where to from here?, page-4

Nemo,

It is a long time since I looked with any detail at MSC and green concrete. All that follows is historical and may not be relevant today - but I suspect that nothing much has changed.

As I indicated earlier I see the success or failure of MSC to be intrinsically tied to the economics of the kaolin business. Green concrete is just another (very large) market for kaolin.

There is no dispute that MSC has a huge high quality resource. MSC has been in a position for many years to supply kaolin to any consumer of kaolin. However it has not been able to deliver any significant sales. This tells you that it cannot compete on price (I also happened to mention MSC to a work college who told me that he had worked for the predecessor of MSC and that they were unable to compete on price).

Green concrete does not require such a high grade kaolin as (say) paper. The price of lower grades kaolin is obviously less that higher grade kaolin, and it is less likely that MSC can compete on price with kaolin destined for green concrete.

So MSC obviously has been searching for ways to complete, other than price, in the kaolin market place. Hence we have had a series of announcements from stuff to spray on plants, green tires and green concrete. However, none of these would seem have any IP owned by MSC and there is nothing to stop a business producing these products from buying from the cheapest source of kaolin.

I actually have faith that, in due course, green concrete will be an important product. A few years ago a google search would hardly yield anything other than academic papers. Now there are 71000 results. Kaolin based concrete has better properties than OPC based concrete, as well as the CO2 issue. On of the problems is that structural concrete requires certification, and it would seem that it is still a long way off. That is why we only see it used in items like pavers.

So Vic has been busily producing enticing releases hoping like hell that a market will appear. Long term investors, I imagine, have mostly grown cynical, and left. I don't regard Vic as a total spiv, but at the same time I'm sure he is fully aware at the time of announcements that they are worthless. And, he pays himself a very handsome wage.

There are only few questions that need be examined:

1. When will a substantially improved market arrive for kaolin?

2. Is MSC price competitive today?

3. How long can MSC keep going without any income?


To address your specific question:

Q. Why are management incapable of turning this technology into a success story?

A. Their kaolin is simply too expensive. They don't own the IP, so the bottom line is they are a supplier of the raw material.

The idea of supplying kaolin to a USA paver maker, one of the announcements some time ago, is laughable. The US to just too far away (shipping costs too high).

I don't believe that a change of management will change the competitiveness of MSC. I don't believe that any litigation would be useful. I lost 35% of a relatively modest $36k investment, but since then that money has returned 200% for me. If I had stayed with MSC I would now be facing a 95% loss, with real prospect of a 100% loss.

I don't have any inside knowledge, and I am probably somewhat out of date on MSC, but the total absence of sales in the higher priced kaolin market place tells me the chances of success are low.

Best of luck?