Really, through that upstream and market side, I really saw the inefficiencies of trading, particularly metals, but commodities in general.
Sometimes we like to joke that half of the trade in some of these commodities is your arbing the actual market structure or the contract traded on the LME or CME, which we've seen now in the gold markets and a lot of the dislocations between New York gold and London gold. There are a lot of problems and a lot of, in our view, outdated market structure, particularly in commodities, which all stems from the fact that a commodity is very different than most securities and that you actually have to produce it and move it and deliver it somewhere in order to get that liquidity and price discovery. We set out around 2018, 2019 in building what we like to say is probably the first full-stack commodity exchange clearing house, new products, new technology, maybe ever.
Most of the commodity markets that you see from WTI crude oil to LME copper to most of the products have evolved over time into different things. The old floor trading pits, which were membership seats of the pit, but mutualized equity. We've had decades of consolidation and really 20 years of electronic trading has led to just a couple of a handful of major conglomerates, the major ones being the Chicago Mercantile Exchange, which owns the NYMEX and the COMEX, and ICE, which basically owns just about everything at this point, from the New York Stock Exchange to the Brent crude oil market.
Our view is that the frontier commodities, the emerging commodities, we think the big exchange groups have kind of lost a step or lost a focus, which is there's no better example that when the London Metals Exchange nickel contract broke three years ago, not a single exchange in the world tried to list a new nickel contract. They just let the market stay broken. In our view, that's an inefficiency of scale. That's an inefficiency of not really doing the ground layer work, the physical commodity work to develop new contracts. Really, our business has two opportunities. There are two things we're doing. One is being really the commodity exchange that only focuses on commodities, not on the latest gambling futures of crypto or whatever the flavor of option volatility is of the month. We're focused on solving the problems of the physical market.
We think we're kind of alone in doing that with maintaining that sole focus. There is a second half of our business that we'll talk about, and that's the technology side, unlocking collateral, moving commodities, and unlocking the collateral of commodities in real time. You can loosely call this tokenization, but as I'll talk about, we actually do things very different than the path that's currently being pursued. We think kind of an heir of the stablecoins and the real-world asset tokenization path. We can talk a little bit about that. Again, ours is really about unlocking collateral for our clients, particularly that of gold, liquefied natural gas, and copper and a lot of the commodities that are already being used as collateral in Asia, but doing it far more efficiently.
Where we're at today, as I was sort of alluding to, we're one of the first commodity clearing houses regulated globally really in decades. I think the first one since Dodd-Frank. There's a lot of conversation about how Dodd-Frank put up these almost impossible barriers to, say, build a bank or so forth. I'd say that barrier is even higher for building a clearing house because if you remember, moving over-the-counter derivatives to cleared derivatives was a primary goal of market infrastructure after the financial crisis. You basically put almost an impossible moat around the existing clearing houses. That said, we were able to break through that. We're one of three, essentially three licensed clearing houses in Singapore. We have applied for a foreign border trade in the U.S., which will give us the equivalence in the U.S. as well.
Like most exchanges and clearing houses, particularly in commodities, again, using the example of something like the London Metals Exchange, it says London, but everybody uses it. That is how we are building our markets, although our operations and home base is in Singapore, as we think that is really the center of the future global commodity trade for origination and flows. We are regulated in Singapore, but as you can hear from my accent, I am American. A lot of our team is ex-NYMEX and Goldman, a lot of Americans on the East Coast, as well as Geneva and elsewhere. Again, we operate out of Singapore. The contracts we have trading today, we have the world's first liquefied natural gas physical futures. This is very much like Henry Hub Natural Gas and again, LME Copper.
This is the way the commodity futures used to be done, where when you get to expiry, you better be ready to make or take physical delivery. One of the problems is a lot of the contracts today that a lot of the other exchanges are building, they're all index-based. There is one other contract people would call LNG in the global market, what's known as the Japan Korea Marker, the JKM, which is traded on ICE, but it's a survey index. When the contract expires, you're just betting against what the survey is going to be. You're not actually pricing that convergence with physical delivery.
We are the only ones that have done the multiple years of work that's taken to figure out what is a common terms of trade, what does that contract need to look like from force majeure to the draft of your vessel, like all of the details of how people trade physical commodities. We had to design that so that when you go to delivery, people know that they meet common terms of trade for making and taking and trading physical LNG. LNG is really our flagship product. We think it's going to be one of the largest commodity markets in the world. We think that LNG is probably already past oil as being the world's global benchmark for all energy.
