Eco Investor Update

A Weekly News Update for Environmental Investors

25 October 2010 - No 6

ASX 100

AGL Energy
AGL Energy has upgraded its coal seam gas reserves, including for the first time reserves in the Hunter region of NSW. As of 30 September 2P gas rose 1,578 petajoules to 1,717 PJ, and 3P reserves rose from 3,372 to 3,639 PJ. The initial Hunter region reserves are 2P gas of 142 PJ and 3P gas of 271 PJ. The Hunter data comes from the first of a number of areas.

However, AGL has started to run into some well organized local opposition to its Hunter Valley activities, where a number of local groups have formed.

Among them, a group called Wollombi Valley Against Gas Extraction Incorporated (WAGE) is lobbying against what it says is the threat of the Sydney Gas/AGL joint venture drilling for coal seam gas in Wollombi Valley. It is also more broadly against coal seam gas in other parts of the world and particularly the use of hydraulic fracturing or "fracking" of coal and shale seams. This is the creation of fractures in rock to increase well output.

Another group, the Hunter Valley Protection Alliance, is also against coal seam gas in the Hunter and organized a protest outside AGL's annual general meeting last week.

In terms of wind energy, AGL has a total of 671 MW under construction (Hallett 4 132 MW, Oaklands Hill 67 MW, Hallett 5 52 MW, and Macarthur 420 MW), and a pipeline of 1,749 MW (Barn Hill, SA 150 MW, Hallett 3, SA 99 MW, Coopers Gap Qld 300 MW, and other projects 1,200 MW).

In regard to the imminent NSW electricity privatization, managing director, Michael Fraser, said AGL will only bid for assets if accretive to shareholders, and the current intention is that any capital raising is expected to be a rights issue to favour existing shareholders. It must also maintain AGL's BBB credit rating. (ASX: AGK)

Origin Energy
Origin Energy has reported that Australia Pacific LNG has found traces of four dangerous chemicals in fluid samples taken from eight coal seam gas exploration wells in the Surat Basin, west of Miles in Qld.

The chemicals, known as BTEX, are benzene, toluene, ethylbenzene, and xylene.

Water produced from the wells is isolated from water courses and livestock and contained in lined and fenced ponds and tanks for treating, which is normal operational practice, it said.

Australia Pacific LNG has briefed the Queensland Government and land holders, and the Qld minister has requested independent confirmatory testing.

Origin said the traces were found as part of Australia Pacific LNG's routine testing of fluid samples from hydraulic fractured exploration wells. "However, Australia Pacific LNG does not use BTEX in its fracture fluids and the supplier has confirmed that the fluids do not contain BTEX," it said.

The testing now underway is aimed at determining the source of the BTEX, which is found in many oil-based products including lubricating oil, diesel and petrol.

Origin said the fracture stimulation of exploration wells will only continue after a satisfactory resolution, and all evidence so far indicates there has been no impact on surrounding landholder bores. (ASX: ORG)

Sims Metal Management
Sims Metal Management has foreshadowed a poor September quarter result prior to the imminent release of the data on 27 October.

For the three months ended 30 September, Sims said sales revenue of $1.88 billion is up 4 percent on prior corresponding period, but earnings (EBITDA) will be $51.2 million or down 44 per cent and EBIT of $16.7 million will be down 69 per cent on prior corresponding period.

Net profit after taxes of $8.2 million is down 75 per cent, and basic earnings per share of 4 cents is down 78 percent on the prior corresponding period.

Scrap metal flows and margins remain constrained, particularly in North America, it said.

The announcement saw Sims' shares fall $2. (ASX: SGM)

ASX 200

GWA International
GWA International is implementing a strategy to improves sale for its heating and cooling products. The Brivis brand is for the supply of ducted heating and cooling systems for residential use, while the APAC brand is for commercial use.

In the residential market, GWA wants to be the brand and product leader in ducted gas heating and a strong competitor in evaporative cooling. It is supplementing its range with compatible air conditioning products, ensuring efficient after sales service for all products, and chasing organic growth.

