kingaroy

Why do I think it worth the money on Kingaroy alone?

Frankly because I believe in the strategy and indicative figures in the presentation.

Both Ergo and Mr Walker are experienced and I’m happy have picked a good site where they actually can generate the syngas. 40MW is not a huge capex and the generation environment is not what it was in ‘02 – it should be easy to fund and implement.

Having done so, there is a working example to convince a utility (perhaps Tarong Energy are interested) that it justifies investing in significant generation to use the gas.

Further, the cash flow from the 40MW can be refinanced, so the expansion in syngas production capacity requires negligible further dilution.

And for a company currently valued around $30m, 70% of $35m per annum cash flow is quite a prize. One sufficiently big to warrant the operational risks, the waiting and the dilution to achieve it.

How much dilution? Once again, the presentation will do as a guide. 70% of 40% of $55m is $15.4m. Now the existing warrants and partly paids expire in a suitable timeframe raising $10m. Just another $5-6m to raise – dilution shouldn’t be particularly severe, and non-existent if nice friendly GE Finance offer easy payment terms for GE turbines.

That said, I do expect further placings – because there are all those other tenements to start progressing and no doubt other projects, which we can expect to increase sharply as the credibility giving 40MW approaches. But all this gives potential for explosive upside, as against Kingaroy itself which offers enough to justify the risk.

I’m pleased to see HC offer a filter facility. The results seem very worthwhile.