That's because increasingly, with the growth of U.S. shale and the export capacity of the U.S., increasingly gas becomes the primary product and oil becomes a byproduct. We think that's going to change geopolitics, and it already has, but it's going to increasingly change sort of the world forever. OPEC and the pricing of oil is no longer your energy basis, but LNG becomes your energy basis for global energy because it's the fuel that bridges all of the regions of the world. We think LNG is going to be the most important commodity market in the world, which is why we've focused on that as a flagship, but also because, again, frankly, we saw opportunity in growth commodities.
This is not a business where you can just compete on price or you can build a better mousetrap and then go try to take market share in Brent crude or WTI. Commodity markets are incredibly sticky. I think WTI still has something like 80% market share of U.S. oil futures, similar with LME or COMEX. Once your contract becomes used by the physical industry and you actually build out that futures curve, it is very hard to move that contract volume anywhere else. Commodity markets are very much winner take all. That is why we focused on contracts that do not have really a global benchmark and liquidity as our entry into the market. We also have two voluntary carbon credit markets. We are the only one that has ever cleared a carbon contract through a clearing house all the way to delivery, which is a change in the registry.
We have nickel sulfate and lithium carbonate. Those are our battery metals. We think lithium will also be one of the largest traded commodities. Today, there's no physical price for lithium. Again, this is a survey index. If you trade lithium on the existing exchanges, you're trading against a survey that's happening in China for the most part. It really doesn't tell you what is the price of lithium carbonate in Baltimore, for instance, where our delivery contract is. We think it's very important to develop the physical convergence for markets. We've done that in lithium. We've also launched a kilo bar gold contract in Singapore. That's our first market that is not really a brand new greenfield market.
Of course, the CME GC contract for gold is incredibly liquid, but there's a big problem with Singapore, with the gold of the CME, and that it's basically a U.S. market based on U.S. vaults and 100 oz bars, whereas increasingly the world's gold market physically is actually in Asia, and it's the form of kilo bars. We have launched a kilo bar contract to really service the physical supply chain, particularly in Asia, which is very different than the financial futures that are primarily being used for hedging on CME. We can get to more of this probably through a Q&A. It's probably best to go through some of this. The key metric for our revenue and our business model is average daily volume. I mean, there will be more business models we will talk about.
More and more of the exchanges, increasingly you've been in the data business as well as ancillary technology services. That is also going to be our path. The first metric for building our business is really building that liquidity. You've got to have that liquidity. You've got to have that hub. You've got to have that connectivity before anybody wants your data. There will be other services we will get to over time. In early days, our business model is very, very simple. Sign up people to trade the contract. Every time a contract trades, we make a fee for the trading and clearing of that contract. This is very different than a commodity trader or an interdealer broker. We're not holding inventory. We're not making spreads. We're not a broker.
We are just the venue where every counterparty can trade, knowing that the performance of their trade is going to be guaranteed and mutualized by the members of the clearing house. We take away counterparty risk for people to be able to trade LNG. Very importantly, because of the structure, we are not just a price hedge, but we can be a quantity hedge. When you build a physical market like this, people, when they have nowhere else to sell, they can sell to the exchange and clearing house to be a buyer of last resort. If they have no counterparties to buy from, they can buy an exchange and be a seller of last resort. We are both in the business of quantity hedging as well as price hedging for our clients. Again, back to the revenue model.
Just to use Henry Hub as an example, the Henry Hub Natural Gas contract traded on the NYMEX, part of the CME, is a 10,000 MMBtu contract. Call it roughly $30,000. They make somewhere between $0.50 and $1 every time that trades. You're talking about just fractions of a basis point. That said, the contract may trade 1 million lots a day. Therefore, making $500,000 to $1 million a day and essentially pure margin product. The cost of running the infrastructure and the exchange is basically fixed. Then you've got your volume. Most exchanges run at somewhere between 50% and 75% EBITDA margins. Very high margin business. Like I said, very sticky, very winner take all as far as getting benchmark status and people trading on your exchange.
The hard part is, of course, developing that benchmark and being the price that everybody uses in their trade. Just to show as a comparison, some of the largest contracts out there in the world, just as sort of a reference, Brent crude oil is the largest commodity contract. In our estimate by value, that's a million lot per day contract. We think the LNG and related products are probably in that range. I think very conservatively, I think we put our TAM at about 300,000 ADV. Currently, we're trading like 1,000. We have a lot of growth ahead of us to ramp up into that benchmark status. This is kind of the we do think LNG can be a top contract. I actually think voluntary carbon and lithium will also be top contracts 5- 10 years from now.
