Eco Investor Update
A Weekly News Update for Environmental Investors
November 2012 - No 107
Sims Metal Management
Chairman Geoffrey Brunsdon told the annual general meeting that 2012 marked a number of low points for the company in its recent financial history.
After a peak in the generation of scrap metal supply in 2008 in the US and the UK, the global financial crisis decimated consumer spending in the US and Europe. The generation of post consumer scrap, the companys most valuable source of feedstock, was adversely impacted and the weak scrap flows contracted margins across the industry.
In response the company has reduced costs by $4 million per month and expects to reduce UK costs by about $1.5 million per month over the next three months. Despite this our profitability and our share price is not where we want it to be. This time last year our shares were trading at around $13. In July 2008, before the onset of the global financial crisis, they were above $43.
While the share price does not drive our business decisions, we believe the restructuring initiatives that we have taken, and that are in progress, will restore value.
The companys share buy back program, now ended, saw the cancellation of almost four million shares for a total outlay of just over $47 million and at an average cost of $11.92 each.
Mr Brunsdon said 26 of Sims facilities were in the path of Hurricane Sandy and some had significant damage, but all of the facilities were operating within five days.
Group Chief Executive Officer, Daniel Dienst, said Sims recently disposed of assets in North America that had below trajectory returns and did not meet its long term strategic objectives.
There are some recent bright spots in the US economy - vehicle sales are up more than 7 per cent, housing starts are up and there have been 1.15 million household formations in the last year, there is a slight rebound in consumer confidence and a creeping up of hours worked. These are all historical data indicators of scrap generation to come, he said.
Significant challenges remain, he said. In the two key scrap generating markets, the US and UK, a wait and see attitude about the economy is adding to the massive backlog for the purchasing of new products which, when met, may unleash a commensurate wave of supply to recyclers.
A positive is that after several years of pain, the strong hand of Darwin is now eradicating and consolidating marginal and unprofitable capacity.
In Australasia ferrous intake tonnes grew by 3 per cent through greenfield facilities and bolt on acquisitions that added 10 new collection sites.
Strategically, the company will continue to expand in its core metals and electronics recycling markets and in emerging economies such as China, India and the Middle East. For example, in September its e recycling business, Sims Recycling Solutions, opened a collection facility in the United Arab Emirates, the first of its kind in the region.
Paul Varello and John Feeney have retired and are no longer directors of Sims Metal Management. (ASX: SGM)
Hastings Diversified Utilities
Chairman Chris Corrigan told the AGM that Qube enters the 2013 financial year in a very strong financial position with high quality businesses which are diversified by customer, geography, product type and service. Qubes management team comprises some of the most experienced logistics executives in the country with the expertise to continue to grow Qubes operations despite the challenging domestic and global economic conditions. (ASX: QUB)
Tox Free Solutions
678,250 options with an exercise price of $2.38 each have been converted to shares, including 366,000 by managing director Steve Gostlow.
Mr Gostlow told the companys annual general meeting that 2011-12 was Toxfrees most successful year to date.
Our business continues to expand in line with our vision of being Australias leading waste management and industrial services company.
Our strategy is threefold:
Approximately 28 per cent of our business services the oil and gas sector, 20 per cent Government, 18 per cent mining, 13 per cent infrastructure, 12 per cent commercial and 9 per cent manufacturing.
Of this over 90 per cent of our revenue is derived from customers who require waste management and industrial services on a continuing basis from regular production operations like LNG production, iron ore mining, household hazardous waste collection, and waste from municipal services or drain cleaning for a local council, as an example.
Current trading conditions are mixed, said Mr Gostlow.
Our services to the oil and gas and mining sectors in Western Australia and Queensland continue to remain buoyant, with the major contracts performing well and growth evident in Pilbara, Kimberley, Surat and Bowen basins.
In contrast we have seen challenging trading in the retail, manufacturing and infrastructure sectors particularly on the east coast. As a result, our industrial services business on the east coast has been slightly below expectations for this time of the year.
Our government contracts mainly serviced by our hazardous waste services are also performing well.
Overall the companys first quarter trading has been solid and on an EBIT basis is higher than the same period last year... we have a positive outlook on our ability to once again increase earnings in financial year 2013. (ASX: TOX)
Evergreen Capital Partners has become a substantial shareholder with 5.3 per cent.