In the commercial market, it is using APAC Commercial as a new growth platform to build the brand, consumers and dealers, improve service operations, and improve its market position in gas and cooling, It will do this through both organic and non-organic growth.

It is also targeting wider media advertising, service technician training, display homes, and improved after-sales service.

Operationally, it is improving sub-contractor coverage in remote areas, spare parts management, forecasting, and implementing tighter inventory control.

It is also looking to reduce costs, and is bringing its Dux Heat Pumps in-house and increasing factory volume. It also wants to use its existing infrastructure to increase its geographic footprint. (ASX: GWT)

Transpacific Industries Group
The share price of Transpacific Industries Group continues to recover. After hitting a 12 month low of 92 cents in July, they have steadily improved to a new six month high of $1.39 in mid October. (ASX: TPI)

ASX 300

Ceramic Fuel Cells
Ceramic Fuel Cells is looking ahead to future new products and applications as it rolls out is first products - its gas powered electricity generators for homes and other buildings. The future products are in LPG, ethanol, off-grid power, and electric vehicle charging.

Meanwhile, it now has 15 BlueGen units installed and operating around the world. These are part of 53 units that have been ordered by 18 clients in seven countries. (ASX: CFU)

Geodynamics has completed the Jolokia 1 well with new liners installed that are suited to the subsurface chemistry conditions.

The company is now preparing to conduct a hydraulic fracture stimulation program to create a second underground heat exchanger.

The Jolokia site is 9 km from the original heat exchanger at the Habanero site.

Successful fracturing of the granite at Jolokia will confirm that Geodynamics can readily create heat exchangers across its tenement areas and will complete the first milestone in the "Deeps" work program announced in April this year.

Tox Free Solutions
Tox Free Solutions has won what it says is a major waste management contract with Apache Energy Ltd in Northern WA. The two year contract has two one year options and an estimated contract revenue of $3 million per annum.

The contract is for waste management services to Varanus Island; Stag Platform and associated floating storage offloading tanker, Dampier Spirit; the Legendre Platform and associated FSO, Karratha Spirit; floating production storage and offloading (FPSO) tanker the Ningaloo Vision for the Van Gogh development; offshore drilling rigs contracted by Apache for the North West Shelf; and the Devil Creek Gas Plant when this site is operational in 2011.

The contract should commence this month.

Managing director, Steve Gostlow, said that as the scale of the operations in the Pilbara region continue to grow, Tox can continue to leverage its infrastructure to provide strong returns for its shareholders.

The company has $100 million of revenue in long term contracts with bluechip clients over the next five years, he said. (ASX: TOX)

Emerging Companies

Australia's leading lead metal recycler, Hydromet, says that based on the preliminary profit results of the first quarter, it has generated a net profit of over $1 million (before an inventory valuation adjustment) and this should continue in the second quarter, subject to favourable commodity prices and the foreign exchange rate.

Chairman, Dr Lakshman Jayaweera, said "It is expected that the total sales revenue will be in the vicinity of $60-70 million for the year with potential to increase to $80-100 million in the next two to three years."

The financial year began with an increase in production for battery recycling and selenium processing, he said.

"We have achieved a record production of selenium and tellurium at our Tomago operation and have established a very strong foundation to further expand this business globally. We have made significant breakthroughs improving the performances of both the lead recycling and selenium operation and with the added benefit of reducing operating costs."

The company is developing technology to introduce other lead bearing feed such as CRT glass, smelter lead dross and other metal waste streams such as a waste stream from aluminium smelting called spent pot lining to the proposed lead recycling process. It is expected that further plant trials will begin this financial year, he said.

The company is also looking at a new approach to its smelter project following what it says are some significant technical breakthroughs. The new approach should significantly reduce capital and operating cost.

"As a result of this new step by step approach, it is expected that the initial capital cost will be in the vicinity of $4-5 million, compared to our previous estimate of $12 million for the full lead smelter project."

The company hopes to make its first lead metal by end of 2011 and become a competitive player in the Australian lead recycling business.

