Energy & Resources: the power to grow your business

Energy and resources are part of our history and essential to our future. Many of the world’s great religions have festivals which involve both the sun is the source of energy and gold is a form of tribute.

Over the century’s wars have been funded by and fought over resources and energy.

At Projects RH we are fortunate that we have significant experience in both energy and resources; many of our clients have been attracted to us because of the skills we have shown in this sector, most of which are transferable.

Likewise; our geographic profile involves a story of nations with energy and resources, and the nations wanting them.

Tabatinga, Projects RH sister company, based in Singapore, has a focus on renewable energy across Southeast Asia and into India.

Our work includes solar projects in Vietnam and Sri Lanka. Being based in Singapore, Tabatinga has access to one of the world’s great energy and resources trading centres.

Its people work with professionals who seem to have energy and commodities running through their veins.

They understand nations and markets.

The energy and resources markets can be seen as domestic and international, with the two feeding off each other.

Some areas of the market are truly domestic.

Nearly all power that is generated is consumed domestically. In most commodity groups, however, more than 70% of what Australia produces is exported and generally as a raw material with no value added.

Whilst Australia is a significant producer of oil and gas, over 50% of our finished products in the retail oil industry (e.g.; petrol, diesel and avgas), are imported.

The Australian Energy Story:

Projects RH is based in Sydney but its principals have worked and studied in Brisbane, Sydney and Melbourne as well as abroad. 

Australia is blessed not only with significant energy and resources reserves but with people who have ingenuity in developing these naturally occurring assets.

Oil and gas have been exploited from the North West shelf to Bass Strait which separates Tasmania from the mainland; gold has been developed from Townsville to our Albany in Western Australia – as Australia’s national anthem says “Our land abounds in nature’s gifts”.

As in many things, Australia’s distance from alternative suppliers has led to the development of many assets in Australia and the development of technologies. 

Given Australia is a price-taker in most commodities coupled with its distance to markets, it has had to learn to be efficient as a producer.

During the events of the Covid-19 pandemic Australia’s mining industry and its energy sector have proven to be reliable to the world.

The sector´s ability to sustain operations has been possible because of the smarts that are being developed in our labour-saving technologies which enable remote operations of large production in both the energy and resources units sectors and support logistics.

In many areas of energy and resources Australia can support ongoing resource recovery and power generation operations with limited human intervention, and where human intervention is essential, it is consistent with social distancing requirements.

Today Australia is the world’s largest exporter of LNG and seaborne coal (combine coking and thermal coal).

Australia is also the world’s largest exporter of iron ore, and a significant producer of gold, lithium, diamonds and base metals.

Australia not only exports commodities but the skills to mine and beneficiate these. Australians have developed well-known standards for measuring and developing resources. Australians are active in mining and energy across the world.

I have worked not only in Australia on coal and energy projects but lived in Indonesia and worked on projects in South Africa and Venezuela.

Today Australian expertise in coal mining, for example, is being used in Colombia, Mongolia, United Kingdom and India.

Projects RH

Being based in Sydney, Projects RH sees many projects across Australia and increasingly across the world.

We are currently working with parties seeking to commercialise a solar energy project in Queensland and waste plastics to energy in Victoria.

We are also working with clients on a new coal opportunity in New South Wales.

In addition, we are working with a party seeking to build a regasification plant for LNG in Buenaventura, Colombia, because the expertise for doing such plans exists in Australia and Australian companies have made significant investments into Colombian infrastructure projects over the last three years.

Tabatinga

Today Tabatinga focuses on renewable energy across Southeast Asia.

Invariably, it becomes involved in other energy projects because of its location and its heritage.

Tabatinga has been involved in solar projects in Vietnam and Sri Lanka, coal projects in Indonesia and Colombia, small-scale hydro projects in Indonesia and Colombia.

In India it is currently involved with parties developing new coal-fired power stations and developing the specifications for the domestic contract mining of coal in India with a specific mandate to include an Australian company as the leader of the consortium.

In Africa and South America, it has worked with party seeking capital for base and precious metal projects with an export focus.

How do we help?

Parties who approach Projects RH or Tabatinga believing we will fund their project are sadly mistaken.

Our role is to understand their minerals or energy project, assemble the information they provide us with into an industry acceptable format and provide them with warm introductions to people who can work with them to fund the project.

What we see is a lot of good projects from all around the world, but especially from Australia, Colombia, Sri Lanka, India and Indonesia.

We believe clients return, and their friends come to us, because we are open and transparent and realistic in what we can say and do.

We recognise that investors will come into projects at different stages of their development.