That is the business that we're building on the exchange side. We really just, as I mentioned, the exchange officially launched from a regulatory perspective last summer. We had a few small block trades going through, but our daily volume activity really only started in August. For any of you that have kind of looked at the share price and things that we've done, it was a major rerating event. Now we've got daily volume. We do have one data distribution partnership. You can watch our live prices and volumes on TradingView. We will get Bloomberg and Reuters and all the rest over time. I mean, that's actually another key part to this business. Pretty much every piece of market infrastructure is in oligopoly because of the way liquidity pools.
Even your data distributions, like we've been talking to Bloomberg for four years, and we're hoping that we'll have our prices out maybe by early next year. Right? Every piece is incredibly slow. You're dealing with very large global oligopolies. That's sort of the perseverance of our team to be able to build this over five years pre-revenue and be able to enter the club of just a handful of global commodity exchanges and clearing houses. Now we're kind of in the growth phase now that we've got initial volume started, particularly in LNG and gold. As I mentioned, the other aspect of our business is technology. This is very integrated, but ultimately, it is separate but equal. Our exchange and our business can be profitable built in sort of the old way. The way that we handle wires is the SWIFT system.
I mean, sure, we've got slightly more updated versions of SWIFT running in a cloud and that sort of thing, like newer messaging standards and so forth. But ultimately, our entire tech stack of our regulated market is more or less how people trade today as far as settlement, collateral, and everything else. We are the only fully cloud-native exchange clearing house. All of our ISVs and market infrastructure connecting us to the market. I believe Google made a $1 billion investment in CME recently to, I think, over five years, move them to the cloud. Same thing with Microsoft and the London Clearing House. Like most financial services, it's very, very hard to change out technology as you go. Being the newest clearing house in the world, we do have the advantage that all of our tech stack was natively cloud, natively blockchain, natively AI.
We were able to have this infrastructure across our market. Again, I want to reiterate that all of our existing markets, there's nothing people do not have to be familiar with blockchain to trade our markets. It's traded in the traditional format. That said, we do think the movement of collateral is the most important piece of the tokenization and what's happening. We agree with Larry Fink and BlackRock that over the next 5-10 years, you will see assets move to this real-time tokenization, very much like we saw the wave of ETFs grow over a decade plus. We think a key piece that's missing to this is digital identity. I think it's something that most of the insiders of the industry agree. It's one of the reasons why, look, there's almost nothing new about blockchain markets. We're now a decade in.
You're not really seeing it in the core of financial institutions. We think it's because of the issue of legal finality. Ultimately, if you own a smart contract in a digital wallet, what does that mean? What does that mean in a court of law during bankruptcy? Are you a general creditor? How do you prove that you own that wallet address to be a general creditor? If you do that overseas, how do you solve the solvency gap between different legal jurisdictions in bankruptcy? There are still so many problems in blockchain as far as using it in a regulated financial system. It is always amazing to watch what's happening in sort of high-level market momentum with stablecoins and so forth. If you're looking at commodity traders moving $40 million cargoes of LNG, they're not using stablecoins for margin. They're not using blockchains for this yet.
We think that's because of this problem of identity. Who is your counterparty on a blockchain wallet? Legal finality. Third, privacy. Ultimately, commodity traders are some of the most private trading firms in the entire world. Their entire business is arbitrage. No commodity trader that are our clients want to see their trades on a public chain. They're very, very proprietary of what they're doing. We think that's another big problem, particularly in our markets. We built an entire tech stack from the bottom up. A lot of the components are the same: content addressable file storage, the way that we use PKI, just encryption, Merkle trees, distributed hash tables, zero-knowledge proofs, all the same components and investment that's gone into the blockchain ecosystem. We've kind of rearranged the stack in a very different way.
Ultimately, what we call digital title—sorry, in our slide deck does have a lot of what I'm talking about with legal finality, identity, privacy. All of that is in our deck. Again, ultimately, we had to build an entire from the protocol layers to the SDKs and the policies, the applications, and then ultimately the commercial application. We built the entire tech stack from scratch with the sole outcome of how do we move, say, a warehouse receipt, vault receipt for gold sitting in a vault? How do we move that from Party A to Party B privately with legal finality in real time? That was the engineering problem we set out to build. We also realized that the same technology, by building a regulated custodian—we also have a regulated custodian—we can also move money markets in real time.
