durlacher summary vti (jan 2004)

VTI Virotec BUY 23.25p
Sector: Speciality Chemicals Initiating Coverage 9th January 2004

Virotec’s innovative and patented process turns the caustic ‘red-mud’ waste from Alumina producers into a valuable compound that can itself be used to address water borne heavy metal pollution – a problem for a
wide range of industries including mining, tanneries waste water treatment plants and electroplating.

Demand will be driven by Government & local authority anti-pollution agencies around the world and has passed the first 3 years of EPA tests on one of the worst pollution targets in the USA. The EU published new rules to prevent pollution and accidents from mining waste in June 2003– including a ‘polluter pays’ principle which should accelerate the acceptance of Virotec’s technology.

Unusually, Virotec will derive an income from virtually every stage, including the production of its raw material as it solves one of the alumina producer’s key waste problems, so gross margins should be very healthy. Income from pollution treatment, both one-off and continual, will be complemented with the use of Virotec’s technology as a fertiliser and later potentially by acquiring, treating and reselling polluted bodies of land or water.

We believe it is now only a question of time before Virotec signs a major deal - not reflected in our orecasts. As a unique proposition, Virotec is ideal for green funds and ethical investors. Our target for the nd of 2004 is 100p.

Virotec will become a UK domiciled business in due course.