Investor News

Shareholder Q&A-July 2018

We'd like to thank Hot Copper (HC) participants for their questions. We received over 100 questions on a range of topics. Many doubled up, so we consolidated them to 49. Some with sub-questions.

Many of the questions received were from HC participants that haven't taken the opportunity to seek clarification directly with the Company in the past, so we’re pleased this exercise has encouraged direct engagement.

Understandably, we recommend investors seek clarification directly from the Company rather than relying on anonymous opinion.

The Q&A is segmented below as follows:

  • General
  • India Project
  • Local Activity

Some questions have been paraphrased for clarity.

Section: General

Question 1:

Holding a Q&A via Hot Copper (HC) is a nice initiative; however, it appears to privilege HC users. Would it be more appropriate to make an ASX announcement to give all shareholder the opportunity to ask questions?


We noted this question early and provided an answer within the HC thread:

  1. There is a higher concentration of confusion on HC compared to shareholders that seek clarification directly via the Company. Rather than excluding non-HC participants, we’re encouraging HC participants that don't seek clarification via the Company in the first instance, to start doing so.
  2. The responses will be posted on our website
  3. Further, shareholders have the ability to ask questions via phone or email at any time, so there is no restriction on access. Many shareholders do call and email. Very few of those participate on HC.
  4. No new or material information is intended to be disclosed, only clarifications or elaborations, so an ASX release is not required.

Question 2:

  1. Given the recent string of announcements and subsequent clarifications/newswires and email responses, what is being done by the Company to ensure that future announcements are clear, concise and are of benefit to the Company and its shareholders?
  2. Noting that ECT are running a skeleton team, PR is surely a requirement to build the brand?
  3. Given the Company’s history of announcements and subsequent clarifications will the Company consider the use of a specialist PR Company to assist in the delivery of well-rounded and concise announcements for any price-sensitive announcements in the future?


Following an announcement, we usually receive emails and phone calls from a range of shareholders. The communications range from notes of congratulations and questions seeking to confirm understanding. This indicates a clear understanding by most shareholders, most of the time.

In the context of HC, confusion seems concentrated compared to direct contacts.

Many calls for clarification come from shareholders who understand the announcement but wish the Company to address the misinformation on Hot Copper.

Shareholders will be aware that Listing Rule 3.1 requires that if there is a rumour or misinformation that may lead to a false market, the Company is required to correct it.

PR is an important component and is a challenge for a pre-revenue Company. PR will be consistently pursued; however, shareholders have made it very clear that they do not want PR spend at the expense of engineering prior to achieving appropriate revenues.

Question 3:

It seems from some shareholder’s perspective that the Company has spent its exertions on activities that have been rendered unnecessary. For example, the financing of ECT’s originally intended one-third contribution to the India project seems to have occupied a large amount of time, with the brevet capital loan facility and other financing options.

This funding now seems to be unnecessary as surrendering royalty rights allowing the Indian partners a further 26% giving the Indian Partners a total of 51% of future royalties. This increase appears to be in exchange of the Company’s originally planned 10 million contribution, roughly the amount secured in the Brevet loan facility.


In building financing solutions for ECT's projects and operations, contingency planning is required to ensure that solutions are not single point sensitive.

To this end, ECT built a financing solution in anticipation of funding our one-third contribution with little or no dilution to shareholders.

This self-empowered financing solution allowed us to negotiate from a position of strength and likely influenced the final outcome of the deal structure. To that extent, this financing solution was a necessary part of capital management planning but, following the offer by the Indian partners to fund the project, was not needed.

Question 4:

  1. Does the Company still need the Brevet loan facility?
  2. Was the latest Brevet funding facility facilitated by Greenard Willing Structured Products as an intermediary between Brevet Capital and Environmental Clean technologies?

a. If so was Greenard Willing Structured Products compensated for facilitating these agreements?
b. How many other funding sources seriously considered?


  1. The Brevet facility remains an important and essential part of the Company's capital management plan, providing working capital financing that is non-dilutive.The companies R&D activities extend between Australia and India, and across all three technology suites, and as such a competitive R&D financing platform remains key to our general operations.Investors will be aware that the general use of lending facilities can allow companies to fund their growth and operations
  2. Greenard Willing Structured Products was the original introducer to Brevet however it does not act as an intermediary between Brevet and ECT.The last review of the R&D lending facility in Dec 2017 was led by ECT directly and included a Request for Proposal (RFP) from other market providers, which lead to Brevet offering the most competitive facility.The RFP was overseen by ECT's independent director, David Smith.

a. NA
b. Five providers submitted a quote to the RFP.

Question 5:

Previous announcements illustrated that Glenn Fozard intended to resign from Greenard Willing Structured Products.

However, on searching the ASIC database earlier in the year it was found that Glenn Fozard was still a director of the Company and still seems to be listed on the Greenard Willing Structured Products website.

  1. Is Glenn Fozard still a director of Greenard Willing Structured products?
  2. If currently a director does Glenn Fozard still intend to resign?
  3. If so what has changed the intent to resign?


