Shareholder Q&A

We recently invited questions from investors via the stock market forum, Hot Copper.

The answers below contain no new material information, just elaboration on previously released information.

Thanks again to all those who took the time to seek clarification.

1) Cam T via email:

Regarding the below $3.5m bond, when does it have to be paid? For it to have any purpose, surely it must be before construction starts? If so, how will it be paid? Do you envision a placement?

Also, it’s amazing that NMDC only have one director who can sign off on the project, and he just happens to be absent on the crucial day. Why isn’t there more than one director able to sign off? Also, more minister presentations? Why not AFTER the signing?


The bond is required to be established ahead of NMDC and NLCIL’s financial contribution to the project account, and thus ahead of construction. The duration of the bond will be from commencement of construction to completion of commissioning.

The bond will expire undrawn at the completion of commissioning so long as ECT does not withdraw from the project before this time.

The purpose of the bond is to align ECT financial interest over the period in which NLCIL and NMDC will be expending circa $30m in capital funding. ECT commitment is to 49% of OPEX and as such, the majority of this expenditure does not occur until after commissioning, during the actual operation of the Pilot Plant.

Notwithstanding the above, the bond must be realisable to its value in the unlikely event we do not proceed. Hence, the bond will need to be, at least partially funded by cash. To this end, we are investigating options to be able to fund this bond including Government funding and securitising the ELF loan book, amongst other options.

Regarding the delay by NMDC in approving the signing of the RCA at their Board meeting: the absent director was not the only director that could sign off the project. He is, however, the director sponsoring the project. His absence simply meant his agenda items were deferred.


2) Marcmarcoz:

Ministry Briefings;

This seems like another added introduction to the government hierarchy of India; do we take this as a positive or negative?

Is there potentially more to this deal? Will Modi be at the Briefing?

It seems the Indian Government seem very interested on the update of this little old project. Until we get more details of the commercial terms, I suggest shareholders think about how far India want to take HydroMor (Matmor) and potentially Coldry–obviously, they are not looking at just an R&D plant with an added Commercial Plant.


As mentioned in our announcement on 19 Nov:

This briefing process is aimed at bringing all stakeholders up to date with the project and is a necessary process to facilitate preparation and coordination of the signing ceremony and subsequent execution of administrative requirements through to ‘financial close’.

The objective of the project is the commercial deployment of Coldry and Matmor, of which the R&D phase is a necessary step.

The commercialisation of Coldry and Matmor technologies in India aligns strongly with stated industrial capacity growth (steel), resource utilisation (lignite), and government policy.


3) NewToItAll:

  1. With the Indian Government Owned Companies holding 51% ownership and thus voting rights, what assurances does ECT have that the future Commercial Royalty Rate for ECT technologies will be at a Fair and profitable rate to ECT?
    As in, what is stopping the 51% ownership voting for the Royalty rate to be extremely low, so as to give the Indian Steel Industry that additional cost competitive edge? This would significantly boost the Indian Steel Market and benefit the Indian Economy, whilst ECT gets 49% of basically nothing.
  2. With the R&D Plant being Royalty free, but requiring ECT to provide 49% of the running costs, what measures are in place to prevent the Venture running at a large loss for 5 years, sapping ECT funds to the point where ECT is now in a very weak bargaining position for future commercial term discussions?


The royalty rate is determined by a formula, set against global benchmarks, and governed by a clause in the RCA. The SPV, and its equity holders will be bound by that clause. Any change by the SPV is not determined by a simple majority and will need to be agreed to by ECT.

As previously mentioned, an overview of the project, including stages and timing, will be provided following the signing of the RCA.

The budgets for the R&D project will be set by the Project Control Committee (PCC) and ECT will lead project execution, driving deliverables.


4) Arion:

There is lots of talk on SKY news about the coal use in Latrobe Valley. Does ECT has any expectations from that region yet?


See the announcement released 28/11.


5) dopod07:

What is your opinion on this NMDC approval delay? Any hidden agenda?

Why require another briefing from Ministries again?

How transparent are NLC and NMDC with signing and project moving forward?


We understand the frustrations caused by any delays.

Despite the deferral at NMDC’s board meeting on 13 Nov of the approval to sign the RCA, we’re comfortable with NMDC’s plan to bring forward their December board meeting to provide the anticipated approval.