"We have also identified a number of other sources of lead feed. Following further development work and plant trials, we intend to process these potential feed sources along with our battery feed in our proposed lead smelter and to become a more diversified lead recycler at global level," said Dr Jayaweera. (ASX: HMC)

Micro Cap Companies

AnaeCo has received planning approval from the WA Planning Commission to construct and operate stage 2 of its municipal waste management facility in Perth. The company said it now has all regulatory requirements in place to proceed. (ASX: ANQ)

Australian Renewable Fuels
Australian Renewable Fuels has received two boosts to its biodiesel ambitions that could see its production plants in Adelaide and Perth operational.

ARF has reached an agreement with Caltex to supply not less than 214,000 litres of biodiesel per month from its Adelaide plant. The initial three month contract can be extended. No financial details were disclosed.

ARF said it has also finalized a deal with GlobalBiofuels Trading (GBT) for the production of at least 30 million litres of biodiesel per year over a minimum of three years on a take or pay basis. The deal is subject to conditions and shareholder approval.

Under the agreement, GBT would import non food grade waste vegetable oil as feedstock under fixed prices. The biodiesel would be bought and exported by GBT.

Production would be from ARF's Picton, WA plant. Work on infrastructure and logistics should begin soon.

Managing director, Tom Engelsman, said a pre-treatment plant needs to be built and GBT will invest $2 million in ARF for this and to fund the first shipment of feedstock.

The pre-treatment plant investment will initially be a loan and on commissioning of the plant will be converted to 200 million shares at 1 cent each and one option convertible at 1 cent. (ASX: ARW)

BioProspect has suspended further development of its Termilone natural termiticide and is looking at new ways to commercialize it following field tests that showed it failed to prevent penetration by termites over time even at the highest treatment rates.

The Townsville trial showed significant levels of termite attack six months after treatment.

The natural Eremophilone oil degraded in the soil to a level below the minimum concentration needed to be effective. The results significantly impact the economics of Termilone as a soil applied product, said the company.

An analysis of the costs of manufacturing Eremophilone oil, together with the high application rates needed, show that it would also be uneconomic as a treatment for timber.

While having shown considerable potential as a low toxicity, environmentally friendly termite treatment, the company had to evaluate its potential in the current commercial environment, said chief operating officer, Peter May.

"We have identified opportunities for aromatic Eremophilone oil in the cosmetics industry, and there may be potential to improve product performance via formulation or use of other technologies," he said.

Meanwhile, BioProspect will focus on its other prospective products.

"BioProspect is determined to deliver financial returns for shareholders. and we consider that our other natural product ranges, including AGRIPRO animal health products, RE-GEN therapeutic and skin care products and natural insecticide Qcide offer superior potential for commercialisation. We are confident of developing these for the benefit of shareholders and all other stakeholders, as part of our focused growth strategy," said Mr May.

BioProspect has also completed the first stage of a $2.28 million capital raising. The placement of 74 million shares was at 0.5 cents per share and raised $370,000.

Each new share came with a 1:1 free option expiring 31 December 2013 and exercisable at 3 cents. The options issue needs shareholder approval.

A prospectus is being put together for a one for two non renounceable rights issue to raise $1.59 million. The price is the same as for the placement and the shares will also come with an option.

There will also be an offer of loyalty options - one loyalty option for every two shares at an issue price of 0.1 cent. The loyalty options will have the same terms and conditions as the new class of options, expiring 31 December 2013 and exercisable at 3 cents. The issue will raise about $0.32 million.

The rights issue and loyalty options have been fully underwritten by Novus Capital Limited.

The funds raised will be used to continue developing the AGRIPRO products and in particular the GI-GUARD Oral Paste for horses, including trials in Australia and New Zealand. (ASX: BPO)

Cell Aquaculture
Cell Aquaculture has commenced commercial production of Australian barramundi at its new production facility near Phuket, Thailand. The first commercial batches of barramundi fingerlings have been shipped to the facility.

CAQ executive chairman, Perry Leach, said "We are extremely pleased with the rapid progress we have made on this venture. Being a company owned facility, we can now push ahead at our desired pace. Our Thailand site suits our needs perfectly and we now have very ambitious plans for the development of this project."