  1. No. He resigned in September 2017 and became a minority shareholder. ASIC records reflect this.
  2. NA.
  3. NA.

Question 6:

Has the Company given any thought to bringing on new blood to the board to take the Company to the next level with those that are experienced and specialists in what they do? i.e. a proven track record in their field of expertise?



The ECT board continues to evaluate the need for new and additional resources, across a growing spectrum of required skills, in line with the company’s growth and future strategy.

It is certainly fair to say that the company’s needs in this regard are becoming more demanding and complex.

Whilst it is desirable to have the broadest, most experienced range resources available at any one time, we remain conscious that this also comes at an increased cost to the business, inclusive of both remuneration but also the resources required to administer and service a larger board.

Renewal of Director's tenure, together with a mix of gender and independent v executive director appointments are equally important concepts which the current Board is aware of and alert to.

Finally, the company must also consider the timing of any renewal or expansion process at Board. Both the loss of critical corporate knowledge and time taken for new Director’s to get up to speed may add significant risk to the company.

Question 7:

Will the revenue model ECT intend on releasing indicate how much they will make from the India R&D project or is it only ever going to be a % disclosure and not a $X per tonne value?


The Company intends to release information on its revenue model in due course.

It’s not just about royalty (trailing revenue) per tonne of output, there are also potential licence fees (upfront revenue) and, depending on the project, potential equipment margin and O&M revenues.

We understand investors would like a simple way to begin to fundamentally value a project, but the following should be considered:

  1. In relation to the R&D phase, activity is not expected to be cashflow positive. R&D is an expense to be recouped following commercialisation. If any profit is made during R&D, it will be incidental. Profitability is the aim of the commercial phase.
  2. We may well sell output from R&D activity but to forecast that is not possible until the plant is commissioned and has achieved steady-state operations.
  3. Following commercialisation, keep in mind that each project will be assessed based on specific feasibility. If we set and publicise a $/t or %/t now, that will cap the negotiating point in the future, potentially leaving value on the table.
  4. Following commercialisation, deal-specific revenue to ECT will generally not be made public. As mentioned above, this prejudices negotiations with other customers, who will always seek the lowest possible number. Earning guidance will, of course, be provided and shareholders will be able to analyse the Interim and Annual reports to understand earnings per tonne of licensed capacity/production.

Question 8:

What price would the Company see as fair value if a hostile takeover was to take place with current status quo?


The Board firmly believe that the current share price does not reflect future value. Beyond that, we are precluded under law to advise of our view of present value without an independent valuation. That being said, if a hostile takeover did occur, we would expect that the price being offered would need to reflect a substantial price premium to win the support of the majority of shareholders required to approve such an offer.

Question 9:

Regarding the recent signing of the project agreement and future global expansion, what is being done to keep the global iron making industry informed of the future progress and expected success of this project?


Global expansion will be best promoted through the successful completion of the India project and overcoming some of the key technical risks inherent in scale-up.

In the meantime, the Company is developing relationships with journalists and industry bodies in the lead up to financial close to promote coverage through each milestone over the project timeline.

The Company will embark on a targeted media strategy, briefing relevant journalists, developing supportive collateral and pursuing relevant presentation opportunities.

Question 10:

Will India try to keep Matmor for itself? Can it do so under the agreements?


The project agreement laid out the framework for the partnership and project, including access to the intellectual property (IP). One of the detailed sub-agreements is the Master Technology License Agreement. This includes ‘use it or lose it’ provisions.

Section: India Project

Question 11:

Does this agreement with India include any further development of Hydromor and COHgen development or does ECT retain that technology?


The project agreement does not cover COHgen development. See Q49 for more about Hydromor.

Question 12:

Who will be responsible for site ownership and what will be the order of precedence? For example; Thermax, ECT, The JV, NLCIL.


NLCIL is the host and therefore their policies and procedures will take precedence. The parties will form a project committee and appoint a project manager.

Question 13:

Will the site have restricted access; with access restricted by the Project Manager?


Yes. The site is subject to existing access protocols imposed by NLCIL which restrict access to relevant personnel.

Question 14:

When will the for-construction drawings be completed?


A timeline of activities will be provided following financial close.

Question 15:

How many tonnes of structural steel are required for the plant?


Approx. 1800 tonnes.

Question 16:

What are the approximate dimensions of the plant?


The site for the plant covers an area of ~19 acres. This allows for the subsequent commercial phase aimed at delivering 500,000 tonnes per annum of metal output.

The layout for the R&D phase will occupy a portion of the area and has been designed to allow for expansion of expandable components, e.g. extending the length of the Coldry drying systems.

The approximate dimensions of the Coldry and Matmor components are:

  • Raw material storage 100m x 25m
  • Coldry primary processing 40m x 35m
  • Conditioning 60m x 15m
  • PBD 33m x 50m
  • Matmor 50m x 50m

Question 17:

Has the onsite Project Manager been shortlisted?


Yes. Candidates are currently being assessed.

Question 18:

Will details of the MPA/MOU & sub-agreements be made available for shareholders to view once all signings have been completed?