The Ministry briefings are (a) reflective of the status and value of the project, (b) interest in the project, and (c) are part of the preparatory activity ahead of the signing ceremony.


6) Giddyup:

What part of the 35 million is going towards the Coldry module? The Coldry module will be around 60,000 tonnes per annum capacity whereas the commercial Coldry module will be around 170kT. How much will a 170kT module cost roughly? Is 60kT coldry plant deemed commercial? Why are we building a 60kT coldry plant when it will be less than twice the size of the upgraded Bacchus Marsh pilot plant?


The high-level break down is capex for the R&D Pilot Plant include ~AUD18M for Coldry and ~AUD12M Matmor and opex of ~AUD5M.

As investors will be aware, smaller scale involves higher capital intensity and lower economies of scale. R&D plant is not intended or expected to be commercial, though output may be sold, providing cash to offset expenditure.

Current estimates indicate a 170 ktpa plant in India would cost 40% more than a 60ktpa Coldry plant designed for the R&D stage of the India project.

The Coldry component of the R&D phase of the India project is considered a small-scale demonstration plant. The aim of the plant is to (a) validate scale up from the base version of the BM pilot plant (x5-10) for the production of solid fuel, and (b) do so for the manufacture of composite pellets for Matmor.

The 170ktpa Coldry module is a large-scale demonstration plant. These descriptions align with the AusIndustry R&D Tax Incentive requirements and our advance finding.


7) stampycat:

Probably silly questions – But thinking ahead are you able to provide any information around the future stages planned on the adjacent land regarding the anticipated scale of:

  • Coldry Tpa of a Commercial plant, and how many modules make up this.
  • Matmor Tpa of a Demonstration plant

If +/- 300mil construction cost:

  • How will this be funded by the SPV? Are ECT expected to fund 49% extra budget capex?
  • When will basic/ initial thoughts on sales pricing structures, profit margins around the production of above be expected to be release?
  • Do we still have a royalty figure/ system in place per tonne?
  • Is the above information in the RCA?


The TEF study, which formed the business case for proceeding with the R&D investment, identified 500,000 tonnes per annum of steel output as the minimum desirable commercial footprint for an integrated Coldry / Matmor plant. The cost estimate was ~AUD300M.

The SPV to be formed after completion of the R&D Project will be for the sole purpose of licensing the technology. The cost of any commercial-scale plant will be funded by third parties i.e. not the SPV.

This does not prevent NLCIL, NMDC or ECT from investing in a commercial plant however they would choose to do this in their own right, not under the SPV.

We have provided an overview of the Revenue Model, which includes this basic information.

The royalty paid under a technology license, together with other revenue streams, are outlined in our Revenue Model overview.

These commercial terms are covered by the RCA.

The 500,000 tpa integrated steelmaking facility remains the notional target capacity contemplated by the parties following successful R&D outcomes. The identified land can accommodate this capacity. Other locations at NLCIL could accommodate further Coldry and Matmor capacity.

In parallel to the integrated Coldry / Matmor Pilot Plant project, NLCIL has asked ECT to participate in an additional R&D program preparing a draft analysis of lignite drying technologies including a standalone Coldry plant.

As part of the additional R&D program, NLCIL, with the support of ECT, will identify attractive markets for upgraded lignite products ranging from power generation through to conversion processes delivering hydrocarbon products (liquid, gas, urea).


8) Pies:

I was wondering if you were able to give a projection of our financial situation going forward. The outgoings for the coming years, our available funds and the expectation of how much financial return over coming years?

Will we be able to keep the home fires burning as well as have deep commitment in India?

I realise it’s not possible to be overly accurate, and it’s complicated, but a ball park estimate of when we will start returning a profit?

The other thing is; we pay a penalty if we say, ‘forget it’. Is there a deadline for the Indian companies to bring this to commercial stage eg loss of rights?

It has been an eventful period for the company looking forward to progressive prosperous future imo, thanks.


As a listed company, the board manages capital very closely, reviews expenditure and budgets every month and is audited on these twice a year. Please refer to our Annual and Half-year financial reports for data and comment on the company’s financial position.

We have recently released an overview of the Revenue Model. This provides information on the mechanisms for generating revenue and our targets & timeframes.

