Gas to Liquid
Commencement of Operations Started 28/12/2006
The strategy of GTL Resources plc is to produce liquids such as methanol and ethanol from stranded gas, corn and other feedstocks with quality counterparties. GTL manages all aspects of a project: finance, feedstock supply, production and marketing.

In line with its strategy of seeking to develop and exploit markets for alternative fuels, GTL has, since the beginning of 2001, concentrated primarily upon developing methanol projects, principally in Australia, and, more recently, ethanol project work. The Board has recognised the strategic benefits of acquiring a cash generative asset on a shorter time scale than the typical methanol construction time of three years. In furtherance of this strategy, on 6 September 2005 GTL Resources acquired a controlling interest in Illinois River Energy (IRE) to build an ethanol plant at Rochelle, Illinois, through its wholly owned subsidiary, GTL USA, which has been established for the purpose of investing in ethanol projects in the USA. GTL USA has invested in IRE by way of a subscription for units of IRE pursuant to the Unit Purchase Agreement.

This project has the advantage that the Plant is expected to produce revenues on a shorter time scale and at a significantly lower capital cost than the methanol plant in Australia.

The Company intends to further expand within the ethanol industry in the United States or other suitable markets by selective acquisition of low cost production facilities. The Company sees itself as a potential consolidator of ethanol plants in a particularly fragmented market.

FT Tip
GTL Resources, an Aim-listed company. It raised money to build an ethanol plant in the US. Raw materials costs have risen but the price of ethanol has gone through the roof. The earnings potential should be spectacular.

New Plant

Construction started at Rochelle, Illinois site in September and production from the 50 million gallon per annum ethanol plant is expected to commence in the fourth quarter of 2006. Following unusually mild weather in Illinois the project has progressed well and is on schedule and on budget. Whilst the Companys main efforts centre on the successful delivery of the US ethanol project at Rochelle, the potential expansion of that site to 100 million gallons is being investigated. In addition and consistent
with GTLs stated strategy for the expansion of its interests in the ethanol industry, other ethanol opportunities have also been identified and will be analysed. Pictures Of The Site Under Construction March 27, 2006 http://www.illinoisriverenergy.com/html/construction.html


Arden
http://gtlresources.com/documents/ArdenAnalystResearchNote.pdf
http://www.gtlresources.com/documents/ArdenAnalystResearchNote.pdf
BBC News Item On Ethanol
http://news.bbc.co.uk/nolavconsole/ukfs_news/hi/newsid_4940000/newsid_4948400/bb_wm_4948456.stm

Ethanol Priceshttp://ethanolmarket.aghost.net/
Ethanol as a Transportation Fuel
http://energy.ca.gov/afvs/vehicle_fact_sheets/ethanol.html

Annual report for 2006
http://www.gtlresources.com/documents/GTLAnnualReport2006_001.pdf
Pics from Ethanol Producer Magazine of GTL's plant.
http://ethanolproducer.com/plant-images.jsp?plant_id=302&image_id=59
Commencement of Operations Started 28/12/2006
http://www.gtlresources.com/
Economics of Ethanol
http://www.ces.purdue.edu/extmedia/ID/ID-339.pdf
2 July 2007 GTL Resources FY pretax loss narrows, plans 13 mln stg placing to fund expansion
http://moneyam.uk-wire.com/cgi-bin/articles/200707020705014067Z.html
GTL Web Site
http://www.gtlresources.com/

Flackwell Vialli

You may be right about the 1.80 to 2.20 range for a time yet, in the short term its hard to predict. I always have a stop loss and a price target on all my holdings, apart from GTL. I take the view with this one as a buy now and tuck away for the future.

I would hope to see impressive returns and much clearer picture after finals in August. I must admit I would be surprised if price hadn't moved up some time before finals.

Flackwell, Spit, good points by both of you, I think.

Nice to see Ethanol back up past $2, though, and apparently still climbing while corn stabilises. To be honest I think a lot of the profit prediction is right there in the figures already, but I have long been saying that the market seems to want proof, which, as you point out, will come with the financial results. Still, that's good for those of us who are prepared to stick our necks out and get in ahead of the crowd.

Those who really like a risk are welcome to join me on AXE :o)

If I re-run the figures I calculated in post #921 (modified by StarFrog's excellent input in #932), using the current ethanol price of $2.04 per gallon:


Assume ethanol price $2.04 per gallon: 2.04 x 2.8 (for gallons output per bushel of corn processed) = $5.71

Sutract cost of corn $3.50 per hedged bushel = $2.21 gross profit per bushel. (Ignoring the fact that the co may have to pay more for any unhedged corn it uses).