While the sub-agreements are subject to confidentiality, the Company intends to release a summary articulating the objectives and the key terms.

Question 19:

  1. Can you expand more on the change in title from Master Project Agreement (MPA) to MoU?
  2. Why wasn't this change made earlier?
  3. Who is responsible for review and compliance with Indian and Australian governance within ECT?
  4. Did the Indian partners sign off on the title MPA?
  5. Why wasn't the change in label explained in the original 30 May announcement?
  6. Is there a change to the substance of the agreement?


The answer to this question was largely provided in our announcement of 31 May.

It's important to understand that the content and intent of the project agreement remained unchanged, therefore there was no material change.

The Company has engaged legal firm Corrs Chambers Westgarth to lead the drafting of the agreements.

As with all material matters, probity and governance matters related to our activity in India are reviewed by the executive team, often based on external advice if required, and approved by the Board.

Question 20:

  1. Please clarify the newly announced sunset date of August 2018?
  2. What impact does the sunset clause have on the binding terms of the MOU?
  3. Why is there a sunset clause to begin with?
  4. What is the relevance and who were the instigators?


A sunset date is a typical feature of legal agreements where there is a finite date for completion of an agreement.

This documentation feature ensures that agreements naturally close-off to ensure no lingering obligations exist beyond the effective dates of the agreement.

Large companies and Government institutions regularly use this feature to ensure that legal obligations are continually closed off when no longer relevant or needed.

In the case of the sunset clause for the MPA/MOU, it was originally drafted to occur on the targeted date for completion, being 31st of July but allowing the sunset date to occur on the exact date the partners were targeting financial close wasn't considered prudent and so the sunset date was extended an arbitrary one month past the target date of 31st of July.

The sunset date once triggered, will have the effect of terminating all obligations in the MPA/MOU in favour of the final sub-agreements which constitute the document suite for financial close.

As described in past announcements, the MPA/MOU provides the framework for the partnership, project and detailed sub-agreements.

Question 21:

  1. Why was the sunset date changed to 31 July at such a late stage?
  2. How can ECT ensure future milestones are met within the stated timeframes?


It’s not unusual for first-of-a-kind (FOAK) technology projects to experience shifting timelines.

This doesn’t mean we don’t strive to avoid delays, we certainly do work toward stated targets.

When one considers the further complexity of this project occurring overseas and having 3 parties to the agreements, some uncertainty around targets is to be expected.

In the last 12 months, the Company has aimed to act as the "pace-setter" to timelines to reflect the urgent nature of technology commercialisation and our shareholders’ appetite.

We manage the uncertainty inherent in pre-commercial FOAK R&D activity by providing timeline guidance to the market and subsequent updates when there is a material change, in accordance with continuous disclosure rules.

Question 22:

The Company announced that Australian Ministers would be invited to attend the MPA/MOU signing, subject to availability.

  1. Why were there no Australian Ministers present at the signing?
  2. If no one was available why wasn’t the signing held at the ECT offices or plant?
  3. If meeting an Indian minister was a big deal for the partners in Canberra, why was there no PR released by the Company?
  4. Why wasn’t an absence of minister attendance clarified in the initial announcement?


Engagement with Government is an important part of our Marketing & Communications strategy and whilst it would have been supportive to have a Minister attend the "signing ceremony", it wasn’t critical.

Initially, Ministers’ offices had made themselves available for the original date of the visit by NLCIL and NMDC on 24 May, but due to the change of dates, the Ministers’ availability couldn’t be guaranteed for 30 May. We worked on a best endeavours basis for their attendance on the new dates.

The Company continued to hold the ceremony in Canberra due to the attendance of the Indian High Commissioner and senior representatives of the Australia-India Business Council and to allow the possibility of the Ministers still being available.

It is also true that there were certain political dynamics behind the scenes that presented a risk of ECT becoming a political 'football'.

Going into details may be taken as criticism by Ministers. It's not in shareholders' interests to alienate relevant Ministers.

PR was released and picked up by some outlets, mainly in India where NLCIL and NMDC are well-known.

The reason why no local coverage was pushed is; (a) the risk was identified that journalists may seize upon any Ministerial absence to infer controversy, resulting in a very different narrative and potential alienation of MPs that we wish to keep on side; (b) without confirmed attendance of a high-profile minister, media tend to follow other stories.

Why wasn't this clarified in the initial announcement? Simply because we did not wish to attract negative attention from MPs or media. There are further opportunities to pitch the story as we step through financial close and ongoing opportunities to gain media traction as we step through project milestones.

We continue to keep relevant MPs updated and continue to receive 'encouragement and support'.

On Thursday 31 May, our Chairman Glenn Fozard, along with members of the Indian delegation, attended meetings at Parliament House for 'private' briefings.

Question 23:

  1. Has there been any follow up by the ASX to ECT’s response to their notice seeking clarification?
  2. Was the source of the notice the ASX or a shareholder?
  3. Is there a way to minimise the chance of receiving a clarification notice?


No further questions have been received from the ASX.

