Eco Investor Update

A Weekly News Update for Environmental Investors

18 April 2011 - No 29

ASX 200

Dart Energy
With coal seam gas becoming more controversial in NSW, Dart Energy has outlined its position, saying the "key to developing a successful CBM [coal bed methane] industry in NSW will be effective external stakeholder management and to create an environment where CBM can co-exist with other activities in a way that is fully sustainable.

"Dart Energy is fully committed to engaging with communities and other external stakeholders early, to be transparent and open about our plans, to listen to concerns and to work with communities and other stakeholders to resolve any perceived issues."

Dart said CBM should be part of NSW's long-term energy mix as gas is currently less than 10 per cent of the State's energy mix and over 90 per cent of the gas it uses is imported from out of the State. Yet NSW has an abundance of coal seam gas that offers the opportunity for a sizeable industry to be created similar to that in Queensland, with additional jobs and economic benefit. CBM is also a cleaner and greener energy alternative than coal and would assist in reducing NSW's carbon foot print.

Among it global CSG portfolio, Dart has tenements near Newcastle, PEL 458, and during the March quarter it made further progress evaluating its commercialization opportunities. This included connection feasibility work for a small scale gas-fired power generation development and engaging with potential counter-parties for gas sales arrangements.

Dart Energy has 35 active CBM licences in seven countries with total acreage of 37,741 square kilometres. Gross original gas in place (OGIP) is 77.2 trillion cubic feet (Tcf) and net OGIP is 48.1 Tcf. (ASX: DTE)

Eastern Star Gas
Eastern Star Gas, which owns 22.3 per cent of Orion Petroleum, has requested a meeting of Orion shareholders to remove two of its directors and appoint three others.

Eastern Star Gas opposes a proposal for Orion to acquire tenements in the Surat/ Bowen Basin, Otway Basin and in south west NSW from Energetica Resources in exchange for Orion shares and options. (ASX: ESG)

Infigen Energy
The Children's Investment Fund Management (UK) LLP has increased its substantial stake in Infigen Energy from 23.23 to 24.26 per cent. Infigen's securities continue to trade at historically low prices. The Fund is an activist investor, having prompted the resignation of Infigen's former chairman. (ASX: IFN)

Lynas Corporation
Shares in Lynas Corporation have hit a new all time high of $2.70 on April 12. The all time low is 5 cents in 2001. There was no news to coincide with the peak apart from a presentation the same day at the BBY Sydney Rare Earth Conference.

Five days earlier it announced Australian Foreign Investment Review Board approval for a proposed investment in Lynas by a special purpose company established by Sojitz Corporation and the Japan, Oil, Gas and Metals National Corporation (JOGMEC). (ASX: LYC)

Transpacific Industries Group
Schroder Investment Management Australia Limited has ceased to be substantial shareholder in Transpacific Industries. It had held 6. 5 per cent. (ASX: TPI)

ASX 300

Galaxy Resources
Galaxy Resources has finalized a $120 million placement to sophisticated and institutional investors at $1.10 per share. Galaxy said the issue was substantially oversubscribed with strong interest from Europe, Asia, US and Australia.

Managing director, Iggy Tan, said "We will use the funds for working capital and ramp up of our Mt Cattlin spodumene project in Western Australia and Jiangsu lithium carbonate plant in China, which we're due to commission at the end of the quarter.

"The timely commissioning and ramp up of Galaxy's operations are essential in meeting the imminent surge in demand for lithium carbonate from the EV/E-bike market. The raising will also provide the Company with funds for potential acquisitions and the repayment of some debt."

Chairman Craig Readhead said the capital raising followed the decision to defer listing on the Hong Kong Stock Exchange.

"We made the decision to raise the capital by way of a placement to institutional investors, as this allowed us to secure funds quickly and efficiently, and at a firm price. Importantly, the placement process did not leave Galaxy subject to market volatility and share price pressure while waiting for the capital raising to be completed. The board was also mindful that shareholder participation was low in the company's previous share purchase plans.