For example, if we look at the typical mining project, it goes through series of stages of development:

• the company seeks money for exploration at say, 1c/share
• it then finds something it wishes to evaluate and issues more shares at say 5cents each, with much of this money being spent on drilling.
• Being of the view that is now time to formalise their studies they raise additional money to prepare a JORC (Joint Ore Reserve Committee) compliant report and a prefeasibility report.
• They will generally then raise money to undertake a bankable feasibility study at say $0.20 a share and often at the same time undertake an IPO (initial public offer).
• Having completed the bankable feasibility study and having all the approvals required they may raise further money at $0.50 a share or enter into a joint venture with a significant capital investor.

Our role at each step in the journey is to assist them with telling and explaining their story, and to provide them with warm introductions to parties who can themselves invest or institutions they represent who can invest.

The development story for a project is not dissimilar in the energy or oil sectors whether it be a power station an oil refinery or infrastructure.

What is important to understand is, that different investors will become involved different steps. Each investor will have their own risk profile, and more importantly, their own internal skills to analyse the available information and have a feel about the market.

Markets

“Boom or bust” it is a statement is often heard with respect to the development of energy and resources projects. Most resources projects, including domestic power stations, are price takers.

New energy and resources projects are based on the perception that the forward price will deliver an attractive return to the investor.

Invariably, in a global market, this will lead to a number of projects being developed at the same time.

In effect, the price will never be as predicted and is likely to fall once a new project is introduced and continue to rise until the next new project commences production.

For project developers, when to commence building a project is a difficult decision.

Most significant energy or resources projects take over three years to build and a number of years before that in design and approvals.

At the time of writing there are three new large LNG projects which have been commissioned in the last 12 months in Australia. They have seen the spot price and LNG for from USD 10 per million Btu’s to be less than USD four dollars per million Btu’s. No doubt over time this price will recover for if it does not no new capacity will be built.

We  work with our clients so that they are ahead of the curve and are ready to proceed when an opportunity appears. Investors are smart, they are aware of the boom and bust cycle and know when to invest.

Australians do invest in minerals projects around the world particularly if they are listed on the ASX (Australian Stock Exchange).

We also work with parties who wish their projects listed in London or Toronto.

Investors in these three markets are the most global in their thinking and willing to invest in projects outside their own jurisdiction.

We believe this is because of the understanding that exists with respect to energy and resources projects within these financial centres.

In Sydney, the home of the ASX, we see a lot of companies from offshore seeking to list good energy and resources projects.

We believe it is in Australians DNA to look at energy resources projects based on their fundamentals then look at where they are located in the world.

Not only do we see good projects we often receive calls from investors wanting to invest, lend or farm into good opportunities not only in Australia but internationally.

These investors have come to us because they do understand we will provide them with the information they require in the appropriate format.

As in all business people in the energy and resources sectors continue to want to work with people they know, people of good reputation.

For promoters, advisers and investors is important to be rigorously honest.

Private infrastructure:

Today most resources and energy projects are in the hands of the private sector and effectively built as infrastructure projects.

Most mines are seen to have at least a 20-year project life and most energy projects are seen to have a life in excess of 30 years.

Today there is little government incentive for most resources and energy projects except on of some renewables in solar and wind.

Social and Local Challenges

In the development of energy and resources projects you generally need government approvals.

As part of getting the government approvals you generally need to negotiate with landowners, local people and the local community.

There is generally a requirement for compensation and the need to get an environmental approval demonstrating that the processes you will use will not damage the environment and that what you do will ensure that the land is returned to the community at the end of the project as usable.

In many countries there will be objections as people do not want their way of life changed and in others, they welcome the change but want jobs, community benefits and taxes paid.

What normally needs to be negotiated is a social contract with the local specialist being engaged for this purpose.

What we have found over the last 15 years or so is that in most countries’ precedents have been set as well as expectations for what a new energy or resources project will be prepared to pay; in some cases, it is even legislated for!

It is important this be negotiated upfront and parties agree.

Our Strategic Partners

Projects RH and Tabatinga each have strategic partners in the countries in which they operate and is generally those strategic partners who bring the projects to our attention.

What is important is that we can connect globally with strategic partners who can provide expertise and experience in the delivery of projects whether they be gold mines in Peru or solar projects in South East Queensland – we are connected.

Conclusion

Resources and energy can be large scale and big-money but it can also be specialised, boutique and highly profitable. We work with companies across the sector, timing is everything but like buying a house you do eventually have to make the decision to go forward.

Projects will become delayed as you need to deal with the approval process.

Timing is important, but understanding the resource and the local environment is equally important.

Investors know they are in this for the long haul so they expect that the planning approval process has been undertaken with rigour and that the investment opportunity is well explained.

The analysts which review projects in the energy and resources sector are specialists and expect to see quality proposals.

At Projects RH and at Tabatinga we work with our clients to show their projects with the rigour the analysts require.

Paul Raftery, CEO, Projects RH