The ASX notice was a response to a shareholder query and was drafted without taking into consideration the clarification announcement the prior day.

Every announcement could go into dozens of explanatory pages and still not satisfy everyone.

The Company received calls and emails congratulating it on the announcement and expressing disbelief and frustration at the response of certain forum participants. This indicates that one group has understood the announcement as intended and another hasn’t.

In such a circumstance, those with questions simply need to call or email for clarification.

Announcements are reviewed by the executive team and Board prior to release.

Question 24:

What was the outcome with NITI Aayog?


NLC and NMDC, as Indian Public Sector Undertakings (PSU), are ultimately responsible to their respective Indian Government Ministries: NLC to the Ministry of Coal, and NMDC to the Ministry of Steel.

As previously reported by ECT, the referral of the project to NA by the Secretary for the Ministry of Coal stemmed from ministerial administrative rules requiring review all JV’s between PSU’s (in the case NLC and NMDC) and non-PSU’s (ECT).

A positive implication of this was the resultant lifting of the profile and visibility of the project within the Indian government.

The exercise in preparing to submit to NA has been highly valuable, entailing an extensive Independent Financial Review, which further refined the approach of the partners to this project.

One of the outcomes of the Independent Financial Review, prepared for submission to NA, was a change to the project structure, delineating the R&D and commercial phases, to accommodate differences in the regulatory framework between R&D and commercial activities.

The R&D phase, from a structural perspective, became similar to an unincorporated JV, which does not require NA approval. Following successful R&D outcomes, the formation of the SPV will be triggered, and may subsequently require review by NA.

Importantly, preparation and completion of this review can now occur after or in parallel to the Pilot Plant Project as a sperate process. As such it will not impact on the timeframe for completion of the Project.

Question 25:

Why have the agreements been broken up into components i.e. MOU & MOA’s?


The decisions to structure the agreements by splitting them into MPA/MoU and sub-agreements/MOA's was identified by the parties and confirmed via legal advice as the most appropriate and efficient approach to framing, developing and implementing the necessary legal, financial and technical requirements of the contracting process.

In making this decision, the teams and their respective advisers considered many factors, including, but not limited to the following:

  • First of its kind Project between 2 India PSU’s and an Australian listed company
  • Jurisdictional legal and tax issues occurring between India and Australia
  • Specific requirements of India government PSU’s in regard to compliance and governance arrangements for both the R&D program and eventual commercial phase
  • Complex Intellectual Property issues related to the licensing of technology from ECT
  • R&D Tax issues as they relate to both Indian and Australian government provisions

Question 26:

  1. What are the ramifications of ECT’s 49% stake?
  2. Does that mean in the future if NLC and NMDC feel like changing any of the terms of the agreements they can?


The 49% ownership stake refers to the future royalty splits and SPV ownership.

The Master Licence Agreement (one of the sub-agreements) outlines the terms and conditions for the use of the technology licences and amongst other things, ultimately protects ECT's interests in the technology.

Question 27:

  1. Has changing the percentage ownership changed conditions of the revenue model?
  2. Has the review made any recommendations in this regard?
  3. Is NLC and NMDC looking at coldry and matmor from ECT's perspective and their plan is more at licensing out the technology or are they more focused on rolling out the technology themselves so that their interests are in limiting the revenue going to the SPV?
  4. On release of the revenue model will ECT put out some figures against current prices to show what the revenue from the planned 500,000-tonne plant will mean to ECT?


The revenue model will be based on the commercial terms of the sub-agreements and a summary released to the market in due course. This is intended to help the market understand the future commercial implications.

Per the Techno-economic Feasibility study released in July 2016, the project contemplates a 500,000 tonne per annum (metal output) plant following successful R&D outcomes.

The scope of Coldry deployment will be based on market assessments of the thermal coal market and NLC power generation plans following R&D outcomes.

In addition to potential commercial deployment by NLC & NMDC, licensing of the technologies globally will be pursued by the SPV.

Question 28:

Will a project timeline be released once the sub-agreements are signed?


Yes, the Company will initially release a broad timeline, then provide regular project updates.

Question 29:

What is the difference between the 2016 TPA and the recent MPA/MOU?


The announcement of 27 Jan 2016 provides an overview of the Tripartite Agreement and the project pathway.

That agreement paved the way for the development and joint financing of an integrated Coldry Demonstration Plant and Matmor Pilot Plant at India’s largest lignite mine.

The announcement provided an overview of the Tripartite Agreement as follows:

The Tripartite Agreement is binding and establishes the collaborative framework to deliver an integrated Coldry and Matmor facility, providing high-level milestones and pivotal decision points along the development pathway.

The framework provides agreed pathways for key activities, broadly including:

  • Detailed Integrated Techno-Economic Feasibility Study (parallel activity to 2 & 3)
  • Coldry Demonstration Plant development
  • Matmor Pilot Plant development

Successful progression through the activities will lead to a series of subsequent steps under the framework:

1. Commercial structure agreements
2. Financial Close
3. Project construction
a. Coldry
b. Matmor
4. Commissioning
5. Validation & optimisation activities
6. Operations
7. Expansion

The Company will continue to own its Coldry and Matmor intellectual property, which will be licensed into the India project.