There is a provision in the RCA for ECT to provide a bond during the period from the start of construction to completion of commissioning. If ECT were to exit the project during this time, then we would forfeit the value of the Bond.

ECT, NLCIL and NMDC will not be responsible for delivering the construction or commissioning of the Pilot Plant. This will be contracted to experienced independent engineering firms with the capability to deliver in the timeframe established for the project.

The SPV will be responsible for licensing the technologies, not NLCIL or NMDC. Clearly, following successful R&D, the objective is to deploy Matmor and Coldry at NLCIL’s site, and more broadly.


9) SP3:

Now that the deal is almost done are you going to issue the Indian partners up to 300m shares @3.2c as approved by shareholders a couple years ago?


No. The approval for Resolution 6 at the 2016 AGM expired after 3 months.


10) Samfiodiving:

Ref commercial tech licence Australia, your update states: “ECT will retain the right to license its pre-existing Coldry IP in Australia.”

No mention of Matmor. How do we stand in Australia with regards to the Matmor IP once proven hopefully up at scale does this mean any uptake in Australia would go through the SPV in India under the 49 – 51% deal or would we retain 100%?

Thanks in advance.


To clarify, ECT retains the right to licence pre-existing Coldry IP in Australia. This means we do not need permission from the SPV to issue a Coldry licence here in Australia.

In relation to Matmor, we state in the same update (19 Nov 2018):

“Any future use of the Combined IP (that is, pre-existing IP together with any new project IP) will require a licence to be issued by the SPV and will be royalty bearing under the Global Royalty Share Structure.”

“All royalty income generated during the R&D Phase, and under the subsequent SPV License to ECT, will be distributed in proportion to each party’s shareholding in the project SPV.”

As such, the SPV can issue a licence for Matmor projects in Australia and revenue will be apportioned according to shareholding (49% ECT).


11) Giddyup

  • Will there be enough detail in the revenue model to do a rough valuation? (concern to get new investors onboard if this is lacking in information?)
  • Will we get a timeline which will include commercialisation of both tech’s?
  • Think someone else has mentioned this, what happens to funding of the commercial plant once the pilot plant is built. Is ect expected to contribute?
  • Is the focus of nlc and nmdc solely on Matmor?


The Revenue Model announcement provides an overview of the revenue mechanisms, target timelines for commercialisation and target volumes.

Investors can take that information and analyse with respect to current market prices for coal and steel.

ECT has made no commitment to funding of a future commercial plant. The SPV to be formed after successful completion of the R&D phase of the India project will be for the sole purpose of licensing the technology. The cost of any commercial-scale plant will be funded by third parties i.e. not the SPV.

This does not prevent NLCIL, NMDC or ECT from investing in a commercial plant however they would choose to do this in their own right, not under the SPV.

The focus of our partners has primarily been on Matmor, as this represents the highest value opportunity for their businesses and for India.

Coldry is of interest to NMDC insofar as it’s integral to Matmor and provides a solution to iron ore fines smelting and an alternative to coking coal.

NLCIL’s interest in Coldry is more aligned to their aspirations around horizontal diversification of lignite utilisation i.e. black coal power station feedstock and higher-value coal conversion processes.

12) Stalktock:

Hi ECT Rep,

Thanks for the opportunity. I look forward to all responses.

Please consider the following, and only reply to those that you feel are relevant:

  • What value does the ECT management feel engagement on Hot Copper provides?
  • Are you aware and have you been keeping up to speed with the thread ECT shareholders adding value on Hot Copper?
  • Does the ECT management team feel shareholder perspectives, views and behaviour plays an important role in a company’s success?
  • How does ECT management feel past performance reflects on current shareholder and market trust?
  • Can shareholders help in any way to improve the trust for other shareholders or potential future investors?
  • Does ECT hold any view relative to the main questions asked at the start of the above-mentioned thread:
    • How can ECT shareholders help add value to the company?
    • What actions and behaviours from shareholders will make us appealing to future investors?

