Shareholder Update – Proposed Bacchus Marsh Upgrades

Shareholder Update – Proposed Bacchus Marsh Upgrades

Char Project and Coldry Capacity Improvements – Status Update

Environmental Clean Technologies Limited (ASX: ECT) (ECT or Company) is pleased to provide the following update on the proposed upgrades to its Coldry High Volume Test Facility (HVTF) targeted at achieving positive cashflow within the next 12 months.

Key Points:

  • ECT targeting ‘12 months to cashflow positive’ under a 3-tiered approach involving organic growth, acquisitions and corporate restructure
  • Tier 1 is focused on upgrades to the Coldry HVTF, supporting expansion of solid fuel sales to the utility heat market and entry into the char market
  • Update of key tier 1 activity including project design and implementation plan, off-take partners, refined revenue targets and project financing.
  • Char project progress update with project awaiting finance decision.

On 4 September 2019, the Company released its updated Corporate Strategy, outlining efforts over the past 8 months aimed at developing near-term operational cash-flows in parallel to proposed large-scale projects in India, the Latrobe Valley, and other regions.

To deliver positive cashflows sufficient to continue the broader research, development and commercialisation objectives over and above basic operating expenses, the Company outlined the adoption of a three-tiered approach of organic growth, acquisitions and corporate restructure.

The first tier of the strategy aims to leverage the Company’s existing Coldry HVTF northwest of Melbourne to build upon the demand in the local market for solid fuel and char products.

With over $10M invested to date, the Coldry HVTF has been focused on supporting the research and development (R&D) of the Company’s growing technology suite.

The next 12 months will involve key upgrades to transition the Coldry HVTF from an R&D-focused facility to a commercial facility with three main goals:

  1. Generate earnings of up to $3M pa from the facility
  2. Underpin the market feasibility of a larger, more efficient and economical Coldry plant
  3. Further develop commercial aspects of the facility

Steam and solid fuel boiler market

  • ECT is operating in the utility heat and steam market, with specific focus on the supply, financing, installation, servicing, and operation of multi-feedstock systems up to 20MWth
  • This market consists of a broad range of businesses including abattoirs, milk processors, food manufacturers and timber processors that require heat or steam for their operations
  • Current revenues of ~$300,000 pa from this market with an objective to grow towards $1,000,000 pa over the coming 12 months

Char market

ECT has been assessing a range of markets for potential Coldry sales, with the char market emerging as the most attractive due to a diversity of applications including:

  1. Char feedstock to BBQ briquettes
  2. Carburiser for the steel industry
  3. Soil conditioner for the agricultural sector

ECT will initially focus off-take marketing efforts on the BBQ briquette market and is in active discussion with off-take parties.

The Australian BBQ briquette market is predominantly supplied by two companies under several established brands.

Given the value of the Australian dollar, there is also growing interest in overseas brands establishing a manufacturing presence where a reliable and cost-effective source of char can be established.

ECT estimates that demand for char feedstock for both the BBQ briquette and carburiser markets exceeds 50,000 tonnes per annum (tpa), with ~20,000 tpa of char being produced currently in Victoria.

Additionally, the worldwide supply of high-quality char is falling whilst demand is still growing, and the cost savings achieved via ECT’s proposed Latrobe Valley Coldry plant would allow competitive access to the export markets with expected demand to be in excess of 100,000 tonnes per annum.     

Chairman, Glenn Fozard commented, “ECT is working closely with off-takers to develop tailored char products. We would like these parties to be closely involved with the proposed upgrades, through to the commissioning of the plant, including support for a parallel R&D program for char product refinement. The BBQ briquette market is a retail market where the consumer demands high quality, so the importance of continually refining product to best suit the buyer, cannot be understated.”  

Coldry HVTF expansion works

The Coldry HVTF has been well established at the Company’s Bacchus Marsh facility with incremental capital works spanning several years. 

These past upgrades provide a valuable source of process data, informing ongoing research and development and the ‘basis for design’ of current Coldry plant and equipment. 

However, the addition of new and repurposed equipment under R&D conditions over the years, inside the constraints of legacy infrastructure, led to a process train that met flexibility criteria for R&D activities, but was not commercially optimised.

The upgrade works aim to deliver the following:

  • Char and syngas production, utilising Coldry pellets via vertical integration with upgrading plant
  • Cost reduction via surplus energy utilisation and improved process assembly
  • Scalability via the upgrade of site infrastructure and utilities providing scope for future commercial activities.

This next phase of development at the Coldry HVTF aims to increase capacity to 25,000 tonnes per annum, with the following sales and revenue targets:

Market Description Volume (Tonnes per annum) Revenue Target ($)
Steam & boiler systems Support existing marketing & operations ~5,000 1,000,000
Char products Vertical integration with char process ~10,000 char 5,000,000-6,000,000
Syngas Derived from the char process ~10,000 (equivalent) ~$500,000+
Total   ~25,000 ~6,000,000+

To deliver the above sales objective, the Company aims to execute the following key capital works:

1) Raw lignite handling

  • Further upgrade of terminals 15 & 16 at Yallourn coal mine to underpin lignite supply
  • Cover raw lignite stockpile
  • Walking Floor conveyor for feed:
    • Retractable canopy roof
    • Feed to belt conveyor then into mill
    • Floor speed controlled by pit level sensor

2) Feedstock preparation

Installation of milling & screening equipment to provide increased volume capacity:

  • High capacity hammer mill       
  • Mill fibrous components to -2mm
  • Automatic operation

3) Primary processing

Installation of larger mixing, milling & extruding equipment with 25,000 tpa capacity:

  • Install larger capacity extruder system              
  • Retain existing extruder system

4) Drying

Conditioning

  • Multi-deck drying belt                                         
  • Extended residence time for improved control over pellet strength
  • Increasing capacity throughput to match packed bed dryer capacity
  • Pellet bed turnover at each deck for improved control over drying/curing parameters
  • A range of vendors currently under review

Packed Bed Dryer

  • New internal configurations for improved airflow & reduced fan energy consumption
  • Modified discharge mechanism to allow product output flexibility to storage or char production

5) Char

Installation of rotary char kiln

  • New Char kiln & systems                         
  • Refractory lined
  • Warmup burner operation (lignite is the main energy source)
  • Energy value in the off-gas is significant
  • Product cooler
  • Refurbished tank for storage & packing

6) Energy

Installation of syngas harvester for process heat requirements and other economic uses (e.g. co-generation of electricity)

  • New combustor for kiln off-gas                         
  • Up to 10MW heat recovery boiler
  • Screw expander for electricity co-generation

Other utilities

  • Additional conveyor systems
  • Site electrical upgrades
  • Process control system
  • Buildings improvements
  • Upgraded concrete padding
  • Removal of asbestos sheeting               
  • Increased security and safety measures            
  • Laboratory
  • Workshop
  • Briquette Press

The updated draft timeline to deliver the upgrades and revenue is as follows:

Whilst the timeline to reach full production has extended to August 2020, discussions with finance providers are well progressed, with final design and procurement expected to proceed quickly thereafter.

The upgrade program will also establish the final plant capacity which may exceed 35,000 tonnes per annum, thus giving potential upside to the economics of this plant as described above.

The Company looks forward to providing regular updates on the progress of the Bacchus Marsh upgrade project.

For further information, contact:

Glenn Fozard – Chairman           info@ectltd.com.au