First half report was awful.. not my first choice of words.. BUT...

First half report was awful.. not my first choice of words.. BUT pretty much all known to the market.

Reasons why I’m back in and looking to further that on any trend break (chart actually for what it is, looks to have bottomed)

ARW appeared to have indicated they had reached 30 days of continuous production in their announcement last week.. then clarified that this week suggesting they were close.

This will see receipt of $5.4m government grant.

Local ops appear to be going in the right direction with a hard nosed focus on feedstock cost reduction : currently running a high tallow blend feedstock blended with expensive canola oil. In addition the tallow is being refined off site at considerable expense so as to avoid contamination issues of last oct-dec.

ARW may install more tallow treatment facilities so as to allow on site treatment and reduction/elimination of use of canola. Hence reducing costs substantially. (10-20%?) (Using fed govt grant for capex.???)

Has been suggestions from one broker that the months of February and March may be cash neutral months while surplus will accrue from April. Hence would appear costs focus working. (proof in the pudding tho!)

Hopefully renewed focus on off take contracts may see something from discussions ongoing with oil majors/distributors etc. This will reduce inventory & increase throughput.

Expect this to ramp up ahead of a green election this year where some possibility rebate fiasco will be resolved in ARW’s favour.

At current prices trading close to replacement value of its two plants.. no value for technology rights, expansion plans and intellectual property etc

Longer term substantial growth from the group’s push into the US and further Australian/NZ plants

In the NAFTA region, the Energea technology and rights provide access to surplus feed stock –Tallow - not sought by other industry participants. Plant size up to 275mlpa. The Best bit: no additional cost to ARW OZ. (US have own MD etc now so process reined in and controlled!)

So while other market participants fight over significantly higher cost corn/crop feedstock’s or palm oil (which has also appreciated and may be banned by the EU in an attempt to stop Asian de-forestation )ARW/ARW US own the technology to tallow processing which is still considered a waste by-product due to mad cows disease etc.

Estimates of margin advantage over crop feedstock round 20c/l rising to 40c/l on completion of local cost rein-in. Current break even well below 60$ oil reducing to 35$ once full local ramp up.

Finally oil price 62$..well above low recent $49.
All up technically and fundamentally best picture for quite some time. As always proof only in the pudding but.. a punt at 40c.. for a mid term trade to me ok.

So while recent run to 70 was probably too early.. more confident this time round... so wont be sitting this one out.

My opinion only.. repeat... My opinion only. DYOR.