This is sort of the answer to stablecoins at the institutional level: to be able to move a money market fund, the ownership interest in a money market fund from Party A to Party B or via Prime Broker A to Prime Broker B, to be able to do that in real time without first having to go to cash, sending the wire, and so forth. We'll be—the tech has now finished, and we'll be doing demos and live pilot transactions really in December of this year. We'll start our pilots to prove all of our claims with regulated counterparties that we can move assets in real time using our cryptography that's very different than the way people are doing it on blockchain. Again, we've announced three pilots: doing a gold repo transaction in real time, moving money markets.
This would be an over-the-counter derivative contract in real time. We are also partnership. We own 20% of a company called MineHub, who does supply chain tracking and tracing in metals. We will be doing a pilot with them where it will unlock the metals in transit on a ship or a warehouse to be able to be collateralized and better project financing using our technology. Yeah, again, just talking about the company and the capital structure. We have been public for about—we went public in 2021, end of 2020. We have been public in Canadian markets. We chose Canadian markets because, again, given my mining and natural resources background, it is a good market if you are going to be a company that is public for five years before revenue. It is very different than a VC market. It is sort of a public venture market for long-cycle investments.
We were more or less, call it flat for four years. Like I said, there was sort of a significant rerating as our exchange started ramping up volume and revenue. We announced our pilots to go live this year. Our market cap is roughly—our enterprise value is roughly $1 billion U.S. at this point. We've got a pretty significant roster of major investors. I still own about 10% of the company, as well as the board, and a lot of our founding executives have a decent stake in the company. We have Canoe Financial, Energy Fund in Canada, owns about 14%. BlackRock, Wellington, Fidelity, Rothschild, a lot of big commodity funds own us. We've got a very smart family office base. When you're building a company over a long period of time, we haven't been really accessible to generalist funds.
Now that's starting to happen. Oh yeah, we just completed about a month ago financing with a strategic investor focused on the money market side of things, what we're doing. We have a good balance sheet and a clean runway. At this current operating cost, we have a bit over a year of runway. We actually have much more on our balance sheet, but we do need to hold reserves in the clearing house. Again, we're just starting our revenue ramp up now. Maybe at this point, like I said, the road ahead is the pilot transactions on the technology, as well as just growing new products, growing new revenue, more onboarding, more connectivity to the market, more liquidity.
That is really a lot of things happening after sort of five years of development, a lot of complexity under the surface that is now kind of turning into business. Yeah, sometimes I find it's easier to do Q&A to go into the details of how do we compete with companies 100 times our size with CME and ICE and so forth about our products. Maybe with that, I'll turn it over to questions. Might be easier to go that way. Yeah.
Is the market looking at you from your tokenization stack or is the market looking at you from the commodity?
Yeah, it's a great question because I was kind of joking that I mean, it was funny because both parts of the business, even from a team, geographic location, corporate entity, they're actually like it's one holding company and we're integrated, but we essentially run two balance sheets of our business. It happened to be that we announced our pilots the same day that our LNG contract started trading. After about five years, we timed it almost perfectly. I would say part of the stock movement was sort of both. If you look at our shareholders, we're almost exclusively held by institutions in commodity funds. They've been mostly focused on our LNG contract, our gold contract, and battery metals, and actually some environmental funds as well with the things that we do in the carbon markets.
I would say mostly investors are owning us for the exchange. Sorry, I should put some metrics of kind of a five-year trajectory. As I mentioned, a million contracts a day is sort of the TAM of our current markets. A million contracts a day using even ICE's numbers of revenue per contract, I think they're around $1.75. You're talking about somewhere in the order of $250 million-$300 million in EBITDA at a million contracts a day just on the exchange. That's before revenue or anything else. The way that these exchanges trade on multiples, I would say our million contracts a day is probably worth about $5 billion in market cap. That's the goal, to grow our current ground-level volumes into that million contracts a day level.
That would be equivalent to something like a $5 billion enterprise value or something like 5x from today. Obviously, need to de-risk, need to grow those volumes, need to connect more market participants. That is a multi-year process. That is the way people see it. I think until people can put some metrics on our business model of the tokenization, I think we're mostly owned for the exchange with some sort of call option blue sky on the technology. We have not forecast our—sorry, I should talk about the technology business model. Again, it's going to be our first customers going to be the exchange itself, being able to use collateral, move margin in real time. I use the example that after Russia's invasion of the Ukraine, you saw TTF gas markets in Europe spike to 250-300 vol.