Managing director Valerie Duncan has reduced her interest from 9.6 to 6.7 per cent. Director Steve Twaddell has reduced his interest from 9.1 to 7.7 per cent, and director Edward Hanna is no longer a substantial shareholder having sold 50,000 shares at $2.20 each. Chairman Ronald Watts has sold 80,000 shares at $2.50 each. (ASX: EAX)
Unlisted Property Funds
Aspen Parks Property Fund
The Fund will also add cabins to parks with high occupancy levels. Identified parks are in Melbourne, Perth and Albury-Wodonga.
Income and profit are both expected to rise by 4 to 6 per cent this financial year, and yield to be maintained at around 9 per cent.
Energy World Corporation
On the same day Transpacific Industries Group provided an update on moves to simplify its debt structure.
At 30 June it had $1,129 million of gross debt including $169 million of USPP Notes and $51.3 million of Convertible Notes outstanding.
By 7 December it expects, through a combination of repurchases and redemptions, to have eliminated the outstanding Convertible Notes, and on 17 December $115 million of USPP 5 year Notes will be repaid. The redemptions and repayment will be funded from existing bank facilities reserved for this purpose.
On completion of these transactions, TPIs debt facilities will comprise $1,429 million syndicated bank debt facility with a three year weighted average maturity and available headroom of about $200 million after allowance for bank guarantees on issue; and $54 million USPP Notes which will mature in December 2017.
Transpacific said debt reduction remains a priority and it expects to realize interest savings of at least $25 million in the current financial year compared to last year. (ASX: TPI)
Director Andrew McBain has indirectly acquired 100,000 shares at 5.7 cents each. (ASX: CCF)
Clean TeQ Holdings
ISK is a leading Japanese producer of inorganic and organic materials and has titanium dioxide production plants in Japan and Singapore and also manufactures other functional materials.
The first LOI is between Clean TeQ, ISK and Clean World Japan Ltd, the joint venture in Japan between Clean TeQ and Nippon Gas Co Ltd. It covers the recovery of scandium and other valuable metals from ISK owned plants globally and other titanium dioxide plants in Japan.
The second LOI is between Clean TeQ and ISK and covers potential opportunities for scandium recovery from all other titanium dioxide producers. These projects are longer term but have the potential to extend the use of the technology worldwide, said Clean TeQ.
Appraisal of the Clean iX technology has been going for six months and will continue over the next six months. Completion of the process design and appraisal will see contracts signed and the first recovery and purification plant constructed at ISKs Yokkaichi Plant in Japan.
This milestone will trigger the license fee payment from Clean World Japan Ltd to Clean TeQ of $3.5 million as announced last month.
Chief executive, Peter Voigt said The relationship with ISK has been developing for the last six months and the signing of these LOIs is a significant step in the commercialization of our Clean iX technology in the resource recovery marketplace.
The results of the technical evaluation based on the Yokkaichi intermediate acidic process stream are promising and have shown that the recovery of scandium and other metals using Clean iX has the potential to provide a low cost recovery route. Scandium is an emerging high value metal with applications in fuel cells, aerospace, catalyst and electronics markets and the long term value to Clean TeQ of Clean iX in this market will be significant.
Meanwhile, Clean TeQs share price continues to trend upwards and touched 19 cents on 16 November. (ASX: CLQ)
The companies said progress to date with a number of projects is being assessed. When a site is considered commercially viable for both parties, bona fide negotiations for a binding supply agreement will commence. (ASX: ENE)
Ceramic Fuel Cells
The new CEO is Bob Kennett, who has been a non executive director since 2006. An engineer, Mr Kennett has served as chairman and director of Powergen Renewables Ltd, and a board member of the Combined Heat and Power Association and chairman of the CHPA Micro Forum.
Chairman Alasdair Locke thanked Mr Dow for his many years of hard work at the company and wished him well in his endeavours.
Company secretary Andrew Neilson has also resigned and is replaced by Glenn Raines. (ASX: CFU)
Micro Cap Companies
Australian Renewable Fuels
The proposal is unanimously recommended by the directors of Wentworth and will be implemented through an off market takeover.
ARFuels will make a scrip offer of 5.7 of its shares for each Wentworth share. ARFuels anticipates pre bid acceptances with certain shareholders and all Wentworth directors for 19 per cent of Wentworths shares. A condition of the offer is a minimum of 90 per cent acceptance.
The merger will provide ARFuels with a cash injection of $14 million to fund working capital, future growth and strengthen its balance sheet. The net tangible asset backing per ARFuels share is expected to increase from 0.4 cents to 0.65 cents. The estimated reduction in ARFuels net gearing is from 65 per cent to 13 per cent.