Work that back to profits per gallon of ethanol, i.e. divide by 2.8 and you get: 78.9 cents per gallon of ethanol.

0.789 x 50 million = $39.45 million gross profit (on turnover of $102 million).

I'd hate to hazard a guess at the running and admin costs; smaller company RVA seems to cost about $3.6 mil a year. Call it $6.5 for IRE?

Leaves $32.95 mil pre-tax. That's 16.4 mil, and about 11.93 mil after tax. Of which GTL owns an 85% share, which is 10.1 mil.

At SP 197.5p, you have a market cap of 45 mil, for a current PE of 4.5.

As usual, this is all just speculation. Don't shoot the messenger, etc.

EDIT: one day when I'm feeling enterprising I'll do the sums using a current cost of unhedged corn as well to make it really realistic, but it's 4:14 a.m. here and I've run out of brain-cells.

Soul Trader

Very interesting thread, coming to the end of my night shift so hardly any brain cells working now. So I had to re-read each sentence 3 time for the figures to make sense. But I agree for those who are willing to be hang on, the rewards will be substantial.

Regards

soul* .... and don't forget to turn the iron lung back on when you wake up .... we need your erudition!

Why the drop in Gtl?. Unfortunately hit all my stops now out.

Cynic - LOL! Nurse Jane has just hooked me up to my IV and propped me up on some nice fluffy pillows, so it looks as if I'm going to make it through another day. :o)

Alex, I'm sorry to hear you;ve been stopped out on this. Why indeed? Only 60k shares traded, which is nothing. Could it be that the MM is trying to force some sales in order to fill a big purchase order?

No idea, but am certain that there's nothing out there to justify the drop. this stock has a life of its own.

Spitfire - thanks!

It seems that every rise is accompanied by a fall twice as large.

nothing constructive to add 'cept>> it's grim isn't it !

This type of thing is rather characteristic of somebody with a very large holding "drip-feeding" his stock into the market. Eventually it will clear might take a few months though!!. Certainly is not characteristic of large buy-order, there price will continue to rise probably over a few days irrespective of quoted buys and sales.

Long term it really doesn't matter (unless you stop-loss out) as eventually value will come through.

hushpuppy
I agree, this looks like bargain basement to me with the plant up and running I dont think we will see these prices for long before we see a bounce.

Is somebody with a large holding really going to start off-loading it now? Of course, I'm not privy to others' investment strategies, but it seems to me that anyone with the resources to make a big investment should also be in a position to do the math and see that this is soon going to be writing up a decent profit.

Maybe someone has just decided they are too overweight; I don't know. Just keep waiting for those results :o)

This type of thing is amazingly typical of the general incompetence of fund managers. I really don't think most of them can do the maths, that's what analysts are for. Despite all sorts of advantages the majority of them manage to underperform the market with monotonous consistency. I wouldn't trust them with my son's piggy bank let alone my portfolio.

No electronic buys available past T10 on a share down 12.5p. Managed to buy in the market in the end but this is strange!

Hush - I feel that no one would be selling majority holdings at these prices, and if he/she 'sdrip feeding then why the huge fall? I would think that strategy intended to get similar prices, if not higher, for all shares sold. Otherwise it rather negates the point of drip feeding it in the 1st place!

Driver - How long have we been saying that?

Soul - Results are a long way off, i wouldnt start waiting and worrying just yet.

Wish I had brought in today at 1.90 instead of 1.97 yesterday. Agree with Hushpuppy a good buying price today.

Potts
All the way from my 300p down to 185p I even say it in my sleep.

when will we see some action on gtl

Potts
Lots of examples of this type of gross incompetence by fund managers can be seen. At 300p bearing in mind GTL's chequered past it may have well been overbought, now with everything being in place that 300p may represent a fair price at this time. I surmise that part of the drop was a correction, this has gone too far and the share is oversold. With a good set of results I have a price target of 400p which I feel is attainable.

Strange price movement today, fairly strong buying with people taking advantage of low prices, but price still lower. If this buying continues tomorrow, I'm sure the price will have to move up.

Hushpuppy - 4.00 sounds about right after finals in August, wouldn't be surprised to see 6.00 in 2008. All imho off course.