"The company also identified an opportunity to attract a number of highly regarded Australian and international institutions to invest in Galaxy, thereby enhancing the quality and stability of our share register. Lastly, this raising delivered an efficient and effective way to provide funding for Galaxy's various projects and, importantly, has left the company in a much better and stronger financial position," he said. (ASX: GXY)

Emerging Companies

CBD Energy
CBD Energy's share hit a one year high of 20 cents on April 12 when it announced a joint venture with two of China's largest renewable energy companies. The joint venture establishes the AusChina Energy Group, which aims to develop $6 billion of renewable energy projects over eight years and become a significant participant in the Australian energy market.

CBD's partners are China Datang Renewable Power Co Ltd and Tianwei Baobian Electric Co Ltd. Both companies are subsidiaries of larger Chinese companies in the Fortune Global 500. China Datang Group is China's second largest utility, with a generating capacity twice that of Australia's, and the Tianwei Group is one of the largest solar equipment producers in China.

AusChina Energy Group is the first venture outside China for the Chinese partners, and signals their intention to be involved in substantial renewable energy projects in Australia.

At a signing ceremony on Monday 18 April, AusChina Energy Group will announce details of the size and locations of its starting portfolio, percentage ownership of the joint venture, how the venture will work, its plan to gain a substantial share of Australia's energy market, and its intention to look at international projects and expand beyond wind energy. (ASX: CBD)

Qube Logistics
Qube Logistics is to acquire all of Wilhelmsen Holding ASA's (WWH) shareholdings relating to the operating businesses in Qube's Automotive, Bulk and General Stevedoring division. These businesses provide stevedoring and related logistics services for the automotive, bulk resources and break bulk sectors.

Qube said the transaction will give it control of POAGS, the largest business within the division, and increased shareholdings in the other operating businesses. Qube's stake in POAGS will rise to 76.7 per cent, in AAT to 44.1 per cent, in NSS to 49.6 per cent, and in Prixcar to 25 per cent.

The total consideration is the issue of 88 million shares in the proposed new holding company of Qube post the proposed restructure of Qube. 75 per cent of these shares will be subject to a three year trading restriction. No cash will be paid.

The acquisition is subject to completion of the proposed corporatization of Qube and internalization of Qube's management, and no material adverse change in the financial or operating position of Qube. Completion of the transaction is expected in July, and WWH will then nominate a director to the new holding company.

Sam Kaplan, managing director of KFM, said "We believe that there is significant growth potential for Qube's Automotive, Bulk and General Stevedoring division and Qube's increased ownership and control of the businesses in this division will assist in realizing the potential. We are pleased to have reached agreement with WWH through a structure that will ensure the continued alignment of interests between Qube and WWH."

Thomas Wilhelmsen, Group CEO of WWH, said "Since our joint investments in April 2007, the relationship with Qube has been very positive. During this time, we have been impressed by the focus of management and employees on delivering services to Australia's importers and exporters, as well as shipping companies and the complementary effect that has had on our core shipping business and our customers." (ASX: QUB)

Micro Cap Companies

Advanced Energy Systems
Advanced Energy Systems said it expects to announce positive cash flows in its March Quarterly Report.

"The company's performance in the first quarter of 2011 is expected to have resulted in an increase in end of quarter cash holdings of the company by about RMB 2 million (AUD 300,000), " it said. "The board is pleased that the successful sales campaign for its ‘Aocheng Gardens' project in Fushan District, Yantai, China is delivering positive financial results for AES."

Advanced Energy Systems describes itself as a company focused on the commercialization of sustainable energy technologies in residential and commercial property developments. The current stage of AES's commercialization model involves entering into technology utilization agreements with joint venture partners and developing the projects jointly."

The technology enables the production of a significant proportion of the energy requirements of a complex within the boundaries of the site, reducing the reliance on external power production and its carbon footprint. (ASX: AES)

A management restructure at AnaeCo will see chief executive Tom Rudas assume a new role as Executive Director – Technology, and a new chief executive officer appointed.

The company said the move is part of its transition from a technology development venture to a fully commercial operation.

The recruitment process for the new CEO has commenced and Mr Rudas will continue as acting chief executive officer until that is concluded.