The boards of both companies said there is a compelling strategic rationale for the transaction as it will combine the technical expertise and production capability of ARFuels, Australias only national biodiesel producer, with Wentworths economic resources.
Vaughan Webber, chairman of Wentworth, will join the ARFuels board as a non executive director on completion of the merger.
Mr Webber said Wentworth is delighted to be merging with an emerging asset rich listed company with strong management, clear strategic objectives and a growth strategy. This merger delivers to Wentworth shareholders not only exposure to a growth business, but enhanced liquidity and genuine potential for share price appreciation. Accordingly, the Wentworth directors unanimously recommend the bid.
Wentworth has appointed Leadenhall Corporate Advisory Pty Ltd as independent expert. ARFuels Bidders Statement and Wentworths Targets Statement will be provided in coming weeks. (ASX: ARW)
Clean Seas Tuna
Chief executive Craig Foster said the turnaround follows the addition of synthetic taurine (an essential amino acid) to the manufactured feed diets provided by the companys two major suppliers.
Investigations revealed that the taurine content in feed supplied by the two suppliers had been insufficient and that the taurine deficiency in the kingfish diet was the principal cause of the suppressed growth and much higher than budgeted mortalities.
The feed supply agreements with the suppliers prescribe a process for addressing feed quality issues, and Clean Seas Tuna has issued formal dispute notices to both suppliers.
Based on investigations to date, independent legal advice from senior counsel and assessments of kingfish feed protocols in Japan, the Board has determined to invoke formal dispute resolution procedures with both feed suppliers to attempt to find a commercial compromise of the claims the company considers it has against both suppliers, he said.
The improved fish health and this seasons fingerling production should lead to lower production costs and generate a more acceptable commercial gross margin if current strong demand and stable farm gate selling prices of around $12.50 per kilogram are maintained, said Mr Foster. (ASX: CSS)
The original Intec Process patent was lodged in 1993 and will expire in 2013 without any commercial applications having been established. Notwithstanding that additional Intec Process patents have been granted, such as the Gold Process, Spent Pickle liquor etc, opportunities for the commercialization of these related applications, within a reasonable timeframe and within the financial capacity of the company cannot be identified at this time.
Fortunately, the disposal of the companys legacy stockpiles of electric arc furnace dust (EAF dust) has given Intec $4.4 million in cash backed security bonds. Consequently, the company is currently in a secure financial position relative to its operating costs, he said.
The focus this financial year will remain on the investigation of corporate and asset acquisition opportunities; preserving the companys financial position as far as possible without resort to shareholders; and investigating alternative value strategies for parts of its technology portfolio including the Burnie Research Facility.
It will also continue the IRC Project for reprocessing an Iranian based zinc lead waste stockpile. This is subject to on going Federal Government approvals and the receipt of pre payments from the client.
Intec has established an active business development function and is reviewing a range of business and asset acquisition opportunities, said Mr Jones. Whilst we can give no indication as to timing of any acquisition, it is our belief that the current environment in the mining and processing industries is conducive to corporate opportunities for companies such as Intec that possess a clean corporate structure, sound balance sheet and healthy cash balance.
Its preference is to progress an opportunity that is associated with the Intec Process. (ASX: INL)
Phoslock Water Solutions
The product comprises 24 zinc bromine batteries housed in a 20 foot shipping container and connected to a large scale solar PV array at the University of Queenslands campus in Brisbane. The system has a 90 kilowatt power output, with 240 kilowatt hours of capacity.
By integrating large scale energy storage with intermittent renewable energy technologies, the M90 demonstrates the viability of energy storage as an important enabling technology for wide spread renewable energy deployment, said RedFlow.
The M90 is capable of
storing large amounts of electricity from sources such as solar or wind
power which can be used during peak demand periods or at night,"
The successful deployment of the M90 product is an important step in the commercialization of large scale energy storage by the company. The M90 will provide an important reference design for system integration partners in the US and elsewhere. (ASX: RFX)
As part of the listing, the green scooter maker raised £1.6 million through a placing by finnCap of 121 million shares with institutional and other shareholders at 1.3 pence per share.
Following the placement, Vmoto has 896,087,712 shares on issue and its market capitalization at the placement price is £11.6 million. finnCap is also acting as the companys nominated adviser and broker.
Managing director of Vmoto, Charles Chen, said We have been delighted by the reaction to our AIM listing in London and are pleased to welcome a number of high quality UK institutions to our register. The funds we have raised will enable us to deliver on our existing opportunities in an expedient way, including ramping up PowerEagle production lines. We intend to make the most of the support shown by the London investment community to expand our marketing and sales operations in Europe to exploit the growing demand for electric scooters.