The site has a production capacity of 500 tonnes of fish per year. CAQ has an option on the adjoining site, which would allow it to develop a total annual capacity of 1,000 tonnes.
The company said it continues to develop its domestic and export markets via its wholly owned subsidiary, Cell Aqua Foods Pty Ltd. This markets a range of premium fresh, smoked and value added barramundi products under the Eco-Star brand.

Mr Leach said development to 1,000 tonnes per annum would see CAQ as a major land based premium producer. The low cost base and Eco-Star range targeted to high-end markets "will significantly enhance the company's financial position".

The company is now also gaining traction on its Singapore, South African and Malaysian projects, he said. (ASX: CAQ)

A Power Purchase Agreement for the sale of electricity from EnviroMission's proposed USA Solar Tower development to the Southern California Public Power Authority (SCPPA) has been placed on the agenda of the SCPPA board for approval, says EnviroMission.

The PPA will provide a commercial outcome and improve the project's viability, said EnviroMission's chief executive, Roger Davey. (ASX: EVM)

Green Rock Energy
Green Rock Energy's 50 per cent owned Hungarian geothermal subsidiary CEGE has acquired what it says is a comprehensive data set for a former petroleum well owned by MOL, and also negotiated with MOL an option to purchase the well. MOL holds the other 50 per cent in CEGE.

The cost to Green Rock for the data well is expected to be about $1 million.

The well is close to existing power infrastructure. Green Rock said the newly-acquired well data is encouraging and will be evaluated to determine if the reservoir is technically and economically viable for the production of geothermal energy.

The target is to commence power production in 2012, subject to CEGE obtaining the geothermal concession for the area under legislation being introduced by the Hungarian Government.

Geothermal energy is expected to be a major contributor to Hungary meeting its renewable energy target of 13 per cent by 2020 given that its wind, solar and hydro resources are limited, said Green Rock.

MOL is a leading oil and gas company in central and eastern Europe and Hungary's largest company with a market capitalization of over US$10 billion.

Three Green Rock directors have acquired additional shares as part of Green Rock's rights issue at 1.5 cents per share: Adrian Larking acquired 3 million shares, Jeffrey Shneider 737,404 shares, and Richard Beresford 572,221 both directly and indirectly. (ASX: GRK)

Medical waste company MediVac has begun the first production run of its new SunnyWipes Antimicrobial Gel.

The company also said it will internationally launch its new MetaMizer 240 SSS and SunnyWipes medical range at Medica 2010 in Dusseldorf, Germany in November. Medica is the world's largest health and medical trade show. (ASX: MDV)

Mission NewEnergy
Mission NewEnergy has made its first sale and shipment of crude Jatropha oil (CJO) to one of Europe's largest power companies, for the use in energy generation.

MBT said it believes this is one of the largest commercial deliveries of CJO. Mission sold 20 tonnes of the unrefined oil at around US$130 per barrel, a 60 per cent premium to the prevailing crude oil prices. The shipment was CIF Europe, meaning MBT paid for Cost Insurance and Freight to the destination port.

Nathan Mahalingham, Mission's managing director, said "This is an important validation of the acceptance of Missions CJO as being a commercially suitable, non food, premium priced energy oil for the future."

Mission said its Jatropha operation yielded its first harvest of seeds in 2010. Based on median estimates of 0.62 tonnes of oil per acre, the expected yield ramp and Mission's 179,000 acres of productive contract farming, Mission's supply of Jatropha oil represents more than 20 million barrels of supply over 30 years.

The company's research shows that there is tremendous demand for sustainable crude oils such as CJO for energy generation in Europe that currently far exceeds Mission's expected supply.

Mission expects to make further sales of CJO or Jatropha based biodiesel after the 2010-11 harvest season.

Meanwhile, Mission NewEnergy has received the first shipment of distillation column equipment at its refineries in Kuantan, Port Malaysia. The distillation column will increase the purity of the biodiesel and provide further refining flexibility to tailor product to different international specifications, which should increase the marketability of Mission's biodiesel around the globe.

