Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
Hi z-cars (are you old enough to have watched it), yes you are quite right, if a customer requires more capacity than a single 35/40t/day unit they would use two or more units.
I can't quite remember whether it was a Peel or PHE release a few months ago, around the end of September , Kenny the Oracle may be able to remember, but the amount of plastic to be recycled at Protos was divulged, the target is 300,000t/y. At the typical 20% rejection rate that would be 60,000t/y, if that was all directed towards the DMG for gasification that would require five DMG's on the protos site.
Hi Steamineagle, whilst we can't answer that question we can look at what the drivers are.
We are in the green space, not quite as green as say ITM when powered by wind or solar but we do have the capability to extract the energy out of end of life plastics,tyres and other organic waste in an extremely efficient way.
We are in the hydrogen space which will be fast growing.
We have what could be the most effective way to deal with end of life plastics and tyres.
We will have very low overheads due to the licencing business model.
The DMG is a very attractive commercial proposition due to it's different revenue streams, which can be tailored to different markets.
Taking all these things into consideration we see that we are in the right space, at just about the right time, with a product that will be in high demand.
We are funded up to break even, which will come with two or three units commissioned, the annual licence fees from subsequent units is virtually pure taxable profit, although it stands to reason that as the annual build quota rises more staff will be needed to cope and the revenue from just a very few more units will be required for company running costs.
These profits could be used in at least two ways, one would be dividends paid to shareholders and the second would be to reinvest into joint ventures of our own product thereby gaining even more profit.
My guess is it will be a combination of both with maybe a sprinkling of share-buy-back mixed in.
If everything goes to plan we will relatively quickly have escalating numbers of projects in many countries around the world all at the same time which will cause profits to rise year on year very sharply.
So, the question that we can't answer is what value will the market put on such a company now and as we grow?
Suffice to say that investment and pension funds will find us very interesting.
AIMHO.
Your welcome Vii, are you aware that the DMG can gasify virtually anything organic, not just plastic and tyres?
Hi Notforalongtime, further to what Kenny says I would add that the smaller you make the DMG the less economical it becomes, especially as a commercial venture. Also, I'm not sure how small the H2 separation equipment goes but the same might well apply, the smaller it is the more expensive it is in pro-rata.
It could be that commercially, anything smaller than say 20t/d that is electric only and especially if they are only selling to the grid would be uneconomical. Maybe an H2 plus electric could be economical at smaller sizes than that depending on the cost of the smaller separation equipment.
Having said that, it may well be possible to go into the single figure tonnes per day for community projects where profit is not the driving force.
It is also a possibility that you could have different programs available for different waste streams to be gasified in the same unit which would make community ownership even more viable.
The long term holders here might recall that one of the early orders for the Pyromex system was for an abattoir in Italy to gasify their waste.
Hi Dii, it's better than you think, around 65 miles to the kg of hydrogen was the accepted average, although the 2021 Toyota Mirai is said to do just over 70 miles per kg, it has three tanks which hold a total of 5.6kg giving a range of 400 miles.
So at 65m/kg, the 2 tonnes per day that the DMG could produce from 35t of plastic would be 130,000 car miles, with the new Mirai it would be 140,000 miles.
But to be honest, I think that HGV's (or buses) are the initial target for Peel at Protos.
Nearby Liverpool would be a great location for a DMG as they are hoping to get up to 25 hydrogen buses onto their streets.
HGV's and Buses would use about 5x more hydrogen per mile than cars.
Hi Rich, welcome and thanks for a good first post here.
You are so right at the potential exponential growth here.
PHE are very aware of the global potential which is probably one of the reasons they chose the licencing path with the manufacturing/building being done by third party, probably international, companies. This approach enables many more projects to be undertaken/managed at any one time with a team of project managers/engineers than would be possible if PHE where to build there own factory for the building of the DMG units. The 'Black Box' is the only part that PHE are likely to make themselves eventually.
Howard White of W2T has great knowledge of Asia and says that in certain countries the feed-in tariffs for electricity would be high enough to allow the owner of a DMG to pay something like $35 per tonne for waste plastic, which could take many families out of poverty and clean up those areas of discarded and washed up plastics.
Before PHE took over W2T, W2T were talking to several Japanese multinationals including Toyota Toshu, the trading arm of the Toyota group, I would expect some signings there once Protos is proven.
AIMHO
Happy new year.
Oz, your reply is very revealing.
We do in fact know how much revenue the DMG is expected to make, PHE broker notes and W2T have made that very clear.
I stand by my guestimate that selling H2 produced via the DMG process at anything over £1.85/kg would generate extra revenue over electricity only.
Peels intention is to target HGV fleets owners who want to transition away from diesel, where H2 is the choice over batteries, they will not be waiting for the take-up of hydrogen cars.
Happy new year everyone.
Hi Oz, I must say I've never actually thought about what it might cost to produce the H2 via DMG, I've only looked at the extra revenue.
How about this for starters
When producing H2 with a DMG compared to electric only there is a loss of revenue from electricity sales of 24Mwh per day, at £60/Mwh that's a loss of £1,440/day.
Assuming 2t of H2 is produced then that loss has cost 72p/kg.
Lets say the equipment to separate out the H2 costs £5m and will be spread over 10 years, lets call it £7.5m to cover interest and that the DMG operates 333 days per year, that would equate to a further cost of £1.13/kg of H2, a total of £1.85/kg as a ball-park figure.
That'll be a Japanese hydrogen bullet train
Just wanted to confirm, I could feel the Yorkshire coming through.
Are you a Yorkshire lad Kenny?