AnaeCo chairman, Professor Michael Dureau said "AnaeCo is at the stage in its development where the corporate and commercial growth opportunities are expanding and the board sees this as the appropriate time to appoint an individual with demonstrable commercialization experience to lead the way.

"We also have a full agenda with respect to the technical exploitation of the DiCOM System. We see huge value in focusing Tom's skills and energy both in the DiCOM installation at the Western Metropolitan Regional Council project as well as the application of the technology to other opportunities."

Meanwhile, Stage 2 expansion of the WMRC Project in Perth is well under way with orders placed for all major long lead time equipment, more than 50 per cent of equipment procurement orders having been placed, and the Stage 1 plant decommissioned and dismantled to enable Stage 2 construction to be completed.

After completion of the civil works, the next phase is the extension of the MRF shed and preparation for installation of the DiCOM vessels and other structural and mechanical equipment. (ASX: ANQ)

Blue Energy
Coal seam gas explorer Blue Energy says it has not used the controversial technique of fraccing to date, but that does not mean it may not in the future.

Chief executive John Phillips told Eco Investor the issue has a number of points. The four chemicals that are controversial, BTEX, are banned. However these chemicals are naturally occuring wherever there are hydrocarbons and they are in diesel, petrol and lubricants.

The US, where the fraccing issue began, uses other chemicals that are not needed in Australia. And unlike the US, in Australia the best fraccing ingredients for coal seam gas are often water and sand.

Fraccing has been used in Australia for natural gas for 40 years.

On water, Mr Phillips said that farmers have between 1,000 and 1,100 bores over coal seams and so have been dewatering coal seams for 30 to 40 years.

Blue Energy has not yet started high production but its tenements are on large blocks used for cattle and are not heavily populated or developed. The water quality is not bad but not potable, an dis perhaps suitable for stock.

From an environmental point of view, coal seam gas companies need to be looked at individually, as the issues are company specific and site specific. (ASX: BUL)

Carbon Polymers
Carbon Polymers has raised $2 million through a placement to high net worth and institutional investors. The raising was at 30 cents per share and a 1 for 1 option exercisable at 30 cents over the next three years.

The company had sought $1.75 million and accepted oversubscriptions.

The funding is for recycling acquisitions. Managing director Andrew Howard said the recycling industry in Australia is in desperate need of consolidation. If the industry adopted best practices, there would be some very profitable companies around, he said.

Carbon Polymers is looking at achieving revenue of $26 million in 2011-12. (ASX: CBP)

The Welsh Assembly Government (WAG) has approved the penultimate milestones in Dyesol's three year partnership project with Tata Steel to develop and demonstrate their ability to produce dye solar cells integrated onto coil coated steel.

WAG has offered £2 million to assist with establishment of scaled up materials manufacture in Wales. The scale-up is planned to commence immediately. As well as enhanced materials manufacturing facilities, the partners intend to expand their R&D laboratories.

"We have also prepared a five year technology road map to deliver advanced, cheaper products with continuously enhanced durability as is needed for the built environment. This expansion of the technology program has already commenced and will run alongside the manufacturing establishment to ensure our product development continues to be market-leading," said Dyesol.

The support follows the 29 March announcement that Tata Steel and Dyesol would increase the joint resources on the project as it moves into the pre-industrialisation phase, and the 31 March announcement that Tata Steel and the Low Carbon Institute had opened the Sustainable Building Envelope Centre (SBEC) at which the first prototype roof demonstration modules from the PV project were displayed.

The project team has demonstrated to WAG that it has developed the necessary experience and expertise to upscale the project. The two milestone achievements were the building of large scale demonstration modules, and production of a detailed technology roadmap that determines how the required end product performance and cost goals would be achieved.

In the US, DyeTec Solar has received its initial commitment of US state government funding – a US$950,000 grant from Ohio Third Frontier Fund in partnership with Pilkington North America (PNA). Key project staff will be transfered from Dyesol Australia to the US to begin operations alongside Dyesol Inc.

The initial focus will be to develop in-house capabilities, resources and designs to build a 300 mm x 300 mm prototype to meet the expectations of the granting body and the requirements for facades in the built environment.