Point 1 above includes the Project Agreement (MOU), signed on 30 May 2018 and the associated sub-agreements.

The Project Agreement provides the framework for the sub-agreements: Master Technology Licence Agreement, Tripartite Collaboration Agreement and NLCIL, NMDC and ECT Services Agreements.

It also frames the mechanisms necessary to articulate from the R&D phase to the commercial phase. This is important in terms of managing the structural, financial and regulatory aspects of such a JV.

Shareholders will appreciate that this type of collaborative venture between an Australian company and two Indian PSU’s is unprecedented, necessitating a bespoke framework.

The ask: a foreign company (ECT) was asking two Indian government-owned companies (NLCIL and NMDC) to make their largest R & D investment in a single R&D project (~AUD35) for the ‘opportunity’ of investing another ~AUD300m.

With this context in mind, early in our engagement with NLCIL and NMDC, it became apparent that the traditional Australian approach to framing agreements was not working. The fact that the project consists of so many ‘firsts’, combined with the inherent risk of R&D activity, was a recipe to ‘do nothing’, despite the clear drivers for all parties to participate.

ECT adopted a project development strategy focused on building the relationship, keeping the parties closely engaged and driving toward building a suitable legal and commercial framework for this first-of-a-kind project. This involved a stepwise approach to agreements and activities, building confidence, buy-in and momentum.

The Tripartite Agreement brought representatives of NLCIL and NMDC into the project (working group ann. 8 Feb 2016), changing the dynamic from a traditional seller-buyer (us-them) scenario to a collaborative scenario, generating increased understanding, shared ownership and building goodwill at NLCIL and NMDC to champion the project from within.

The fact we are now poised to complete the sub-agreements and step forward on a historic project indicates this approach has delivered the desired outcome.

Question 30:

Will the Company release the Coldry-Matmor Basic Design package?


An overview will be provided. The basic and subsequent detailed design package constitutes valuable IP, so won’t be publicly released in full.

The Company plans on releasing more information regarding its revenue model during July.

Question 31:

ECT’s 17 May 2018 announcement refers to an ~AUD35 million investment by the Indian partners for the R&D phase.

It also mentions stage 3 upgrades of the HVTF of ~AUD1.5 million.

Is the AUD1.5 million for stage 3 HVTF upgrades coming from the ~AUD35 million India budget?


No. The decision for investing in stage 3 upgrades at the HVTF will essentially be separate from the Indian project but may be influenced by the activity at the HVTF required by the Indian project as well as other local projects.

Question 32:

ECT’s 17 May 2018 announcement stated, “Each party will make the following up-front contribution in consideration for its respective deferred equity”.

Does this mean the Indian partners will provide the full ~AUD35 million up-front?


Following financial close the funding commitments by our Indian partners are binding, with funds drawn down in accordance with the needs of the project execution plan's budget.

Question 33:

Post financial close, will a broad project/timing plan be publicly released, inclusive of site works commencement?



Question 34:

The Company’s 29 May 2018 announcement states, “The Collaboration Agreement has taken the legal and financial structures from the Project Agreement and complemented these with the necessary detailed terms and conditions to be executed as a Deed between the parties (Tripartite Collaboration Agreement). This document will form the central contract around which the other agreements can then operate.”

The TCA will be executed as a DEED. Will it be considered binding by all parties?



Question 35:

The Company’s 31 May 2018 announcement stated, “Indian Public Sector Undertakings (PSUs) undertaking significant collaboration projects are required to follow naming conventions which essentially allow for two types of legal titles: Memorandum of Understanding (MOU) or Memorandum of Agreement (MOA).”


We've frequently mentioned the first-of-a-kind nature of the partnership, project and technologies. This combination of firsts required a unique approach to developing the framework. By breaking down the legal documentation into targeted components we've been able to achieve the formulation of a framework and method of engagement conducive to advancing the largest ever R&D project between Australia and India and the largest R&D endeavour ever undertaken by either party.

Question 36:

  1. What is the difference between a MoU and a MoA?
  2. Why are the sub-agreements designated MOA's?
  3. Does the Company not believe this is information shareholders would find pertinent?


  1. Please refer to our announcement of 31 May 2018
  2. Please refer to our announcement of 31 May 2018
  3. If the content and intent remain unchanged, and a change in the title has no material effect on the consistently stated objective, the Company does not consider it material.

Question 37:

Shareholders also have concerns in relation to whether any document signed thus far is legally binding. The most pressing issue for shareholders is whether or not they are strongly legally binding. One example of strong legal conditions is a break fee if either party should choose to withdraw from the conditions of the signed document.

  1. Does either the Tripartite Collaboration Agreement or Master Project Agreement contain similarly strong legally binding conditions such as a break condition or other strong legal conditions?
  2. If not, is the memorandum of agreement including the sub-agreements the document(s) that will contain such conditions i.e. a break condition or other strong conditions?