Even some of the largest integrated oil companies in the world had an $8 billion margin call intraday. Even the largest energy companies in the world cannot move $8 billion intraday. That was two problems that we solved. One, they were hedging LNG against pipeline gas, and pipeline gas was the core of the crisis when Russia stopped the gas. They were hedged against the wrong instrument. That was one of the reasons for the margin call. Number two, they could not move any capital in real time to meet the margin call. That is what our technology solves. Again, we are not focused on the abstract nature of tokenizing everything. It is a very specific use case where we are starting.
The business model for that would be basically anytime an asset is pledged to a clearing house, the interest or the fees are shared by the clearing members. If someone moved a money market fund for collateral, we would share in the yield. It would be very similar, like Circle is basically making a net interest margin of what they collect versus what people collect to hold the stablecoin. Very similar. We would share with our clearing members the interest on those money market funds while it's being held as collateral. Part of the business model is just the share in the assets of the network. The other is just the SaaS licenses. In order to create a digital title, move it. Everything we built was protocol layer. It's all private. People can use it bilaterally.
The first access to our protocols, we've built the software to do that. Very much like somebody uses a business model to access the blockchain, a Coinbase subscription or something, you're interacting with a SaaS or a fee model to access the protocol. We've built all of the software applications to build titles, to move titles, the data and the management, the reporting. We built the SaaS businesses. There will be a SaaS business as well as a revenue share business on the assets. Those are the business models that will come out of this. Yep.
What do you consider to be your competitors and what's your competitive advantage?
Yeah, from a competitor's perspective, again, the big commodity, there's really about five commodity exchanges and clearing houses at the global scale. You've got CME and ICE.
You've got the Hong Kong Exchange Group , which owns the London Metals Exchange. You have the Singapore Exchange, which owns—I forget what SGX, I think, was the market they bought. That's the iron ore futures and a number of other futures in commodities. You have Deutsche Börse, which owns a lot of the power markets, EEX and Nodal. Those are kind of it at the global level for commodities. Again, we're not going head to head against their products right now. We're developing products that they have not put the years into developing. That's sort of our advantage is just—I mean, a lot of—so Joe Raia, who runs our exchange, ran the NYMEX and the COMEX for CME. We just poached the head of the Dubai Mercantile Exchange, who runs the Oman Crude Contract. He joined us. Nancy Seah is our CEO in Singapore.
She was the Co-Head of Commodities at Goldman. She was the Chair of JR and the Goldman business in China. She was brought in to build the Chinese market for Goldman in commodities. We have the best commodity team in the world in our view. Sure, we do not have the budget they do right now. We do not have the cash flow that we do, but we do have the human capital to take them on. That is really the big one. On the digital side, again, ICE will be—they have announced that they are working with a pilot with Circle to be able to use stablecoins as margin. We do not think that works. We do not think that works legally, even with the GENIUS Act. I think a lot of the regulators around the world agree. There is sort of a political impetus to use stablecoins outside of retail.
I don't think institutions will do it at any real scale, in my personal view. We think our tech stack, again, it was purpose-built for this use case legally and technologically. We're going to prove that in the pilots. I believe for moving collateral, I think we've got an ecosystem that is sort of as big as blockchain on the collateral use case. Look, I think there are some firms that are doing it quite well. Digital Assets and the Canton Network, they've focused on legal finality and privacy, not so much on identity. There are projects out there that I think are institutional scale. The broad public blockchains, I don't think we're there yet. Good. I think we've got about 45 seconds left, so we time that perfectly. I'm around for questions. I know we covered a lot.
Oh, I should also say we do have a podcast because so much of the things that we do are market infrastructure education. If you ever want to get in the weeds of how LNG markets work or carbon markets, we do do series. Right now, we're running a series on tokenization, so getting into the weeds of tokenization. Our Chief Strategy Officer that runs the podcast, he was my colleague at Goldman. He was the head of metals research. Then he worked for Ray Dalio at Bridgewater. Very good. It is kind of what we used to write in Goldman reports. We just put in podcast form. We do a lot of education because so much of our business requires education. I wanted to put that out there as well.
It is called Smarter Markets.
Yeah, sorry, Smarter Markets. Thank you.