Counter-intuitively, I think the drop in the Phoslock share price over the past week will likely prove to be more of a positive than a negative over the long run.
Major investors who are looking to buy into a company usually buy on the dips, so if there are fund-managers watching this stock (and I suspect there may well be, given that this company has enjoyed quite a lot of coverage in the financial media over the course of the year) they might make a move soon.
Certainly, it is encouraging that the number of buy orders jumped over the past few days, seemingly in response to the fall in the share price. It will be worth watching to see if there is an increase in volume accompanied by a rise in the share price over the next week: if so, that could be an indication that a significant investor has started to buy into the stock.
With a market cap of 200 million, I would think the company should now warrant inclusion on the ASX 300 index, provided the share price holds around the current levels, and my feeling is that it will.
Shortly after finishing that last post on the situation in Germany, I noticed that just within the past week, a science website featured an update detailing the results of a study from earlier this year on a lake in Germany, Lake Muggelsee, concerning the impact of nitrogen inputs on the growth of algae in the lake over a 38 year period:
For decades, experts have debated whether reducing the amount of nitrogen flowing into lakes can improve water quality in the long-term, even though blue-green algae can bind nitrogen from the air. However, no lakes with decreased nitrogen inputs have been monitored for long enough to clarify this -- until now: scientists from the Leibniz-Institute of Freshwater Ecology and Inland Fisheries (IGB) have analysed long-term data to prove that decreasing nitrogen in Berlin's Lake Müggelsee is the key to reducing algal blooms in summer. They showed that the amount of atmospheric nitrogen bound by blue-green algae is far too small to be used as an argument against the ecologically necessary reduction of nitrogen inputs.
In the 1970s, scientists discovered that nutrient inputs -- mainly phosphorus and nitrogen -- from agriculture and wastewater discharge were the main cause of excessive plant and algal growth in lakes and rivers. Since then, water management experts have concentrated on reducing phosphorus inputs. "Although this strategy often works, it is by no means always successful. In shallow lakes, the sediment releases large quantities of phosphorus in summer. In these cases, reducing nitrogen input may help to control algal blooms because algae need both phosphorus and nitrogen to grow. Until now, however, there has been no convincing evidence that decreasing nitrogen inputs, which is more complex and costly than decreasing phosphorus, works in the long term," stated IGB freshwater ecologist Dr. Tom Shatwell, explaining the starting point of the study.
To conduct their investigation, the scientists statistically analysed 38 years of data (1979-2016). Since the 1970s, Lake Müggelsee (in Berlin, Germany) and its tributaries have been sampled on a weekly basis as part of a long-term programme to investigate phosphorus and nitrogen concentrations as well as the species composition in algal communities. Müggelsee is one of the few lakes in the world that have experienced a significant decrease in phosphorus and nitrogen pollution and that have been monitored for a sufficiently long time to draw conclusions on the effects of reducing nitrogen inputs.
Every summer, there was an excess of phosphorus in the water of Lake Müggelsee. The scientists concluded it was the decrease in nitrogen that caused algae blooms to decrease -- and water clarity to increase...
In the past, this company treated water contaminated with blue-green algae through the application of the Phoslock, which binds the phosphates that provide nutrients for algal blooms. But since entering the Chinese market, Phoslock's capabilities have expanded significantly.
As such, today, the company has new tools at their disposal, and this includes Zeolites, which bind the nitrogen that can be a food source for algae.
That study of lake Müggelsee found that at least in some instances, excessive nitrogen can trigger the growth in algal blooms.
The implication of this study is that water treatments by PET are now likely to have a much higher success rate, as today the company has the capability to contain both the major inputs, nitrogen and phosphorous, that provide nutrients for the growth of blue-green algae.
In theory, this should open up more doors for the company. More importantly, the capacity to deal with both phosphorous and nitrogen should also lead to an improved success rate, resulting in more happy customers and thus a higher rate of recurring revenue.
(20min delay)