  1. The parties have full legal recourse under Indian law via an agreed arbitration process.
  2. The sub-agreements contain all necessary and appropriate terms and conditions that would be expected of such a project. ECT has engaged legal firm Corrs Chambers Westgarth, who has extensive experience with Indian law.

Question 38:

The announcement of 31 May 2018 states, “Under Australian nomenclature, the MPA may be described as a Heads of Agreement, as it outlines the key terms of the sub-agreements largely in commercial language.”

Why was Australian nomenclature not revealed prior to signing?


In the past, we've received feedback from shareholders that they have trouble with jargon. As such, we attempt to use terms to describe the intent of each agreement. These descriptions are accurate. This question builds on the false notion that a change in label constitutes a change in content or intent.

Question 39:

The referral to NITI Aayog appeared to have some regulatory approval role.

Is this still relevant?


Please see Q24.

Further, we remind shareholders that the first-of-a-kind nature of this project has required agility in navigating India's complex laws and requirements.

Where some investors see revised guidance as delays, the likes of Austrade in India and the Australia-India Business Council (AIBC) note how we've managed to pull together such a complex deal, in a relatively short timeframe, given the history of failures by various companies to establish a presence in the Indian market.

NITI Aayog is an important committee for the Government of India and our project represents an important outcome with aligned purposes for all of ECT, NLCIL, NMDC and the policy objectives of the Government of India.

Question 40:

The new Memorandum of Agreement and sub-agreements to be worked out by both the Company and Indian partners with a “sunset date” of August 31 leads to some further questions. The usage of “Memorandum of Agreement” has given some shareholders the impression will contain strong binding commercial terms different from any prior agreement and appears, from a shareholder’s perspective, the most important and price sensitive document.

  1. What are the chances of this document or documents being similarly thoroughly scrutinised in an ad hoc fashion or process not yet familiar to the Company much like the diversion to NITI AAyog?
  2. How can shareholders be confident that another ad hoc review similar to the NITI Aayog submission will not occur given that similar language was used in 2016 of the MPA signing being on track?


There is no 'new' MOA. There is the project agreement, designated as an MOU and formerly labelled MPA. There are several sub-agreements which are designated as MOA's. These were outlined in previous announcements.

Previous documents have not been scrutinised in an ad hoc fashion. Thorough scrutiny of material agreements is a certainty and a requirement within any business. The parties have been drafting the sub-agreements since April 2018. There is always a chance that delays can occur, however, there is currently no indication of such a delay.

Unknown unknowns by their nature cannot be predicted, only managed if they eventuate. However, there is no indication of divergence from the current path at present.

Question 41:

The Company has commented on the recent confusion experienced by shareholders but this has only arisen because of the obfuscation of information behind commercial confidentiality. This confidentiality has given shareholders little oversight or understanding of the true situation of current events. Here are some general questions that I would think would allow shareholders to make better judgements.

  1. The project is to build a pilot Coldry/Matmor plant in India. If this is undertaken by the Indian public sector is the plant therefore owned wholly by the Indian public sector?
  2. Is revenue the Company receives to be received only after construction?
  3. Are royalties based on a per-produced basis or per-sales basis?
  4. Can the Company receive an advance on royalty payments to compensate for lengthy negotiations?
  5. Was the change in ownership split in exchange for the one-third capital contribution?


  1. Per the announcements on 17, 22, 30 & 31 May, the ownership of the project is 49% ECT, 25.5% NLCIL, 25.5% NMDC.
  2. A separate announcement on the Company's revenue model will be made soon.
  3. A separate announcement on the Company's revenue model will be made soon.
  4. A separate announcement on the Company's revenue model will be released in due course.We note the question conveys the writer’s opinion that the negotiation process has been lengthy and that lengthy negotiation processes should be subject to compensation, specifically via advance royalty payments.In our experience it is not common to make advance payments on royalties ahead of commercialisation, even then monetisation of a royalty stream typically involves other mechanisms.Further, while the writer sees the negotiations as lengthy, the likes of the Australian High Commission and Austrade India, with extensive experience in trying to assist Australian firms to break into the India market, hold a different view on our progress. They see the scope and speed of the development of our project as unprecedented.
  5. The parties arrived at the ownership split primarily based on the outcome of the Independent Financial Review, which considered many factors, including funding (past and present) and structuring requirements.

Question 42:

Will the R&D plant be capable of making both Coldry pellets and Matmor composite pellets?

Is the proposed 500,000-tonne per annum (metal output) commercial-scale plant outlined in the TEF just for Matmor?


The design of the integrated plant allows for the Coldry component to produce both Coldry and Matmor pellets.

The ~AUD300 mill plant contemplated by the TEF states a notional 500,000 tonne per annum steel output.

The scoping of future commercial-scale Coldry-only facilities by the parties will be the subject of a project feasibility study following the R&D phase. This will allow prevailing thermal coal demand and prices to be considered.

It may be helpful to elaborate on our approach to R&D. ECT have adopted a 'frugal innovation' approach. Looking for efficiencies in the allocation of time and capital where possible.

