Three week ago, Penrice Soda Holdings downgraded earnings and saw its shares fall more than 11% in a day and then a lot more as investors deserted the tiny company.
Yesterday the shares surfed 46% at one stage after the company revealed an agreement with GE Power & Water covering a new water treatment idea.
The company’s shares hit 20.5c, a rise of 6.5c, before they finished at 17c, a gain of 3c or a less exuberant 21% rise, compared to the initial reaction.
The catalyst was this announcement to the ASX announcing an agreement with GE Water to provide the coal seam gas (CSG) industry in Australia with a process to remove brine from its wastewater.
In doing so, the process produces saleable chemicals and wastewater that’s clean enough to be returned to the environment, Penrice said in the announcement.
Penrice and the water and process technologies business of GE Power & Water will build demonstration plants to commercialise technology developed by Penrice.
Drilling coal seam gas involves "fracking", or hydraulic fracturing, using an array of chemicals, which has raised concerns in the broader community about the potential for toxic rock to contaminate surrounding water supply.
Already there are growing concerns in Queensland and NSW over the process.
Penrice makes soda ash, which is used in glass and washing powder, and sodium bicarbonate, and says it would diversity its chemicals business by using the brine.
Penrice managing director Guy Roberts said the technology would mean treated CSG water would be clean enough to be returned to the environment, used for agriculture or as potable water.
Penrice said it had undertaken considerable research and development with CSG water over the past three years and has developed novel and innovative process technology to remove the associated brine and to make saleable chemicals from the brine. As part of the research and development project, Penrice has lodged a patent application over its technology.
"Penrice is confident that its technology provides a valuable opportunity to assist the CSG industry solve one of its major environmental challenges in dealing with its CSG water – by producing saleable chemicals as the water is cleaned," Mr Roberts said the statement.
Using water from several CSG projects, Penrice has conducted laboratory and small scale field trials, converting the dissolved brine in CSG water into saleable chemicals, namely sodium carbonate (soda ash), sodium bicarbonate and sodium chloride (common salt).
At commercial scale, Penrice’s process should be cost effective and has the environmental advantage of generating zero waste.
Penrice is confident that its technology provides a valuable opportunity to assist the CSG industry solve one of its major environmental challenges in dealing with its CSG water – by producing saleable chemicals as the water is cleaned.
"It is envisaged that the companies will join forces to create an attractive solution to one of the major issues confronting the CSG industry – how to successfully deal with the water that accompanies the gas extraction process."
The market reaction was a long way from the slide engineered by the May 16 profit downgrade.
In that Penrice Soda said it expects full year normalised earnings to be in the range $0.5 million to $1.5 million loss after tax.
"Guidance provided previously was that full year underlying earnings would be less than Penrice’s 2010 financial year result (a profit of $5.3 million), due to factors materially affecting earnings, including the Queensland floods’ impact on demand for soda ash and sodium bicarbonate, foreign exchange rates effect on margins, and uncertain timing and extent of recovery of a major insurance claim.
"Today’s guidance incorporates those factors and also a lower than expected demand for soda ash from two major customers in the current quarter which is not anticipated to extend into the new financial year.
"On a statutory basis, this full year earnings forecast represents an after tax loss in the range $3.5 million to $4.5 million. This excludes any further insurance claim recovery above the $0.4 million after tax ($0.5 million before tax) already received. Normalised earnings guidance assumes the insurable events reduced earnings by $3.5 million after tax.
"The company remains confident it will recover a substantial portion of this loss; however, these further insurance recoveries are now more likely to be realised in the 2012 financial year."
