Company Q&A on Hot Copper, page-52

The previous agreement between the company and the Indians partners was listed as a “Tripartite Collaboration Agreement”. This is an ambiguous title for a document and many questioned at the time whether it was legally binding, for example a binding collaboration contract, or simply an MOU. Since the signing of the latest agreement the company has revealed.
Thursday 31 May 2018:”Indian Public Sector Undertakings (PSUs) undertaking significant collaboration projects are required to follow naming conventions which essentially allow for two types of legal titles: Memorandum of Understanding (MOU) or Memorandum of Agreement (MOA).”
Several questions arise from this information.

1. What is the company’s understanding of the difference in usage of memorandum of understanding and memorandum of agreement by their Indian Partners?
2. What is the reason the sub agreements are titled as a memorandum of agreement as opposed to a memorandum of understanding?
3. Was the “Tripartite Collaboration Agreement” considered by the Indian partners a memorandum of understanding?
4. If these are the only two types of agreements that can be signed by the Indian public sector why was this quirk not mentioned between the two signing dates of the TPA on 27/01/2016 and the MPA on 30/05/2018?
5. Does the company not believe this is information shareholders would find pertinent?

Shareholders also have concerns in relation to whether any document signed thus far is legally binding. The most pressing issue for shareholders is whether or not they are strongly legally binding. One example of strong legal conditions is a break fee if either party should choose to withdraw from the conditions of the signed document.

1. Does either the Tripartite Collaboration Agreement or Master Project Agreement contain similarly strong legally binding conditions such as a break condition or other strong legal conditions?
2. If not, is the memorandum of agreement including the sub agreements the document(s) that will contain such conditions i.e. a break condition or other strong conditions?

Further it was stated on Thursday 31 May 2018 that “Under Australian nomenclature the MPA may be described as a Heads of Agreement, as it outlines the key terms of the sub-agreements largely in commercial language.”

1. Why was Australian nomenclature not revealed prior to signing?’
2. Do the terms Tripartite Collaboration Agreement, Bridging Agreement and the future Memorandum of Agreement and sub agreements have rough Australian legal equivalents that could also be revealed to shareholders?

Prior to the signing the Heads of Agreement equivalent or MOU announcements stated that available Government Ministers would be present at signing.
Thursday 17 May 2018
“MPA to be signed in Canberra in the presence of available Ministers(s) and dignitaries”

1. Were available Government Ministers asked to attend the signing ceremony?
2. If so did any of the available ministers accept?
3. If accepted the absence of these ministers’ means they subsequently decided not to attend. Was a reason given?

In a prior announcement on Thursday 18 April 2017 the company announced it presented on the 21 February 2017 (or thereabouts) to the Secretary of the Ministry of Coal, Shri Susheel Kumar. The project was then diverted to NITI Aayog which is described as a “Think Tank” but also appeared to have some regulatory approval role. This was a tremendous shock to shareholders who believed some kind of agreement was about to be finalised in late 2016 as per company announcements.
Following these events a timeline was eventually developed and published that board approval required several reviews as well as ministry approval, some interaction with NITI Aayog and Policy Alignment and Assessment all prior to signing.  

1. Is the NITI Aayog component no longer relevant to any future or current agreements?
2. Was the majority of 2017 invested in this review that is no longer relevant? If so does it have to do with the nature of the MPAs legal conditions?

The new Memorandum of Agreement and sub-agreements to be worked out by both the company and Indian partners with a “sunset date” of August 31 leads to some further questions. The usage of “Memorandum of Agreement” has given some shareholders the impression will contain strong binding commercial terms different from any prior agreement and appears, from a shareholders perspective, the most important and price sensitive document.

1. What are the chances of this document or documents being similarly thoroughly scrutinised in an ad hoc fashion or process not yet familiar to the company much like the diversion to NITI AAyog?
2. How can shareholders be confident that another ad hoc review similar to the NITI Aayog submission will not occur given that similar language was used in 2016 of the MPA signing being on track?

The company has commented on the recent confusion experienced by shareholders but this has only arisen because of the obfuscation of information behind commercial confidentiality. This confidentiality has given shareholders little oversight or understanding of the true situation of current events. Here are some general questions that I would think would allow shareholders to make better judgements.

1. The project is to build a pilot Coldry/Matmor plant in India. If this is undertaken by the Indian public sector is the plant therefore owned wholly by the Indian public sector?
2. Is revenue the company receives to be received only after construction?
3. Are royalties based on a per-produced basis or per-sales basis?
4. Can the company receive an advance on royalty payments to compensate for lengthy negotiations?
5. Was the increase in Indian royalties in exchange for the 10 million the company was going to raise for project works?

