Welcome Fellow Shareholders,
2019 has been a very a challenging year for ECT, requiring board & management to make deep and dynamic changes to our commercialisation, revenue and resource strategies.
We started the year cautiously optimistic of delivering our Indian project and by June 2019, it was evident that one of our partners, NMDC, had unexpectedly decided not to proceed. This had a major disruptive effect on most facets of the business given delivering the Indian project was our highest priority, a commitment we made to our shareholders many times over. Notwithstanding the continued developments being made with our technology suite during this time, the company had become single point dependant on achieving a project in India this year and when we weren’t able to deliver, expectations and strategy had to shift fast.
We had always prepared for the “what next” in our strategy once the India project was consummated, which was why we had been developing a steam & boiler market for our Coldry fuel as well as the key reason behind the CDP acquisition to support feasibility for the proposed Coldry project in Latrobe Valley. However, a key part of the successful delivery of these downstream components was the expected confidence generated through evidencing progress of our Matmor (now HydroMOR) technology in India and the effect that this would have on further financing the ongoing costs of the strategy through repayment of the Equity Lending Facility. Without this, the company implemented a re-set of the strategy that was less about changing the tactics and more about changing the emphasis. Originally, we were driving outcomes to drive confidence in blue-sky potential of our technologies to ultimately drive share price however, this has now been replaced with driving outcomes that generate operational earnings.
Over the year, we have continued to refine and develop our technology suite. We have made significant advancements in Matmor which has led us to our HydroMOR patent pending. Coldry advancements continue with efficiency improvements to the packed bed dryer, conditioning process and other design improvements which will be tested in the upcoming upgrades project at Bacchus Marsh. We have also purchased outright technology called CDP-W2E, to convert waste into diesel products, which aims to use Coldry pellets as a feedstock stabiliser. Finally, COHGen has shown continued improvements coming from our work with universities and we expect to review the prospects for lodging a patent application in the new year.
All of our technologies are “best of class” for emissions profiles with Coldry still remaining the world’s most efficient, zero-net emissions, means of drying low grade coals. HydroMOR remains the only technology capable of using low-cost lignite and low-grade iron ore to produce primary iron. CDP was reviewed by UQ as being the most efficient and lowest emissions profile technology for converting waste to diesel. COHGen is a potential pathway to eliminating carbon capture and storage when extracting hydrogen from brown coal.
Prior to June his year, our strategy was clear. Start the construction of the India project and then move quickly to upgrade Bacchus Marsh to support the techno-economic feasibility of a Latrobe Valley project as well as serving as an ongoing test facility for the Matmor India project and further technology development of CDP and COHGen.
As we know, the India project didn’t proceed and as at 4th of September, the company released an update to its corporate strategy of targeting operational earnings, underpinned by three tiers : 1) organic growth, 2) acquisitions and 3) corporate restructuring. The basic premise of this re-set strategy is to monetise the technology and equipment that this company has developed to date to use operational earnings to prove the commercial strength of our technology suite. Our greatest physical asset we have is the Bacchus Marsh High Volume Test Facility and when confronted with the value proposition of spending ~$4-$5m to produce $3m in earnings, represents a strong economic driver for proceeding with the development. Unfortunately, as we all know, there was a fire in late October which rendered the plant inoperable. Whilst this was a force majeure event which meant we could no longer supply our steam contract or produce further Coldry, the insurance coverage was further testament to the facility risk management of the executive in protecting this asset’s value.
The India project, along with COHGen and CDP development, will also be kept active except they now won’t be the recipients of our priority focus and resources and will rather be driven by clear market signals for deploying further resources.
If the international and other markets aren’t pulling us towards them, then we will keep pushing operational earnings here in Australia.
Along with a significant shift in strategy, also came necessary internal changes. With a priority shift away from continued technology development and into operational earnings, also comes a shift in necessary skillsets across our staff, support systems and infrastructure. Much thought and effort has gone into this right-sizing initiative which has seen executive wage and day to day expenditure significantly reduced. Our corporate centric skillsets will be replaced with a greater emphasis on in-field and production environment experience and we have seen this with recent staff changes, most significant of those being Jim Blackburn’s resignation as head of operations. Jim’s departure from the executive makes way for a senior production manager to take on the responsibilities of Bacchus Marsh through the construction and commissioning phase and into 24/7 operations. Jim’s contribution to ECT as an executive was significant, with his work ethic and commitment to hours, over and beyond, on display daily. He had an unwavering resilience to obstacles and was never afraid to take on all problems as they presented themselves. It would have been a tough decision for Jim to make to leave at this stage, but thankfully, Jim will still be supporting ECT as a non-executive director, which ensures that the company does not lose valuable legacy knowledge from prior service. Furthermore, we retain the valuable service of Ashley Moore and Martin Hill as the remaining executive roles, along with myself.
In the interim, I will be acting Head of Operations for the foreseeable future and our corporate structure has been simplified to better reflect the sharp focus we now have on the Bacchus Marsh upgrades project.
Accordingly, we have started the recruitment process for our next key appointment of Production Manager. This role is currently being advertised and will continue through to end of January as we take our time to seek the right candidate. Initially, this role will be in support of the Project Manager for the construction and commissioning phases of the upgrades at Bacchus Marsh after which, the successful candidate will be responsible for continuous production of the plant as it produces valuable energy products like char, syngas and boiler fuel.
Looking forward over the next 12 months, we set our sights on a number of key targets and achievements. In the next 8 weeks we expect to receive the final insurance payout figure, finalise the R&D lending capacity for the plant and complete our current capital raising. These three initiatives will close off our major capital raising initiative for the year and allow us to direct our efforts towards core business activities. The current non-renounceable entitlement issue prospectus replaced the prior renounceable rights issue prospectus for which we received applications and commitments for ~$1.8m. As explained in prior ASX announcements, the decision to terminate the prior prospectus was driven, in part, by material changes in assumptions around insurance and R&D lending, which has ultimately led to the minimum subscription coming down from $2.7m to $1.4m.
From February onwards, our targets will be geared towards the upgrades project, specifically delivery of full design, procurement, construction and commissioning stages with September 2020 being the target date for completion of construction. Additionally, we also expect to see further developments over the next 12 months with the India project, Matmor overseas ruling, COHGen patent progress, offtake agreements and expansion of our diversified fuels steam and boiler packages.
On behalf of the company and the board of directors, I thank all shareholders for their patience and commitment to our vision over the last 12 months and longer. We expect next year to be more stable with clearer outcomes and success factors that are easier to measure and the board and management look forward to the challenge of driving share price higher on the back of a successful Bacchus Marsh upgrades project.
For further information, contact:
Glenn Fozard – Chairman [email protected]191212-Presentation-ECT-AGM-v2-s-1