AMU announced yesterday an update on its biodiesel prospect. It was promising stuff and probably what is exciting the market today - as well it should.
The announcement flagged that the biodiesel project (by AMU's subsidiary Australian Renewable Fuels) is undergoing due diligence by ANZ for the provision of debt financing. This has been noted before (ie in the report by Shaw's posted on AMU's web site) so is not new news. But the implications of a tick of approval from the ANZ are significant though. First up, I believe the debt financing referred to here is for all five plants AMU/ARF plan to establish in Australia (anyone else with info on this?). So a tick would bode very well for the future in this regard. Second, a tick would also be the trigger for a number of investors currntly waiting to tip in a few millions in equity, and that will further kick the biodiesel project along the road to reality.
The announcement also noted that discussions are taking place for off-take agreements with a major petroleum company (a good sign) and fleet operators (note, plural - also a good sign) into the developing Australian market and with European parties into the established EU markets (this too is a pretty exciting prospect).
It also flagged that the first biodiesel plant will be located in Adelaide and the second plant will follow in Picton WA. That sounds like a confident prediction that those plants will eventuate.
More and more the biodiesel project looks like it has moved from blue sky to reality.
The significance of biodiesel is that each plant is slated to produce 40 million litres of biodiesel (plus a few other saleable products - albeit minor in the scheme of things). The Shaw's report notes the margin on each litre will be in the vicinity of 20 to 25 cents. And AMU will have a bit over 50% of each plant.
Work the sums out for yourself - that is the equivalent of around $4 to $5 million accruing to AMU, FROM EACH PLANT. And to put that in perspective, total profit from AMU's oil and gas operations last financial year is foreshadowed to be A$2.7 million.
Any wonder the market is showing a bit of excitment with the stock. With a likely expansion of oil and gas production from FY2002-03's approximately 200,000 boe to at least 250,000 boe in FY2003-04 (a 25% increase) just on current production, prospects for more drilling success to add to that, and now the biodiesel project coming to fruition!
Looks like AMU is finally coming of age.
AMU Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