DyeTec's mission is to develop a Standard Technology Platform to mass manufacture Dye Solar Cell (DSC) coated glass for the Building Integrated Photovoltaic, Automotive Integrated Photovoltaic and Building Applied Photovoltaic markets. (ASX: DYE)

Eden Energy
Eden Energy has completed a placement to sophisticated and professional investors at 11 cents per share, raising $551,440 for working capital.

The placement included one free option per share with an exercise price of 20 cents up to 30 June 2014.

Eden is undertaking a non-renounceable pro-rata rights offer to shareholders on the same terms as the placement. The offer is conditionally fully underwritten by RM Corporate Finance Pty Ltd.

Meanwhile, Eden Energy has made its first commercial sale of carbon nanotubes (CNT) and carbon nanofibres (CNF) to an industrial battery manufacturer.

The sale followed testing by the manufacturer of the suitability of the nano-carbon fibres in its batteries - a wide range of rechargeable industrial batteries including re-chargeable vehicle batteries.

Eden said the manufacturer advertises that a very small quantity of carbon nanotubes added to material in the battery dramatically increases the storage capacity of the battery and significantly reduces the time taken to recharge the battery.

The first sale was a relatively small quantity of carbon, but Eden understands it is sufficient for possibly up to 1000 batteries.

Most importantly it is confirmation from the market of the commercial acceptability of the carbon nano-products for electrical applications, said Eden.

Several Indian concrete manufacturers have expressed interest in testing the carbon nanofibres as an additive to concrete - to increase performance, particularly compressive strength.

Eden's Hythane Company's laboratory in Colorado, USA, will commence testing the effects of mixing carbon nanotubes and carbon nanofibres with rubber and plastic.

Trials by other research groups indicate that substituting a percentage of carbon nanotubes for the carbon black can increase the tensile strength of the rubber by up to 35 per cent and the strain energy density by up to 37 per cent, potentially resulting in lighter, longer life tyres.

In the case of plastics, other researchers have shown that adding carbon nanotubes and carbon nanofibres to the plastic can significantly increases strength, and electrical and thermal conductivity. (ASX: EDE)

Greenearth Energy
Greenearth Energy has raised $610,00 via a placement at 8 cents per share. The capital is additional funding for its current suite of energy projects.

The shares were issued to the managing director and executives as part of performance bonus, and to directors in lieu of cash payments for directors fees. (ASX: GER)

Utilities management provider, Intermoco has entered into a contract to provide embedded network services to its first customer in NSW and earn $1.5 million in revenue over the five year contract period. Intermoco will receive the upfront capital cost of $98,000 this month.

The property is constructed by property development and investment company Corporate Property Management Pty Ltd, which is part of the Capital Corporation Group. Known as the Atlas Norwest and located in Sydney, the property will comprise showrooms and office space, with the final stages of construction due for completion in May.

Intermoco said Capital Corporation Group is a well-recognized property development and construction group that has been operating for 18 years.

Chief executive officer, Ian Kiddle said the contract establishes Intermoco Connect in the NSW market. "The agreement with Capital Corporation strengthens Intermoco's increasing base of property development partners. With this contract we have established a strategic partnership that provides Intermoco an opportunity for additional embedded network services contracts across planned Capital Corporation developments, and access to increase the company's footprint in NSW following a number of successful contract wins in Melbourne." (ASX: INT)

Liquefied Natural Gas
PT LNG Energi Utama (PTLNG), an Indonesian subsidiary of Liquefied Natural Gas, has issued a letter to Mitsubishi Corporation requesting compensation of US$70.9 million in relation to the Donggi-Senoro LNG Project in Central Sulawesi, Indonesia.

The Indonesian Commission for the Supervision of Business Competition (KPPU) on 5 January 2011 handed down a decision that PT. Pertamina (Persero), Medco Energi Internasional Tbk, Medco E&P Tomori Sulawesi and Mitsubishi violated Articles 22 and 23 of Law No 5 concerning "The Ban on Monopolistic and Unfair Business Competition". The violations relate to the proposed Donggi-Senoro LNG Project.

