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MARKET ASSESSMENT FOR NEW COAL TECHNOLOGY

Client’s Challenge

An independent coal technology company was looking to secure financing to establish and marketing its unpatented coal fines binder technology in an African country. The company’s technology was intended to be used in industrial-sized coal briquetting plants and entailed a standardized system for briquetting fines sourced from arisings or slurry ponds. As the feasibility of the project remained unknown and no insights were available for market potential, potential investors remained hesitant to provide funding due to the technology being relatively unproven and formally untested.

Our solution

Our client engaged us to serve as the lead consultant to offer a multi-pronged solution. From market analysis, support with implementing a project execution plan, operational support with development of the first formal pilot plan and securing financing for the first scaled industrial plant, Contax Partners was engaged to offer an end-to-end solution.

At the start of engagement, we immediately leveraged our in-house knowledge and empowered our client with analysis and outlook on the regional coal industry. This included a comprehensive market sizing of the African mining industry, highlighting world-wide demand potential for coal fines binding, shortlisting possible clients, illustrating key geographic areas and pinpointing overall potential. Based on the results of this, our project team conducted a preliminary feasibility study to evaluate the applicability of the technology. Our joint operations team then undertook formal testing to study the potency of the binder under strict conditions.

Upon having positive initial results, a formal holding company structure was incorporated on behalf of the client and a design & utility patent was filed to secure the financial interests of all parties. Next, Contax Partners conducted a financial modelling and risk assessment exercise, accounting for (1) single investor model, (2) shared ‘tolling’ model with established mining partner and (3) entering into a joint venture with an existing mining partner on a pure profit-sharing basis. We also accounted for various assumptions in the model, such as (1) estimating cost factors when scaling up to multiple plants and/or mines; (2) adjusting price factors for increased output and tolling prices when profit-sharing with investor (3) forecasting impact of staggered start-up of multiple plants on cash flows and resulting impact on IRR & NPV, (4) gauging terminal values over a 15 year period; (5) benchmarking discount rates for the country and all applicable VAT tax rates; (6) forecasting cash flows in lieu of bank loans and (7) benchmarking exit multiples and strategy.

Based on the above exercise, Contax Partners management identified sources of funding to meet capital financing requirements of the proposed pilot and industrial plants. We aggressively lobbied within our network of high net worth individuals, private equity firms, mining companies and financial institutions to assist our client secure funding.

Impact on client’s business

Following a preliminary round of equity funding, the client secured its target funding for the pilot plant and the first pilot plant successfully produced pellets and briquettes of bound coal fines. After two additional rigorous rounds of formal testing, the technology was considered a trial success, allowing for the client to move onto planning for a full-scale 10,000 ton industrial plant.

At the present time, the client is on the verge of securing growth financing and finalizing Black Economic Empowerment quotas for full scale operations. While large-scale mining operations presently remain a core focus, the ability to transplant the technology to smaller plants across all coal mines still remains limitless and potentially very lucrative.

 

LET US HELP YOU SUCCEED IN THE ENERGY MARKET!

 

Contax Partners assists project owners, contractors and suppliers to maximize opportunities associated with these projects, guide them on the underlying risks related to execution and the effects of increasing project workload. 

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Since our establishment in 1985, Contax Partners has been the advisor of choice for companies operating within the constantly evolving Middle East and Africa energy sector. Having operated in the energy market for over 30 years, we have a track record of empowering our clients to win business. Contax Partners is well placed to understand the challenges, and what impact these can have on your growth plans for the Middle East and Africa. 

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