Short Term Trading Week Starting: 5 November 2018, page-19

It’sworth taking a decent look at HZR here as a mid term trade.

 

They have avery good chance of getting a solid pump (similar to EDE) over the next 2months. They will want to get the options well over the line (30c/Dec18) to fill thecoffers. With a few tech runners recently doing 100% plus on material news(EDE, A3D, ECT) the scene is fairly well set so my thinking is that HZR with afew known news items approaching could run very well. Being the only co with a foot in each the hydrogen and graphite spaces that are getting some good exposure also helps.

 

Over thenext month or so MIN will be commissioning their pilot plant at Kwinana, MINhave also given a target of mid 2019 for their first commercial scale plant.From what I understand MIN will aggressively expand once commercial with a modular design..

 

The pilotplant location is 1km from BOC’s industrial gas plant. BOC have been workingwith HZR for ~2 years and have no hydrogen supply in Kwinana but do have both ademand and a purification plant (formerly supplied a fuel cell bus fleet inPerth), there are also 2-3 other hydrogen consumers in the area. With this in mind the chance of anofftake on the hydrogen with a major petrochem/gas co seems likely.

 

The big onewhich I think can send it on a blue sky run is the release of the in progressFEED and concept studies. This will allow them to provide costings to marketfor building and operating a plant. From my understanding of the process andeconomics it is likely to prove that they can produce product streams wortharound $700-800/t from methane which costs around $300/t. To put this incontext methanol is produced from methane and works on a $50-$100 value shift.In terms of process complexity and CAPEX the processes are similar so if theycan value add even $200 value shift ($500/t product streams) then it’s aprocess which stacks up better than methanol or fertilizer.

 

The marketwill likely attribute the high end product stream values ($2k plus) due to the MIN target of $6k/t but evenwith floor sweepings grade it should look fairly good. With the current existinghydrogen market being around $150b and the graphite market $15b a process whichstacks up (on paper at least) should find it easy enough to catch the marketsimagination for a blue sky type run.