Chief Executive’s Message
I am pleased to report that we continue to make tremendous progress on several fronts since our last newsletter. Three projects are underway and another two are on the drawing board for Coldry, our flagship coal drying and water recovery technology.
- The TinCom-Loy Yang project in the Latrobe Valley is being fast-tracked (see the update later in this newsletter).
- Alexis Minerals International is working on the Indonesian project in East Kalamantan, which involves a power station, Coldry plant and associated mine and export infrastructure.
- In Poland we are busy developing the business case for a project within the BeÅ‚chatÃ³w power station complex. The global financial crisis has slowed the progress of overseas projects in particular, but we believe these projects will gain momentum as the year progresses, due to the tremendous value-add of the Coldry process.
MATMOR, our cost-effective process to produce a high quality, high purity and high iron content product, also continues to show significant potential. More on that below but first, I would like to reassure you about ECT’s position in relation to two topical government policy areas, namely the controversial Resource Super Profits Tax (RSPT) and the postponed Emission Trading Scheme (ETS). We believe that, with our robust business model and positioning, neither will be detrimental to ECT. Let me explain.
As our business is focused on licensing Coldry technology, by which brown coal is dewatered and transformed into black coal equivalent (BCE) pellets, as distinct from coal extraction (or mining) activities, we believe that we are exempt from the RSPT. However, it is worth noting that a possible outcome of the tax may be an increase in the selling price of coal globally. To this end, ECT could actually benefit. If our competitors (predominantly thermal coal producers in New South Wales and Queensland) are forced to pass on their RSPT payments to their biggest customers, our product at once becomes more attractive and competitive. Click here to see our website for a more detailed discussion on this issue. Details of the RSPT are expected to be finalised in 2012 and we will continue to monitor developments and keep you informed.
In relation to the ETS, listed renewable energy companies experienced a significant price drop recently in response to the Federal Government’s decision to delay the scheme, widely reported to have the potential to stall up to $2 billion of investment in new power stations. It is true that without an ETS, there isn’t a driver for brown coal-based power stations to change from burning cheaper. Despite this, our local Coldry business case is good because importantly, our Loy Yang based project is export focused and is therefore not reliant on a domestic ETS. In our target markets, demand for thermal coal and logically, for upgraded black coal equivalent (BCE) products like Coldry, is strong and expanding in emerging economies.
However, if and when an ETS takes effect, we believe Coldry is the most cost effective option available to local brown coal-based power stations looking to reduce emissions without stranding or abandoning the lignite resource or the multi-billion dollar assets it fuels. Even now, a 10 per cent blend of Coldry into the Victorian power stations would meet the previously proposed 5 per cent cut in emissions by 2020 – without the need to modify the power stations boilers. In essence, as Coldry does not rely on a carbon price to cost-effectively sell into the thermal coal market, ECT is well placed, with or without an ETS. Again, click here to see our website for a more detailed discussion on this issue.
The 2011 financial year is shaping up to be busier than ever for ECT management and we welcome Amit Aggarwal to our team as Financial Accountant. I’m sure you’ll agree he is a valuable addition when you view his profile below. Thank you to all our shareholders for your ongoing support and as always, I welcome your feedback.
Project Update: TinCom
The TinCom funded, Loy Yang based project moved ahead significantly last month. Under a newly signed agreement, TinCom will become shareholders in ECT and expand the feasibility study to include the preparation of detailed design and tender packages by Arup. We believe these factors clearly signal TinCom’s commitment in driving the Latrobe Valley project at an accelerated pace.
The project’s special purpose vehicle, Victoria Coldry Pty Ltd, of which ECT will ultimately own ten percent, is to be licensed exclusively to manufacture and market Coldry Black Coal Equivalent (BCE) pellets within Victoria (for 5 years) and Vietnam. It also has non-exclusive rights for plant construction in Indonesia and the rest of Australia. ECT retains rights to build Coldry production capacity at its own facility in Victoria and will earn royalty (CPI-adjusted) of A$5 (ex GST) per tonne from Victoria Coldry.
The project will be rolled out in four phases, anticipated to be completed in 2020. Phase 1 is planned to deliver a two mega tonne plant in 2013 from which, at full production, ECT would earn A$10M per annum in revenue. This revenue would grow to A$50M per annum on completion of Phase 2 (scheduled for 2015) and by 2020 recurring revenue would amount to A$100M per annum in today’s dollars.
Update: MATMOR Commercialisation
A Marketing Report by Melbourne based energy and resources consulting firm NEGOTIACTION, and preliminary Technical Report by HATCH confirms our belief that the market dynamics are very favourable for the deployment of MATMOR.
Niche, high margin opportunities have been identified that are not being exploited by traditional or emerging technologies. For example, electric arc furnaces that represent a market in excess of 435 million metric tones a year and induction furnaces would clearly benefit from MATMOR which uses low ranking coals to produce high quality iron product. Apart from its greater energy efficiency and reduction in emissions, factors in favour of MATMOR uptake include a significant increase in steel demand throughout Asia and India, increasing input process, and the need for a low-cost operation that can be deployed at a regional level.
Current engineering work flowing from the recommendations in HATCH’s report involves testing and documenting in greater detail aspects of the plant which will help refine the assumptions for scale up moving forward. Some tasks within the current program are straight forward such as the addition of several temperature gauges to fine tune data collection. Other tasks include the analysis of gas flow and composition within the various sections of the plant at different stages of operation to refine the energy-mass balance data in order to increase design accuracy and pricing. Once sufficient progress has been made, ECT will seek partners for the development of a pilot scale plant that has a target capacity of 7,500 metric tones per annum of iron.
Introducing our new executive team member
Amit Aggarwal – Financial Accountant
Amit has recently been appointed Financial Accountant, bringing this key role in house. The role was previously outsourced to our Accountants, RSM Bird Cameron. With increasing activity, the time involved in managing the accounts, preparing board reports and working with our auditors PKF, reached the point where it commanded the attention of a full time resource. Amit, in addition to accounting qualifications (CPA), has a degree in engineering, providing added value and support to our sales efforts via financial modeling of each Coldry business case we prepare for prospective licensees.