It's helpful to understand the concept of commercialising a new iron-making technology. Furnace engineering consultants HATCH state that it takes around 10 years and about $100 million to commercialise a new iron making process.

We've seen vast sums invested in the development of Hi-smelt, without commercial success.

BHP's ~$2.4 billion loss on the HBI plant in WA is another example of spectacular failure.

The goal of an R&D program should be to fail as early and cheaply as possible.

Recently, a Swedish government-backed project was announced, seeking to commercialise a hydrogen-based iron making process. That project will aim to deliver a pilot plant capable of outputting 1-2 tonnes per hour by 2022, at a cost of $190 million. Our India project, by contrast, is seeking to demonstrate at the same scale of 2t per hour within 2 years at a cost of ~AUD35 million.

Shareholders who understand this background will appreciate the relatively rapid and cost-effective approach we've adopted.

Section: Local Sales

Question 43:

When will local sales volumes and revenue guidance be provided?


The local sales initiatives hold a strategic purpose that isn't solely to generate earnings, although sales margin is a guiding principle behind these sales. The local sales aim to attend to many important aspects in the full commercialisation of Coldry:

  • testing the technical specs of the Coldry fuel in a variety of boiler systems
  • upgrading the Coldry pilot plant to provide process scalability testing, improved measurement and control of plant inputs, outputs and sequencing, wider waste heat simulation profile. These upgrades have also reduced the per-tonne cost.,
  • establish market feasibility in support of the Latrobe Valley project and
  • test for the most suitable sales packages (that is, solid fuel contracts only or boiler system packages inclusive of long-term fuel supply, as an example).

Question 44:

In your announcement on 29 June, you stated, "These details remain commercial-in-confidence given the emerging interest in the market from parties that may seek to market alternate products to the same consumers.” What are the emerging interests and what are the alternate products?


We are aware of at least two potential entrants to the solid fuel market. Both appear to intend to make briquetted char or coking coal. Of interest to shareholders is the policy by the Victorian government to limit lignite access to 27,000 tonnes per annum for new processes that emit CO2 greater than 0.3 t CO2-e / t coal or 0.45 t CO2-e / MWh ( ).

Typical charring and briquetting processes generate heat via combustion of coal or gas. If they use coal, CO2 emissions will be greater than the caps, limiting them to 27,000 tonnes a year. This is enough to make around 12,000 tonnes of briquettes. If they use gas their operating costs will likely be higher due to the increase in local gas costs. At commercial scale, Coldry is designed to utilise waste heat, making it a zero-CO2 process and therefore unaffected by the 27,000 tonnes per annum cap.

Question 45:

Previous announcements the impression that the “fast track in India” approach was necessitated because of domestic political resistance or the prohibitive costs of labour for building or developing an Australian plant among other reasons.

  1. The Australian political situation does not seem to have outwardly changed.
    What has changed that gives the Company confidence of development in Australia despite the Government’s history of abandoned projects and the reluctance of politicians to associate themselves with the Company’s current events?
  2. What is the equivalent amount of funding required in Australia for a plant similar to the hypothetical Indian combined Coldry/Matmor plant?


  1. Correct. At the time of the past announcements that mentioned India as the logical focus for initial demonstration (i.e. current project) the political and financial climate in Australia/Victoria was relatively less conducive.However, this question fails to consider announcements since.Shareholders will be aware of the extensive news around electricity and gas pricing and energy policy, highlighting the change in political and economic drivers.Energy costs have doubled or tripled for some users, creating a potential opportunity for Coldry in the local market. Hence the ongoing sales of Coldry to customers in Vic/Tas and the consequent potential for the Coldry pilot plant to focus on commercial sales following R&D activity, and driving the feasibility study for a commercial scale demonstration plant in Victoria's Latrobe Valley.

    With regard to the question's specific reference to political aspects of the signing ceremony, the writer starts from an incorrect assumption; The lack of Ministerial presence was not due to the Company or its activities to do with coal.

  2. A like for like assessment has not been done.

Question 46:

  1. Why have substantial revenues not yet been realised from the upgrades of the Coldry HVTF?
  2. When does the Company expect to
  3. Without substantial revenue why have costs in areas such as remuneration broadly increased?
  4. Does the Company believe it can produce 35,000 tonnes per annum or is this a maximum theoretical number based on numerous preconditions?


