Garbage a respectable investment
Environmental consciousness has driven companies to find treasure in trash, writes James Dunn
ON the stock market, recycling is not just a noble aim of cleaning up mess and reducing pressure on resources: it is money. As the saying goes, where there’s muck, there’s brass’’. With prices of virtually all raw materials going through the roof, the economics and ethics of recycling have finally coincided. Not only do raw materials cost more, at the other end of industrial processes, waste products cost more to dispose of — and there are burgeoning environmental constraints on the disposal of waste.
For recyclers, the environmentally conscious times bring the perfect opportunity to make profits at both end of their businesses — charging to take away waste, and selling the recycled materials.
Recycling is considered an integral part of the emerging investment sector of cleantech’’, the term used to describe companies involved in alternative and renewable energy sources, recycled materials, energy efficiency, carbon emissions reduction and water purification and pollution remediation technology.
Jeffrey Castellas, chief executive officer of Clean Technology Australasia, says cleantech is the next big wave in technology. Cleantech is where biotech was 10 years ago,’’ he says. Worldwide efforts to address environmental problems such as global warming, air pollution, water security and increased energy use are on the rise, and cleantech, a new industry based on innovative clean technologies, has begun to capture the attention of the investment community.’’
What makes recycling such a compelling part of the cleantech argument is that on the back of the massive industrialisation occurring in the BRIC ( Brazil, Russia, India and China) nations and the emerging economies of the Persian Gulf, the world can no longer satisfy demand for paper and steel from virgin materials alone. Recycling has become an absolute necessity for industrial growth and stability.
These recyclers have joined Sims Group on the Australian Securities Exchange ( ASX):
CMA Corporation ( CMV, market value $ 211.4 million): Metals recycler CMA has integrated operations in the supply, processing and exporting of scrap metal as well as in resource sector plant deconstruction, industrial demolition, site clearance and remediation. It operates in Australia, New Zealand, Singapore, Malaysia and the US. Broker Intersuisse says the group’s expansion moves over the past year or so are now showing the benefits: the first- half result was a strong one, with revenues up more than 120 per cent and net profit after tax up 159 per cent to $ 7.4 million. The broker sees this trend as continuing, forecasting full- year earnings this year of $ 20.5 million ( up from $ 6.5 million in 2006- 07), increasing to $ 27 million in 2008- 09.
Transpacific Industries Group ( TPI, $ 2.3 billion) Transpacific is a leading provider of waste management and environmental services with operations across Australia and New Zealand. Transpacific collects, transports, processes, recycles and disposes of liquid, sludge and hazardous waste generated by the agriculture, manufacturing, construction, mining and government sectors. Wastes collected and treated include grease and cooking oil, used mineral oil, sewerage, stormwater, winery waste, hydrocarbon wastes, bulk liquids, ships’ bilge, oily waters, oily sludges and hazardous waste. The company collects solid waste and recovers and recycles organic and inorganic waste materials: in New Zealand it also captures landfill gas and converts it to electricity. In 2006- 07, Transpacific earned net profit of $ 103.4 million, on revenue of $ 1.29 billion. This financial year, broking firm Bell Potter is looking for net profit of $ 184.7 million on revenue of $ 2.29 billion, both up about 80 per cent.
Reclaim Industries Limited ( RCM, $ 7.2 million): Reclaim is a waste tyre recycling company that processes the recycled rubber into anti- slip surfacing, safety, traffic, architectural, horticultural and gardening rubber products. Reclaim has recycling facilities in Western Australia and South Australia, and manufacturing and distribution facilities in Victoria, Queensland, New South Wales, WA and SA. In 2006- 07, Reclaim reported a 10- fold jump in net profit to $ 226,000 on revenue of $ 15.2 million. But in the December 2007 half, the company slipped to a loss of $ 408,000, on revenue of $ 8.4 million.
HydroMet Corporation Limited ( HMC, $ 35 million): Metals recycler HydroMet has two main businesses, the processing of used lead- acid automotive batteries and the treatment of smelter wastes. The battery recycling plant at Unanderra in NSW processes onethird of the nation’s volume of used lead- acid batteries, recovering the lead, which is sold as shredded scrap metal, or used in zinc sulphate fertiliser. HydroMet also recovers and recycles the plastic and acid components of the batteries. The smelter waste treatment operation, at Newcastle in NSW, treats anode slimes from nickel and copper smelters, recovering for sale selenium ( used in agriculture and glass and pigment manufacture), tellurium ( used in high- tech optical applications such as night vision’ equipment) and precious metals.
HydroMet managing director Gregory Wrightson says his company has limited worldwide competition’’, as confirmed by its winning of a major selenium/ precious metals recovery project on behalf of Falconbridge Norway. He says there is no other recycling process available’’ to smelters such as Falconbridge. HydroMet has applied for council permission to build its own secondary lead smelter at Newcastle. In the December 2007 half- year, HydroMet reported a ninefold jump in net profit to $ 3.56 million, on revenue of $ 20.2 million.
Tox Free Solutions Limited ( TOX, $ 128.9 million). Tox Free operates proprietary thermal desorption technology at its facility in Kwinana, Western Australia. The company’s indirect thermal desorption technology is defined as a BDAT ( best demonstrated available technology), by the US Environmental Protection Agency, and has been applied successfully in a large number of operations including the treatment of contaminated soil, sludge, refinery sludge, pesticide- contaminated soil and material, pyrolisis ( decomposing by heating to high temperature in the absence of air) of rubber and plastics, and waste to energy. The technology has successfully processed used car tyres, turning them back into their original constituents, being carbon black and high- calorific fuel oil. The fuel oil is suitable for electricity or energy generation and the carbon black suitable for re- use in the manufacture of new tyres. For the December 2007 half- year, Tox Free earned net profit of $ 3.1 million, up 7 per cent, on revenue that doubled to $ 15.9 million.
Intec Limited ( INL, $ 40.3 million). Intec is building a plant at Hellyer in Tasmania to use its patented hydrometallurgical technology to extract zinc, lead and silver from electric arc furnace dust, a waste product from the manufacture of galvanised steel, and lead sulphide recovered from the Hellyer zinc concentrate project. Intec sells bulk zinc concentrate to smelter customers in China, and expects to make available a lead sulphide product as well. Intec owns a 20,500- tonne stockpile of electric arc furnace dust and a 460,000 tonne stockpile of former lead smelter residues at Zeehan, Tasmania. This historic stockpile has lain idle for decades, waiting for an appropriate technology to become available to recover economically the contained zinc, lead and minor metals. For the December 2007 half- year, Intec earned net profit of $ 1.2 million, on revenue of $ 14 million.
Anaeco Limited ( ANQ, $ 15 million). Anaeco, which listed in November 2007, has developed a recycling technology that recycles the organic component of municipal solid waste into agriculture- grade compost and bio- gas, and separates out items such as steel, plastic and gas for recycling by third parties. The company says the DiCOM technology is suitable for the cost- effective recycling of large- scale feedlot manures, piggery wastes, poultry wastes, and other
problematic agricultural residues.’’ Anaeco is not yet profitable.