opportunities for growth, site visit thoughts

This a repeat of a post on SS in answer to questions about where the opportunities lie, what the staff are like and pending acquisitions. This gleaned from site visits, attending the AGM and spending a lot of time with the management. Hope it's useful.

The plants are substatial enough to make serious money given the throughput and margins. Plus there's plenty of room for growth that will happen.

Staff appear to be very happy, committed and thankful for the new management. Brentt Robinett at Port Headland grew up there, loves the place, loves the warm weather (because it gives him a good excuse to drink beer), loves the fishing up there and he's a self described pyromaniac so he loves burning things in the kiln! He's got 11 other staff up there who work 4 days, 4 nights, 4 days off. They appear to have a good team that likes what they are doing. Brentt has a good number of shares and is focused on making good money for the company - he's very good about knowing which jobs he should or shouldn't take and how to get profitable jobs.

At Kwinana there's Ged Syles who was at TOX, went to TPI and was then recruited back to TOX (he's very happy that happened). I didn't get to talk to him but the other shareholders got a tour with him, perhaps they'll post some feedback? I had time with Neil Armstrong, the technician. Also met Neil Smith, the sales and marketing guy. Steve has an office there too. Basically the management team is a group of 4 mid 30 year olds who are very motivated by the extraordinary opportunity presented to them. THey like the nature of the work, and really appear that they want to make it happen. They've got shares and are concious of their interests aligning with the shareholders.

Great news that Ian Burton was made Chairman. I've done a background check, of sorts, on him and also got to spend 6 hours on the ground with him. He's not a spruik and is careful about managing the company's growth. I feel that they could grow faster than what they are planning but he was keen to point out that TOX had a near-death experience and they're concious of making good decisions, not fast ones. I felt very comforable with they way TOX is managed.

Ref: acquisitions. They were a bit coy about saying what they could do. They have identified at least 3 or 4 that they could do, but I think that they will focus on their theme of "dominate the West then penetrate the East" and so some of these acquisitions will come in the longer term.

Think about what they've got and what they haven't got. Care of Delvex they've got the trucks to pick up the liquid waste. They've got the treatment facilities. But they don't have the disposal facilities...they have to pay, what, $100 a tonne to dispose of treated and stablised solids. So, just guessing, perhaps they'll get some landfill?

Also they send the PCB and OCB waste to others to dispose of. Perhaps they'll pick up this capacity as well?

Queensland Cement operate the only other facility in Australia that's similar to Port Headland, but PH can release 3% chlorine to the atmosphere but QC can only do 1%. TPI have the only other facility comparable to Kwinana but TPI cannot do sludge like waste. So in the treatment game they are well covered. Perhaps, then, all they need to focus on is expanding capacity. We already know of the back end work at PH that will take 6 months to complete and they've got the front end into the TDU that could lift capacity there by 5x (!!).

From my site visit I can also see that they've got plenty of room at PH to put a second kiln in beside the first one. They've spoken of putting a co-gen plant in: cost: ~$1m, savings: $15k/month (180k/year) = 6 year payback (faster given the power they may put back into the grid) on a low risk project (this the worst payback for their expansion capabilities).

There's any number of easy things that they could do. e.g. (one example only) They could run waste heat into the evaporation ponds to speed up the treatment of contaminated water (the outside of the kiln is 400degC and that waste is not being utilised - this could also be run through a heat-exchanger into a turbine).

On another matter, they now have the license to send an unlimited amount of waste (of the appropriate type) to the sewer at Delvex. Practicalities mean that they can only do 80,000L/day. But still, that's plenty.

Now in Karratha they've a whole new site, located both on the rail line and road from Rio's Pilbra mines (the site was the place where they made the precast sleepers for Rio's railways). THey could build a whole new treatment site here. Not likely to be too toxic, but they could do things like treat the drilling mud from teh offshore oil drilling programs that is currently simply dumped at sea (!). One wonders if there's any opportunity to use the rail siding they must have there to get volumes from Rio, or from the port (perhaps they can ship directly to their facility via the Karatha port from east coast customers)? Anyway, that's some pipe dreaming!

Suffice to say that there's a tonne of things that they could do and are doing and there's every liklihood that something could be announced prior to Christmas. So don't be short of this stock in your portfolio!