  1. The Company has made ongoing sales of Coldry product to customers (ann. 29 June). We draw shareholders’ attention to previously announced local market testing with potential customers and reconfirm that all product taken by those customers has been successfully used, resulting in repeat orders.The HVTF is focused on executing eligible R&D activity. This produces a given tonnage. That tonnage, if within specification, is sold to customers. Following conclusion of eligible test activity the HVTF can be focused solely on production for the purpose of supplying customers. Such a change in the basis of the activity would render the cost of production ineligible for R&D tax incentive rebates.The question makes a subjective assertion, that the potential revenue from the HVTF is substantial. Shareholders will have their own views on what constitutes substantial. Per announcements, the HVTF is an R&D facility, not a commercial facility. Given the primary objective of the Company is the execution of the India project, R&D activity takes precedence.Revenue from sales will be reported in the Annual and Interim Financial Statements.
  2. Following the completion of R&D activity, the Coldry HVTF will be in a position to produce predominantly for the supply of product to consumers. Until then, the Company will continue to sell Coldry solid fuel on an ad hoc basis under R&D Tax Incentive rules.
  3. The question conflates required R&D activity expenditure (including market-based remuneration of staff) with the potential to offset some or all of that cost via product sales. The upgrades, as announced (e.g. 16 Dec 2016), are intended to deliver expanded R&D capability including process/scalability testing at higher throughput, greater measurement & control of plant inputs, outputs and sequencing, ability to simulate a wider range of plant integration options, including Matmor and HydroMOR.That the upgrades may also result in potential revenues due to the local market economics with regard to energy demand and supply, is a welcome opportunity for a non-commercial plant. If these market conditions persist, the Company would seek to continue production on a predominantly commercial basis. i.e. producing to meet demand from consumers rather than to generate R&D outcomes. This may also entail expansion to a large-scale demonstration plant, subject to final outcomes from the Latrobe Valley feasibility study.
  4. Yes. Per announcement 29 June 2018.

Question 47: 

Projections of profits have further been tempered by admissions that the site was never intended to be commercial but only a test facility. This is an unclear narrative and it could give the impression that the Company is hedging its bets on both success and failure of commercial sales. What is the Company's realistic outlook on the HVTF?


This question is built on incorrect assumptions.

The Company has not made profit projections.

Further, the question claims that an 'admission' of non-commerciality has been made. This claim only makes sense if the Company intended the pilot plant to be commercial but chose to keep that secret. This is incorrect.

The Coldry pilot plant has always been an R&D facility. It's function as a pilot plant has been to develop the process as part of the step-wise incremental scale up through to commercial scale.

The question ignores the framework under which the Company operates; the R&D Tax Incentive program, and the function of a pilot plant in the context of a scaleup pathway.

The fact that the Coldry pilot plant is an R&D facility has always been overt. There was never an intention in the design of the pilot plant or its upgrades, to make Coldry in a commercial sense. The scale is insufficient.

However, per our announcements, the local market has seen such recent growth in the cost of electricity and gas that the price consumers are willing to pay for solid fuel are greater than our cost to produce test output from the pilot plant, making it potentially profitable.

It is also necessary, as shareholders will understand, to ensure activity is eligible for R&D Tax Incentive rebates, hence the overt narrative that the plant is not commercial, but rather is selling output from eligible R&D activity, which is permissible under the R&D Tax Incentive rules.

Question 48:

Bacchus Marsh upgrades have been scheduled on different dates for some time.

  1. Why the delays?
  2. When will the stage 3 updates be done?


The stage 3 upgrades to the HVTF have been delayed for a number of reasons.

Foremost is the focus of Company resources allocated to the development of the India project, a priority commitment given to shareholders in previous updates.

Secondarily, the Company has also been conducting Coldry R&D at the plant in support of the India project as well as developing working relationships with end users of solid fuel to trial the pellets produced from the R&D.

The current plant configuration and R&D work plan aren’t prioritising volume of throughput for sales, instead, it is focusing on R&D process and product improvements, end-user trials, operational rigour and development of process and procedural discipline. This focus will place the plant operations on a stable footing for an increase in volume when required.

The stage 3 upgrades will proceed in due course and the Company has all the planning in place. However, it will not be adopting a "build it and they will come" strategy.

Finally, the Company has also been trialling a packaged offering to end users, which combine fuel, boiler operations and maintenance and on-site capital improvements to ensure that when we do increase our sales drive, it’s against sales that are commercial and deliver a unique value proposition.

Question 49:

Does ECT have any other technologies that are being developed that may represent similar breakthrough as MATMOR in other areas?


Hydromor and COHgen are the two other technologies under development.

Hydromor (hydrogen metal oxide reduction) is a result of new findings during the development of Matmor, allowing the application for a new patent. In essence, the integrated Coldry-Matmor plant will be an integrated Coldry-Hydromor plant.

The India project agreement structure provides for such IP development and provides a distinction between pre-existing IP and new IP developed under the project.

Hydromor will eventually replace Matmor. Changing the use of the name from Matmor, which is relatively familiar, to Hydromor will occur in due course. The Matmor process patent 703821 expired in January 2016. The Matmor apparatus (retort) patent 767268 will expire in 2020. The Hydromor patent application PCT/AU2017/051281 is on foot and progressing through the patent process.

COHgen (Catalytic Organic Hydrogen generation) research is still at an early stage, testing hypotheses on laboratory scale apparatus. COHgen research stemmed from Matmor and Hydromor research. If hypothesised COHgen process parameters can be validated and subsequently prove to be scalable, it may be an ideal lignite-based hydrogen production process capable of replacing the ‘standard’ gasification-steam reforming process earmarked for adoption in places like Victoria.