"With the distillation column in place Mission will be able to offer palm based biodiesel that exceeds the United States ASTM D6751 quality standard. We expect this to create commercial opportunity for Mission, as historically, palm based biodiesel has enjoyed a cost advantage to soybean oil based biodiesel produced in the United States," said the company. (ASX: MBT)

Pacific Environment
Environmental consultant Pacific Environment has reported considerable improvement in its first quarter results, and is considering a share buyback.

The first quarter's performance is in line with the board's expectation for profitability and return to attractive fundamentals this fiscal year, it said.

Consolidated operating revenue was $2.35 million, an increase of 31 per cent over the previous corresponding quarter. The result reflected a significant increase in demand for the Group's services, said the company.

"The consulting business units continue to employ new resources and with high workloads across all these units, in conjunction with continued management of operational and corporate overheads, we can also report an EBITDA of $540,000 compared to $167,000 in the previous corresponding period."

"Both our cashflow and balance sheet also greatly improved over the FY2011 first quarter due to: the support from our founders converting their convertible notes early, the on-going reduction of aged creditors, and improved cash performance resulting from improved profitability."

During the quarter the company opened a new office in South Australia and this fiscal year plans to open offices in Western Australia and Gladstone, Qld where there are opportunities in the resources sector.

The board expects to close $2 million of funding within the next two months and will use this to continue to reduce balance sheet liabilities and investigate a share buyback if the share price remains undervalued compared to the balance sheet and prospective enterprise ratios for the year. (ASX: PEH)

Panax Geothermal
Panax Geothermal has acquired 45 per cent of the Sokoria Project, in Flores, Indonesia. The holding is through a 45 per cent interest in PT Sokoria Geothermal Indonesia (SGI), a company formed by Bakrie Power as a special purpose vehicle to develop the Sokoria Project.

Panax said Sokoria is a near term geothermal development project with the target reservoir at approximately 2,000 metres depth and indications that the overall potential is greater than 100 MW generating capacity. SGI already has a concessions to generate the first 30 MW.

Panax will reimburse Bakrie Power 45 per cent of its SGI expenditure to date, or about US$100,000, and will cover 100 per cent of the cost of a future Feasibility Study. Panax is the operator of the project until the completion of Feasibility Study and the development decision.

The Sokoria Project has three wells from previous work, and geothermal temperatures estimated at over 230°C at depths of 1,500 to 2,000 metres, indicating low cost drilling.
The project will replace local diesel generated grid power, and is strongly supported by the local government and the local community, say the partners.

A data review will commence immediately in preparation for well site selection. If needed supplementary surveys will be carried out in the first quarter of the 2011 calendar year, followed by well site preparation and drilling in the next financial year.

Panax said it can fund all its share of the expenses for this financial year from current sources.

The equity Panax acquired in SGI is balanced by the equity rights Bakrie Power acquired in Panax's Dairi Prima Geothermal Project, it said. (ASX: PAX)

Skydome Holdings
Lazco, the company formerly known as Skydome, is to change its activities and enter the vocational education and training sector with a planned acquisition and $5 million capital raising.

As part of a restructure (Eco Investor August 2010) the skylight assets of Skydome were transferred to a private company called Roofdome that is owned by Skydome's founding chief executive Michael Bonello.

Unlisted Companies

Worldwide Coatings
Venture capital manager Cleantech Ventures has completed the sale of the Centre for Energy and Greenhouse Technologies (CEGT) Fund's investment in Worldwide Coatings.

Worldwide Coating's "TAG" technology is an innovative material that acts as one-way insulation to block heat transfer in one direction and allow heat to transfer in the other. When added to paints and other materials, TAG protects against high temperatures but allows heat to escape when the temperature is higher than the ambient temperature.

Applications are in roof coatings and the power equipment sector.

Cleantech Ventures did not disclose any financial or investment data on the exit.
Worldwide Coatings featured in the first edition of Eco Investor in August 2005.

Unlisted Funds

Climate Advocacy Fund
Australian Ethical Investment's new Climate Advocacy Fund has reported a return since inception in February this year of 5.9 per cent. It outperformed its benchmark, the S&P/ASX 200 Accumulation index, which returned 1.5 per cent over the same period.

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