The exception to the Global Royalties as listed is in Australia where the revenue potential is 100%. However, from previous announcements the impression was given that the “fast track in India” approach was necessitated because of domestic political resistance or the prohibitive costs of labour for building or developing an Australian plant among other reasons.
The Australian political situation does not seem to have outwardly changed. For example the company states in a prior publication that the company would not say why Ministers did not attend the recent signing ceremony but it was inferred this because of the, “political football“, of the company or its associated activities with coal.

1. What has changed that gives the company confidence of development in Australia despite the Government’s history of abandoned projects and the reluctance of politicians to associate themselves with the company’s current events?
2. What is the equivalent amount of funding required in Australia for a plant similar to the hypothetical Indian combined Coldry/Matmor plant?

On a domestic front maiden commercial capability for Coldry products appear to have occurred in on February 4, 2011 under prior management - http://www.ectltd.com.au/coldry-pilot-plant-upgrade-adds-commercial-capability/
Most notably in this announcement:
This upgrade will enable the following:

• Higher production capacity – 20,000 tonne per year maximum

As we can see this commercial capacity seems to be overstated as the stage 1 upgrade plans that were completed by current management raised the capacity to 10,00 tonnes per annum. Stage 4 on this new schedule gives an estimate of roughly 35,000 tonnes per annum.
https://www.asx.com.au/asxpdf/20171023/pdf/43ngkmx4wj659w.pdf
Despite increase in capacity there does not seem to be as yet any strong domestic customer base, 10,000 per annum or otherwise. Announcements have, none the less, stated that the revenue from such upgrades and sales promise to be substantial.

1. Why have these substantial revenues not yet been realised?
2. When does the company expect to make reasonable revenue from upgrades and have a consumer base that can accept the yearly quantum the upgraded HVTF can produce?
3. Without this substantial revenue why have costs in areas such as remuneration broadly increased when total revenues have not increased or not increased substantially?
4. Does the company believe it can produce 35,000 tonnes per annum or is this a maximum theoretical number based on numerous preconditions?

Projections of profits have further been tempered by admissions that the site was never intended to be commercial but only a test facility. This is an unclear narrative and it could give the impression that the company is hedging its bets on both success and failure of commercial sales.

1. What is the company’s realistic outlook on the HVTF?

Bacchus Marsh upgrades have been scheduled on different dates for some time and these have changed without a presented rationale. Shareholders would like to know:

1. What is the status of upgrades at Bacchus Marsh?
2. How much Coldry is currently being produced?
3. Why had/have dates for upgrades changed?

It also seems from some shareholder’s perspective that the company has spent its exertions on activities that have been rendered unnecessary. For example, the financing of the project source seems to have occupied a large amount of time, with the brevet capital loan facility and other financing options.
This funding now seems to be unnecessary as surrendering royalty rights allowing the Indian partners a further 26% giving the Indian Partners a total of 51% of future royalties. This increase appears to be in exchange of the company’s originally planned 10 million contribution, roughly the amount secured in the Brevet loan facility. However some questions remain.  

1. Does the company still need the Brevet loan facility for any project undertaking or will it need a similar facility in future?
2. Was the latest funding facility facilitated by Greenard Willing Structured Products as an intermediary between Brevet Capital and Environmental Clean technologies?
   1. If so was Greenard Willing Structured Products compensated for facilitating these agreements?
   2. How many other funding sources seriously considered?

Finally, previous announcements illustrated that Glenn Fozard intended to resign from Greenard Willing Structured Products on taking on his new role with ECT - http://www.ectltd.com.au/equity-lending-facility-update/
“The Company is pleased to announce that Mr Glenn Fozard (current Executive Chairman) has agreed to join ECT in a full-time capacity. Glenn has supported the Company as an adviser since 2007 and a director since 2013. He has been employed in an executive role on a part-time basis since 2015”
It further states
“In accepting this new role, Mr Fozard has announced his intention to resign from his directorships at Greenard Willing and Greenard Willing Structured Products over the coming weeks.”
However, on searching the ASIC databased earlier in the year it was found that Glenn Fozard was still a director of the company and still seems to be listed on the Greenard Willing Structured Products website.

1. Is Glenn Fozard still a director of Greenard Willing Structured products?
2. If currently a director does Glenn Fozard still intend to resign?
3. If so what has changed the intent to resign?