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/

More likely they raised the price to draw in a few punters to sell on the stock they took in ealier in the day. This could well drop again tomorrow.

driver ... a philosophical Q... if you bought enough to strat with, is it wise to buy more just because sp is lower?

cynic
Yes, I spend most of my time averaging down on most of my shares that go tits up hopefully when it hits the bottom and not on the way down.

gulp! ..... can't believe i am reading that ..... just because sp falls does not de facto make it a good buy .... there may be reasons to keep holding, but just to add to average down cannot have financial logic

just topped up this morning, only 250 worth mind, anyone dare to join me... lol

cynic
There you go cynic, ghjones2 following my strategy. Obviously I dont average down if the share is a lame duck those I sell but that is not the case with GTL or GOO and SER.

SER too small cap for me, so don't really follow it ..... not as much fun as SEO!!

Hey Cynic don't forget Driver is trying to average down from 3 on GTL.
I,ve got my average down to 2.15p now but bit top heavy whilst waiting with bitten fingers.

each to his own .... have foolishly allowed myself to do similar in the past, but have now (almost) cured myself of the habit ..... occasionally buy less than my norm on the basis that i may top up later, sometimes at a lower price, sometimes higher

Serious tree shake 7.5p drop in one go on only 8,000 sales?

sickening isn't it!.... well fed up with this one now...I bought in at 2.38p, taken in by all the "hype" we're being taken for ride here ! and being shafted at the same time !

Wait for figures guys, good things come to those that wait, i am fairly confident it will recover this afternoon.

Come to think of it, this downward spiral began when the consolidation took place, we were at 230 before, the day it went effective we had an instant drop to 210 then 200, then its slowly dropped ever since.

Personally i think this is partly due to the nominal value change. When it went to 1 shares i think there was anticipation that it would attract large investors and some big timers, currently over the course of a day you rarely see a trade over 5,000. Maybe the consolidation could be classed as a bit of an let-down???

when do the figures come out ?

no one really knows to be honest, i think some preliminary figures should come out soon updating us on how its began, and of course Merrill Lynch has become interested in us recently.

Added to the fact that there has been no RNS announcement for over two weeks (technically means nothing) but one would hope that one would be due shortly.

I will remain in long term mainly based on the pe basis of where the sp should be but at this stage am mystified.

If house broker Morgan Stanley is preparing a report on this co then that ought to change the outlook considerably. They have enough contacts and clout to allow for the generation of significant interest.

IMHO of course.

Just in from Peter Middleton: -
I don't understand where the lack of confidence arises. 18 months ago I said we would build an ethanol plant in USA. We have, and we did so on budget and on time. We are earning the first revenues in the history of the company. Through the deployment of options and futures, we have locked in 95% of the corn we will need for 2007 at well below the present market price. We have a robust risk management system in place. So, we now have a business and it is being well managed.

Shares in the ethanol sector are under pressure on both sides of the Atlantic because the markets question the ability of ethanol companies to make profits at present corn prices. I cant change their opinion but have informed them of our corn buying policy. I have to hope that the market will recognise that GTL is now on a sound financial footing. You probably know that our retail investors are selling GTL stock, not the institutions. The numbers are small for example the price fell by 4% today on a trade of only 430 shares.

With regard to Morgan Stanley, they have set Easter as the furthest date for publishing research. How much sooner than that it might appear, I don't know but they have got our message loud and clear that, the sooner the better.

Again, all sounds good, but why the drop?