Non executive director Olly Cairns said The dual listing on AIM really compounds the turnaround year Vmoto has had. Without doubt there is good investment appetite for us in London which we will need to access as and when our pipeline of business expands. Vmoto has made fantastic progress in a rapidly growing market but this is just the beginning. Vmoto is already a leading electric scooter company in Europe and we intend to deliver value for money to our customers and solid returns to our shareholders. (ASX: VMT)
Production was 154 tonnes of superior battery grade product with 99.5 per cent or above purity, and the balance was technical grade product.
Sales on October of lithium carbonate totaled 273 tonnes with revenue of $1.7 million. Galaxy also recorded initial sales of battery grade product following customer testing.
Sales will comprise mostly technical grade product until the battery grade product completes customer qualification testing. Battery grade samples have been sent to over 50 potential battery cathode customers in China plus a number of Japanese customers.
Galaxy Resources director Robert Wanless has sold 60,000 shares at an average price of 49.09 cents each. (ASX: GXY)
Micro Cap Companies
AnaeCo and Dynagreen signed a Memorandum of understanding in May to form a collaborative relationship for the commercial exploitation of the technology in China and overseas.
Zhi Jun, president of the BSAM, said The visit to Western Australia and the DiCOM System plant in Perth was extremely beneficial. This type of alternate waste treatment technology is an excellent solution for the ever increasing volumes of municipal solid waste for the densely populated urban areas of China. We were impressed by AnaeCos technology and technological edge and are pleased to be their partner for the dissemination of DiCOM in China. (ASX: ANQ)
Carnegie Wave Energy
Attendees included General Martin Dempsey, chairman of the Joint Chiefs of Staff; Admiral Samuel Locklear, Commander, United States Pacific Command; Ambassador Jeffrey Bleich, American Ambassador to Australia; General David Hurley, Chief of the Australian Defence Force; and Dennis Richardson, Australian Secretary of Defence.
Carnegie also presented scoping study results highlighting the suitability of its technology for both power and freshwater supply to defence installations globally.
Carnegies chairman, Grant Mooney said Defence organizations globally have unique requirements for energy and water security, and are often co located with attractive wave resources.
The Perth Wave Energy Project will deliver Carnegies first power sales revenues through the sale of the electricity to the Australian Department of Defence. (ASX: CWE)
Earth Heat Resources
Energy Developments and Enerji have extended by a year their October memorandum of understanding outlining the process for potentially designing and installing Enerji waste heat to power systems at EDL sites.
The companies said progress to date with a number of projects is being assessed.
When a site is considered commercially viable for both parties then bona fide negotiations for a binding supply agreement will commence. (ASX: ERJ)
The test achieved the planned maximum production rate of 35kg/s at a flowing pressure of 29 MPa (4,200 psi) through a variable choke. The company said the surface pressures indicate the well has additional capacity to flow at higher rates which were not attempted during this test.
Temperature at 4,130 metres depth was 241°C with a surface temperature of 191°C, and increasing, after 82 minutes of flow.
Managing director and chief executive officer Geoff Ward said, This is the highest productivity result achieved at the Habanero location and confirms our view of the quality of the Habanero 4 well.
The results exceed those achieved at Habanero 3 which recorded a stabilized flow of 27kg/s after local stimulation and again confirms the high productivity and temperature of the Habanero resource positioning Geodynamics well for a successful trial of 1 MWe Habanero Pilot Plant trial in the first half of next year.
The next steps are local stimulation followed by a second open flow trial. Following the completion of the second open flow test, the planned major stimulation exercise will be commenced and is anticipated to be completed in early December.
Geodynamics has posted on its web site a video clip showing steam flow during its well clean up program and from the first open flow test at Habanero 4. (ASX: GDY)
Water Resources Group
Under the proposal, the US Corporation would own the water treatment technologies and current business operations. It would operate separately from WRG and be responsible for all future costs for technology development and marketing.
WRG would maintain a substantial minority interest in the US Corporation. It would retain control of business exclusively in SE Asia, China and Australasia and receive a cash payment of several million dollars. Equity in WRG would not be affected, said chief executive, Brian Harcourt.
On completion, all future funding requirements would be met by the US Corporation, enabling the Group to appoint new executive management in the US and provide a faster product roll out, he said.
The proposed new agreement would require shareholder approval.
Water Resources Group has hired Patersons Securities to assist in raising working capital in addition to the funds expected from the US transaction. (ASX: WRG)
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