Pertamina, Medco and Mitsubishi have submitted appeals against KPPU's decision.

In early 2005 LNG subsidiary LNG International Pty Ltd signed an agreement with Pertamina and Medco to progress the development of an LNG project in Central Sulawesi, based on gas feedstock from Pertamina and Medco. This is now the Donggi-Senoro LNG Project.

As required in the agreement, LNG International and its Indonesian partner subsequently incorporated an Indonesian foreign investment company (PTLNG) to own and develop the LNG project.

LNG said that in 2006 Mitsubishi undertook detailed due diligence of PTLNG's proposed LNG project on the basis of Mitsubishi potentially becoming a partner in and buyer of LNG from PTLNG's LNG project. "Such due diligence, under a confidentiality agreement, included access to all project technical, financial, modeling, planning and development information."

Despite PTLNG having significantly advanced the project and incurred considerable costs, Pertamina and Medco decided, in late 2006, to seek tenders to develop the Donggi-Senoro LNG Project. Despite Mitsubishi's due diligence of PTLNG, Pertamina and Medco allowed Mitsubishi to submit a tender. Pertamina and Medco subsequently awarded the Donggi-Senoro LNG Project to Mitsubishi, despite PTLNG's protestations.

KPPU determined that the tender process was unfair and cited LNG International and PTLNG as affected parties. PTLNG and LNG International have requested compensation of US$70.9 million from Mitsubishi.

PTLNG is yet to receive a reply from Mitsubishi about its letter of claim, and says it is assessing potential remedies for its losses. (ASX: LNG)

Nanosonics said it has made two new senior appointments to its management team that will assist with its continuing expansion into international markets.

Grant McGregor is chief financial officer and company secretary, and will have overall responsibility for the financial management of Nanosonics, company secretarial functions and joint responsibility for investor relations.

Mr McGregor has 15 years business experience in the medical device and healthcare industries in Australia and the US. Most recently, he with Invacare Corporation as the finance director, Asia Pacific. Invacare Corporation is a NYSE listed US$1.7 billion global home medical and mobility equipment company. Mr McGregor also worked for Coopers & Lybrand for more than 10 years in Australia and Europe.

Gerard Putt is the head of Manufacturing. Mr Putt has 12 years experience in the medical device industry as a leader and manager of development, engineering and production teams at ResMed Ltd, a US$4.5 billion global leader of sleep and respiratory medical device products. As head of Manufacturing at ResMed, he acquired experience in the implementation of new products into the manufacturing process and scaling to international market needs.

Kinetic Investment Partners Limited has increased its holding in Nanosonics from 6.1 to 7.17 per cent. (ASX: NAN)

Phoslock Water Solutions
The new chairman of Phoslock Water Solutions, Laurence Freedman has increased his shareholding in the company by indirectly acquiring another 290,278 shares at 6.4 cents each. He now holds 36,497,906 shares. (ASX: PHK)

Planet Gas
Shares in Planet Gas hit a 12 month low of 4.8 cents on 8 April and are continuing to trade at slightly above this level. This is despite news that the company has begun exploring for coal seam gas at two sites in NSW - PEL 468 at Bylong in the Sydney Basin and PEL 470 at Mooki in the Gunnedah Basin.

Physical operations have commenced at both sites with low impact seismic surveys.

Two exploration coreholes will be drilled at Bylong during May/ June, and a single exploration corehole will be drilled at Mooki during May, both projects subject to receipt of approvals. The data will be used to derive gas resource estimates.

Gas resources in the Illawarra Coal Measures and the Shoalhaven Group are being targeted at PEL 468, which is adjacent to a recent gas discovery by a neighbouring operator, said Planet Gas.

The Maules Creek coals are being targeted at PEL 470 Mooki, which is adjacent to an
existing CBM gas development project at Narrabri.

"The early stage exploration work being undertaken involves minimal interference or disturbance to the area where it is taking place. No hydraulic fracturing or ‘fraccing' is involved in these operations," said the company. (ASX: PGS)

Refresh Group
With its shares at a one year low of 3 cents, Refresh Group is selling its subsidiary AridTec Pte Ltd to the original owners and vendors of AridTec.