Hi JMF, PHE was created in 2011, via the reverse takeover of Bidtimes, with a licence to manufacture and sell Pyromex gasifiers, with the goal of eventually buying Pyromex.
Phe did eventually buy Pyromex and things appeared to be going well but in February 2015 it was decided to ditch the original Pyromex design and concentrate on developing the G-3 in Australia, this took longer than expected. Once completed it was shipped to the UK, arriving in March 2017, by which time Dave Ryan, who was on the W2T board, was appointed Director Of Program Development.
We were very lucky to get DR as he has further refined the G-3 into the very efficient DMG.
We are now at the start of the first project, it's been a long journey but it has every chance to be huge.
Hope that helps, if you want more detail trawl back through the RNS's.
Potential, FlyingHorse1, potential, the same thing driving AFC and ITM and we have some catching up to do.
Hi jt, with regards to your first point, I can assure you that both PHE and W2T (when they were the UK licensee) have had phenomenal interest from companies around the world who want to use this tech BUT they all wanted to be the second customer, so I have no doubt that once the foak is proven there will be a queue of customers/potential licensees.
As for point two, this is part of the reason that Dave stood down from CEO, he want to ensure that we get the right team in place to take us forward at pace.
Hi Bananaman2, I'm happy to defer to you on AFC's business model as I don't follow them too deeply any more.
And yes Ceres may well be a better comparison, MC of circa £2b and still making heavy losses, I have no idea where we will be when the market wakes up to how quickly we will be in profit.
Are you the original Bananaman from the AFC board.
Hi Hypermarlin, lets see if we can put some flesh on the bones of Oz's 12p by Feb 2021 prediction.
First, AFC who are at a similar stage to us i.e. they have a couple of projects that they hope to convert into sales in 2021, are currently on a MC of £375m on hope of those sale occurring.
I fully expect PHE to catch up with them soon, as we are on a similar timescale which would put us on a share price of circa 10p.
But I think we have a much better business model than both AFC and ITM with the licence model so there is the possibility that we could surpass AFC's MC.
Turner Pope today confirmed that we only need 2 Protos sized projects operational to break even or better, which should occur within 2022. Every one after that is profit, I recall Keith Allaun saying the design life was 20 years although that may well have changed, so every one we licence could bring in £10m in it's 20 year life.
I think that's enough reason for our MC to not only reach that of AFC but also to start chasing that of ITM.
Whether we reach 12p by Feb is an unknown but certainly not impossibility.
Thanks for your very kind words Sprog, it's been a roller-coaster at times but I don't think it will be long now before the market really catches on to what we have here.
That's a great combination of words "hugely profitable scalable, repeatable and global".
Hi iWTO, you are right, the RNS was indeed ambiguous which prompted me to contact the company at the time.
You can rest assured that it is definitely an annual £0.5m royalty payment.
Hi Sprog, I'm not sure if the comparison with ITM is as simple as that.
I take it the 1Gw you refer to is the new factory that they are building, which I assume can manufacture 1Gw of electrolysers in a year.
If we assume that an electrolyser to produce 1 tonne of H2 uses 55Mwh of electricity, then that would likely be refereed to as a 2.3Mw electrolyser, as that is how much electricity it would consume per hour.
From that I would then assume that their giga factories annual output would be the equivalent of 435 1 tonne per day electolysers.
In my view we would still not be comparing apples with apples as I believe ITM will make their profit on the sale of units, so to continue making profit they have to keep making and selling.
As Cred2 said this morning, ITM are yet to make a profit but for arguments sake lets say that the full output of their giga factory in a year made them a £50m profit, they would have to sell the same amount the following year to make the same profit.
In comparison the PHE model is to licence the manufacture of the DMG tech and take an annually recurring royalty. This means that PHE profits will rise every year that new projects are completed.
For the first 11 projects that Peel do we know that the royalty is £0.5m per year per project.
So, year 1 sees one project completed, that sees income of £0.5m, lets say year 2 sees a total of 4 new projects completed in the UK and abroad, that's income from a total of 5 units, so £2.5m, year 3 sees a further 15 projects completed as the number of licensees around the world increases, that's income from a total of 20 projects, so £10m income.
As you can see the income will snowball with the royalty model.
It has also been said that the we only require the royalty from two or three units to break even.
When the time arrives when we have 435 DMG units in operation income will be £217.5m on the basis of £0.5m royalty per unit, if you take off the royalties for three units it leaves £216m of taxable profit and if we didn't have a single new project the following year we would still have £216m profit.
So as you can see, it's not a simple comparison and that's ignoring the fact that PHE will not have the overheads of manufacturing.
Hi Dr. A and Sprog, over the years the amount of electricity generated after H2 separation has varied and at times been confusing.
58Mwh after separation of H2 sounds just about spot on, leaving the H2 in the syngas would be 67Mwh at lets say 35% efficiency of the gen-set which would be an extra 23.5Mwh, totalling 81.5Mwh which aligns with the figure given for electric only.
Now here's some food for thought, I believe it takes somewhere in the region of 55Mwh of electricity to produce 1 tonne of H2 via electrolysis, so there is the possibility of taking production of H2 up to 3 tonnes per day if demand was there.
The annual value of 58Mwh of electricity per day at say £60/Mwh to private wire, on 333 days per year run time is £1.16m, the value of 1 tonne per day of H2 over the same 333 days at £10/kg is £3.33m, a difference of £2.17m. Even if the H2 was £7/kg the difference would still be £1.17m.
I have no idea how much a 1 tonne per day electrolyser costs but it could well be an idea in the right place.