As he squares off against the New South Wales Independent Commission Against Corruption, 81-year-old Travers Duncan — known affectionately as “Mr Coal” — has another problem.
The company Duncan chairs, White Energy, is still to deliver on the promises it made back in 2006, when it was bought by Amerod Resources in a reverse takeover to commercialise its so-called “binderless coal briquetting”(BCB) technology.
A Crikey investigation finds the BCB coal upgrading technology has soaked up hundreds of millions of public and private funds over almost 20 years, with little tangible result. It raises questions about the role of scientists in the CSIRO’s energy division, helping to promote a range of dubious coal upgrade technologies.
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Shares in White plummeted on November 9, 2011, when it announced its Indonesian partner, Bayan, had pulled out of a joint venture, PT Kaltim Supacoal, to build a briquetting plant at Tabang in the remote Indonesian province of East Kalimantan, when the plant was said to be over 95% complete. Roughly $200 million in shareholder value went up in smoke that day, as the shares plunged from over $1.50 to below 50c. White was the worst-performing company in the ASX200 that year, and was removed from the index in late 2012. Its shares have never recovered, trading now at 21c.
Since 2011, White’s cash balance has fallen from $184 million to $89 million, as Duncan and chief executive Brian Flannery have continued to plow money into the BCB technology, while diversifying into South Australia, South Africa and America.
At last Friday’s AGM in Sydney, frustrated shareholder Mark Zions from Peak Finn challenged the company over its cash burn and perseverance with BCB. He made similar comments at the AGM a year ago. “They seem hell-bent on making sure this technology works no matter what,” Zions told Crikey this week.
Despite the setback at Tabang, Flannery is unrepentant. The BCB technology — being trialled at a plant near Cessnock in the NSW Hunter Valley, originally built with the proceeds of a $4.3 million Commonwealth grant announced by then (and now) Industry Minister Ian Macfarlane in 2007 — is on the verge of a breakthrough.
“Technology generally is tough,” Flannery said in an interview last week. “I think we’re almost there.”
The BCB technology turns finely crushed and dried coal into so-called briquettes, about the size of backyard barbecue coals, and was originally intended for use in power generation. With thermal coal prices sliding, Flannery says BCB is now being considered by various large South African companies, which have vast stores of discarded “coal fines” that might be suitable for briquetting, and will also be used to add value to the coal from the loss-making Mountainside Coal mine in Kentucky, which was bought for some $20 million earlier this year. White is planning to build a new $40 million BCB plant in Kentucky and is hoping to sell the briquettes into niche markets.
BCB grew out of earlier, related CSIRO-sponsored research by a White-affiliated company into “ultra clean coal” (UCC), which was ground down to below 0.5mm, suspended in coal water slurry and injected into large diesel engines for use as a transport fuel or in power stations. The UCC technology was owned by Felix Resources which was bought by China’s Yancoal Ltd in 2009 for $3.5 billion, vaulting both Duncan and Flannery onto the Rich List. Duncan is ranked 68th on the list with a personal fortune estimated by BRW at $680 million.
Yancoal last year suspended trials of the UCC technology at the Cessnock site, on the same block of land and in the same large shed as White’s briquetting plant.
White is suing Bayan over the failure of the Tabang project and has been hit with a counterclaim. Hearings are expected to be held in the Singapore High Court next year. At the Sydney AGM Flannery declined to put a value on the claim, but court documents show it is at least $US138 million.
Duncan is facing possible criminal charges after ICAC found he had engaged in corrupt conduct during the aborted half-billion-dollar sale to White Energy of Cascade Coal, a company of which he was a director and part-owner, by failing to disclose the involvement of the family of former NSW Labor minister Eddie Obeid. ICAC recommended Duncan be prosecuted for obtaining financial advantage by deception, a criminal offence. Duncan, who says the findings are “without any factual foundation”, has begun proceedings in the Supreme Court seeking a judicial review of the ICAC findings. His challenge is likely to be heard mid-next year.
Duncan’s re-election to the board of White was opposed last week by the Australian Shareholders Association, on the grounds both of his age and tenure, and the adverse ICAC findings. Duncan was easily re-elected despite a 9% protest vote.
*Do you know more? Email Paddy Manning — anonymity is guaranteed.