For the people who have contributed their input into providing their feedback and suggestions on the above questions, does ECT wish to provide any response (please refer to thread if further info required) on any of the following:

  • Talk to brokers
  • Don’t reply to threads trashing company and BOD
  • Capitalize on threads being being read by whole new audience
  • Add value as a company – might even benefit Hot Copper (HOT)
  • Stop replying to trolls
  • Contacting news outlets, stock market blogs, Motley fool etc… and with respect to when strategic timing might be for this
  • Stop chasing the small gains
  • Voting system on trolls
  • Hold management to account
  • opportune company image marketing
  • Encourage those who stopped contributing in the past, to return
  • Require senior executives to bear the risks of ownership just as shareholders do
  • Reward CEOs and other senior executives for delivering superior long-term returns and build their success on a performance-based culture
  • Ask ECT thoughts on consolidation
  • suggest to ECT to explore other revenue streams (e.g.similar to

Thanks, and let us know if any of the above need clearing up.


This question is broad-ranging.

Engagement on HC with shareholders has primarily focused on providing accurate information in response to reasonable questions raised.

By joining the discussion in this forum we’ve been able to clarify and elaborate. The feedback from shareholders has been positive and while we can’t monitor every thread, we will continue to engage on HC.

Can shareholders help in any way to improve the trust for other shareholders or potential future investors? In short, by seeking clarification direct from the company, shareholders can ensure they receive accurate responses to their queries. This helps shareholders to present accurate information when posting and alerts us to potential negative speculation that could benefit from direct attention.

It never helps a company to have negative comments in public forums, but this cannot be prevented.

As we progress through each milestone, ECT will consider how we engage brokers, investors and media. We’ll continue to seek ways to add value.

In terms of media coverage, we could spend a lot of time and money trying to get media to cover us right now. However, based on feedback from the journalists who previously covered us, we need to get the deal signed and reach financial close before we can start to vie for serious attention.

In terms of ‘requiring’ senior exec’s to bear the risk of ownership, they already do. See page 52 of the 2018 Annual Report. Key Management Personnel holds just under 160M shares. The broader team’s holding brings it to around 220M shares.

Moving forward, performance-based staff incentives will be considered.

As for the topic of consolidation, that remains on the agenda and appropriate accounting and legal advice will be taken on structure and timing. Traditionally, consolidations tend to see a short-term drop in market cap, so timing should ideally aim to coincide with positive share price momentum.


13) Justintonation:

When the current crop of financial information is confirmed by our partners signing, is it your intention to brief Arrowhead (or some other similar entity) on the financial model with a view to getting a fresh valuation of the India Project published? How about ECT the company as a whole?

Do you think it’s an appropriate time to conduct shareholder tours of BM again sometime soon?


The release of the Revenue Model overview may allow investors to form a view on potential value.

Regarding pilot plant tours, we’re not planning any, however, we are planning a virtual tour of the plant which will appear as a video on our website in due course.


14) Arion:

I believe NLCIL will sell the lignite to SPV.

The same IMO with Iron Ore from NMDC.

That expense to the SPV will be into GROSS NET, before the profit is moved to SPV??

If I am correct, then will there be any money from the Gross net paying for coldry/matmor license?

Or Coldry Matmor is excluded because the partners invest the money

As far I can understand the setup, SPV will receive profits only.


It’s important to distinguish between the R&D phase and any future commercial phase.

During the R&D phase, the lignite and iron ore will be provided by NLCIL and NMDC, respectively

The cost of the supply of lignite and iron ore will be funded as part of the OPEX of the project (i.e. 25.5% NLCIL, 25.5% NMDC and 49% ECT).

The total cost of the lignite and iron ore is not expected to be more than 10% of the overall OPEX for the project.

Any sales that eventuate from the R&D output will simply help to partially offset R&D costs. Profits are not anticipated, and the RCA does not provide for royalties to ECT during the R&D phase.

Following successful outcomes from the R&D phase, the SPV entity will be the licensor to commercial projects, whether those projects be carried out by NLCIL/NMDC or by others.

The SPV to be formed after the successful completion of the R&D phase of the India project will be for the sole purpose of licensing the technology. The cost of any commercial-scale plant will be funded by third parties i.e. not the SPV. The SPV will receive revenue from royalties and are independent of raw material costs.

SPV profit will be passed to the shareholders – NLCIL, NMDC and ECT per the shareholding, 25.5:25.5:49. The SPV will have some direct compliance and administrative overheads, but these are expected to be modest.

Filed Under: ECT