AridTec, which refresh acquired in July 2010, is a Singaporean company that has developed a range of products that provide atmospheric water harvesting solutions, based on drawing water vapour from the air and producing drinking water.

Refresh said it originally considered that the potential to distribute the AridTec products would complement the existing Refresh water production and distribution business.

But its financial performance since the acquisition has not met expectations and Refresh said it is unlikely to do so in the future.

"In addition, the directors considered that more operational focus is required on Refresh's Australian based production and distribution business," they said.

Consideration for the sale of the AridTec shares is the cancellation by way of selective capital reduction of the 71.8 million Refresh shares issued to the original vendors as consideration for the purchase of AridTec.

The sale is conditional on Refresh shareholders' approval, approval by the original vendors of the selective capital reduction, and the resignation of Mr Chee Keong Oh as a director.

An inter-company loan of $485,928 from Refresh to AridTec will be capitalized so there will be no outstanding loan owing to Refresh.

The directors said that the disposal will improve refresh's potential to trade more effectively.

Refresh is also looking at other ways to revitalize and recapitalize itself, and has engaged First Corporate Pty Ltd to assist with the strategy.

Chairman, Henry Heng, said "We believe First Corporate has the expertise to assist our company with not only the identification of opportunities to enhance shareholder value but also assist us with capital raising endeavours and merger and acquisition processes. Once the company has achieved a recapitalization event with First Corporate's assistance, Refresh would invite two principals of First Corporate, Mr Jeffrey Broun and Mr Michael Slater, to join the Refresh board to strengthen the on-ground corporate expertise at the board level and lead the expanded investment goal."

The recapitalization is dependent on shareholders passing all resolutions on the sale of AridTec and resetting the company's share placement ability. (ASX: RGP)

Style is to convert its unlisted convertible notes into fully paid ordinary shares at a price of $0.0175 each. The conversion will result in 60,000,005 new shares.

Note holders can also request that the accrued interest be converted to shares. If all Note holders request this, an additional 6,133,424 shares will be issued. (ASX: SYP)

WestSide Corporation
WestSide Corporation has expanded drilling at its Meridian SeamGas reserves, with drilling commencing on the MER14X exploration well in PL 94 near Moura.

The MER14X coal seam gas (CSG) exploration well - the ninth in the Meridian SeamGas reserves expansion exploration program, spudded on 8 April and the target depth is 800 metres.

WestSide said the MER03V appraisal well, which was drilled to its target of 572 metres, has been suspended as a future producer. Drilling intersected the targeted Baralaba Coal Measures and Kaloola Formation with total net coal measured exceeding 21 metres.

Similarly, the MER11VR appraisal well has been cased and suspended as a future producer. Drilled to a target depth of 1,376 metres, it intersected total net coal measured exceeding 22 metres. (ASX: WCL)

Unlisted Companies

Biofiba, a company that featured at Eco Investor Forum 2009, will received up to $1.97 million from the CSIRO for its manufacturing process that uses organic fibres to make planks for shipping pallets.

Wooden pallets account for a large slice of the world's timber consumption, and most export pallets are used once and then consigned to landfill where they slowly decompose.

The CSIRO's Australian Growth Partnership (AGP) program - funded through the Federal Government's extension to the CSIRO's Flagship initiatives - offers between $500,000 and $2 million per company and allows businesses to purchase CSIRO research and development capability.

The CSIRO will invest up to $1.97 million in Biofiba to fund a collaboration through its Future Manufacturing Flagship to tailor the material formulation and high speed production.

Biofiba's managing director, Laurence Dummett, said the company was attracted to the AGP program because it could deliver a combination of benefits. "The CSIRO's Future Manufacturing Flagship has the facilities to develop the commercial process and to validate the products' biodegradability. AGP offered us access to this and funding as well," he said.

Innovation Minister Senator Kim Carr said Biofiba's technology would allow production of timber substitutes from organic fibres and natural starches. "The raw materials come from renewable sustainable resources and pallets made from Biofiba composites will break down into Earth-friendly, natural matter – delivering significant environmental advantages over traditional wooden pallets."

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