Picking up on Highwayman’s earlier comment re Ergo it got me...

Picking up on Highwayman’s earlier comment re Ergo it got me thinking about rights to the technology and specifically its application in Australia. The latest Ergo agreement was announced in November 08, high level extraction below:

“The General Licence Agreement (GLA) provides Cougar with access to Ergo Exergy’s eUCG technology and personnel to develop UCG projects on a world wide basis.

The GLA will run for a period of 10 years, with provision for extensions, with Ergo Exergy providing support for the economic life of any projects that are identified as commercially and technically feasible.”

Interestingly it is not an exclusive right within Australia, however it does have an valuable added benefit of allowing IP to be shared with other Ergo advisory UCG projects around the world.

The non exclusive part is not concerning me, as the close relationship Dr Len has with Ergo is well known, but is does raise an interesting point around other players in the industry. Currently there are three key players in Australia, being LNC, CNX and CXY, with a number of up and comers already promoting their wares (eg LBY, MLM).

At present I firmly believe what’s good for the industry is good for CXY, and I’m especially pleased with CNX’s latest run to 80cents. This however will change in the future, when new entrants (especially miners sitting on useless coal deposits) see opportunity. The first and logical response is who cares, with the amount of coal in the ground being abundant for all to profit. The next level of thinking however takes you to finite shareholder and investor $$, and this will be the battle ground. I for one would prefer to compete only with LNC and CNX for capitial / SP support, as these finite resources shared more broadly means slower progress in SP value.

The mind then turns to barriers to entry, with technology, capitial and Government Regulation (production standards, environmental impact etc) all being key. To my knowledge it is only LNC, CNX and CXY that have the technology to undertake a full UCG project, with CXY (via Ergo) the only proven. So what then is the best business model going forward for these companies? Retain the IP and partner only on a project by project basis when a 3rd party has access to a juicy load of suitable coal? Makes sense, and it looks like CNX has done exactly that with LBY, who for interest has rocketed from 3cents in May to 25cents yesterday on the back of the agreement. Such a rise would be nice for CXY also, and whilst I’m absolutely confident it will happen, I hope the investor and shareholder focus remains on the three pioneers and is not shared before the industry properly establishes itself.

Nothing more than future musings, I believe in CXY and am in for the long run, just ready for the long awaiting SP appreciation and want Cougar to be at the front of the queue.