From other side:-
David Hoppenwasser:
Hello. This is David Hoppenwasser, senior analyst with the Wall Street Reporter. Today our company in focus is GTL Resources Plc. GTL Resources trades among the London Stock Exchange AIM market with ticker symbol GTL. Today we are very pleased to have with us Mr Peter Middleton, Chairman of GTL. Welcome Peter.
Peter Middleton:
Thank you. Welcome.
David Hoppenwasser:
Peter, maybe you could start off by discussing an overview of GTL and which markets you are involved in.
Peter Middleton:
Yes sure. After the company explored other possibilities, we decided at the beginning of 2005 that our focus would be on ethanol and producing ethanol in the mid-west of the United States. So in the first few months of 2005, we identified a group of investors who wanted to build an ethanol plant at Rochelle in Illinois and were looking for a partner to help them to raise the finance for that and thats where GTL came in. We decided that the best structure for this was to raise the debt in agricultural banks in the mid-west and to raise the equity capital in London and thats what we did. The principle lender is CoBank - its their office in Omaha that we have dealt with. And then in July 2005 we did a road show in the city of London and we raised the equity capital. The construction of the plant began in early September 2005. The plant began operations on 27 December 2006 and the plant is working fantastically well and the company now has a stream of revenues for the first time in its history.
David Hoppenwasser:
Congratulations. So maybe you can elaborate on that a little more; exactly what the capacity is and who your customers for ethanol are?
Peter Middleton:
The plant is located in Rochelle Illinois, some 70 miles west of Chicago. The production capacity is 50 million gallons of ethanol a year, thats the name plate capacity. We have a marketing arrangement with a company called Provista and they sound out potential buyers for batches of ethanol that we produce. Obviously the key number for us is the margin of ethanol over corn. We have developed a good risk management system and if the price is within the framework and is acceptable to us then we tell Provista to go ahead and do the deal but its a multiplicity of customers that buy our ethanol.
David Hoppenwasser:
Right now there are a lot of trends. Maybe you can identify some of those that are affecting the ethanol business.
Peter Middleton:
I think there has been quite a change since let us say July/August last year. At that point, if you approached one of the three or four main constructors to say please can you build me an ethanol plant? they would say come back to me in 2009 and Ill talk to you. But since then of course the price of corn has escalated rapidly. The price of ethanol is actually holding up well but this rise in the price of corn has led a number of people who had planned to build ethanol plants to think again. So, in fact, a number of the constructors that we have spoken to, now do have gaps in their schedules even for 2007. The consequence of that is that I believe that some of the forecasts for Ethanol production at the end of 2007 and more particularly for production at the end of 2008 will now prove to be optimistic. I think there will be significantly fewer ethanol plants built to begin operations by middle to end of 2008. Most of them now are 100 million gallons and most constructors will tell you that it will take them 21 months to build. So any plant that is not being built now will not be in production much before the end of 2008. The other thing that has happened is that driven really by the price of specialist steel, which in turn is driven by the price of Nickel, construction costs for ethanol plants have risen quite sharply over the past 6-8 months. So what you are seeing is as I have tried to indicate, is actually a slow down in the building program for ethanol plants. Our view of this is that there are projects that we are seeking to pursue. We want to become a significant player in ethanol in the United States, but we will not proceed with any new projects unless we believe that the economics are sound. The one step we will take, and we have made this public already, is that we intend to double the capacity of our existing plant and we would expect that construction on that would begin around the middle of 2007.
David Hoppenwasser:
So actually this is good for you having this one plant up and running at this point with other people dropping by the wayside.
Peter Middleton:
I think that we were lucky. I think that if we had just reached the point where we had found a site and we were starting now to try to build an ethanol plant for the first time, I think we would find it very difficult. I think that the price of corn is making some of the banks more cautious about the amount of exposure that they want to have to the ethanol industry and the debt that they would be prepared to offer, both by volume of debt and the terms accompanying it. We were lucky to the extent that we got in at a time when a company like ours entering the industry for the first time actually was able to do so. In theory, we are interested in becoming a more significant player but frankly at the moment the economics are not very attractive.
David Hoppenwasser:
Would that mean if the economic situation changes and it becomes attractive, which areas would you like to be opening additional plants in?
Peter Middleton:
We see the theatre where we would operate as the mid-west broadly defined because that is where the corn is. The big plus for our site is that it is really a very very good location. We have the option, as we have been doing, of trucking ethanol to Chicago and we can send it by rail to New York. There is an abundance of corn in the area and that means that when you are looking at the Chicago Board of Trade price there is also what they call a basis or local price which is underneath that and we get a good benefit from the local price. And the other thing that we have done is that we have locked in 95% of our corn requirements for 2007 at well below the present market price.
David Hoppenwasser:
I was going to ask you about that, how its still possible with the increase in corn price to still be profitable but I guess that answers that.
Peter Middleton:
We have good partners in Cargill; they supply the corn to our plant and we chat to them and other people about it. There is a feeling that the price of corn will continue to rise in the first half of this year and then there is an expectation that it will begin to drop off. It always goes down a bit at harvest time but the indications are, and I cant deliver any proof to you but what everybody is saying is that many, many more hectares, new hectares will be devoted to corn at the planting season this year than ever before.
David Hoppenwasser:
I would like to change gears a little bit and maybe you could discuss a little bit about the Board and Senior Management and whats driving the company.
Peter Middleton:
We are a very small company. We have a total of 9 employees. We have four senior executives including myself. We have Mike Brennan who is the Finance Director of the company, who came from the petrochemical industry who joined us in the beginning of April 2005. He is very well respected, very talented and very good. Mike, as a good finance director is the conscience of the company. Some of us might be tempted to think that, well, maybe we could do a project, but we know the price looks a bit steep.it is Mike who argues that no, we cant, the economics are not right. We have Daniel de Lange, ex JP Morgan Chase who lives in Hong Kong. Daniel arranged the debt for the building of the ethanol plant and will be central to the discussions on the debt financing for the expansion of that plant. And then in the summer last year we decided that we needed a very good Chief Executive for our American subsidiary to be based in America. We reached an agreement with Richard Ruebe and he is our Chief Executive of GTL USA, which is the subsidiary we have that actually holds the 85% of the shares in Illinois River Energy, which is the company that runs our plant.
I am very lucky, I have got some very good people working with me and we have 5 other people who support us well. I have a very good group of three Non-Executive Directors: Julia Henderson who was a broker in the city of London and is now an independent consultant for a number of brokers and other houses. We have Michael Nobbs, ex City Group. He is resident in California, an expert in the property market and property financing and Graham Wickham who is based in London who is a retired broker who knows the city of London market extremely well. The other thing that we have got is very supportive shareholders. Some of our shareholders have been supporting this company for a number of years and January 2007 is the first revenue that they have ever seen the company earn. We are very conscious that we have had terrific support from the shareholder community both institutional and individual retail investors and I am now pleased that we are going to be able to repay the faith that they have had in the company for a long time.
David Hoppenwasser:
Looking forward, maybe you could sum up. What would you say are the best reasons for someone investing in GTL for the long-term.
Peter Middleton:
I am precluded by the rules of the London Stock Exchange from ever recommending to someone that they should buy GTL shares. What I would say is that I believe from the evidence that is available to everybody not least the recent State of Union speech, that
Ethanol in the United States has become not just a natural resources renewable energy phenomenon, though it will always be that. I think it has now been given political and macro economic connotations because it seems both of the parties, democrats and republicans believe that its in Americas interest to lessen their dependence on oil first of all and imported oil secondly. One of the ways of doing that of course is to use the fact that you can blend 10% ethanol with gasoline and any car can run on it, but increasingly we are beginning to see a serious move towards what is called E85 where you have 85% ethanol blended with 15% gasoline. Listening to your political leaders, I believe that ethanol which until say 3 years ago was always a bit of a side show in the world of energy, I think it has come into centre stage. I think that any company that is in the ethanol business, if properly managed, and if it doesnt make silly investments, and we certainly wont be doing that, it has every chance of sustainable long term growth.
David Hoppenwasser:
Excellent. It certainly is a compelling story and interesting investment opportunity. I would like to thank you Mr Peter Middleton, Chairman of GTL Resources for taking time out of your day to speak with us. Once again the company in focus is GTL Resources trading London Stock Exchange AIM market with ticker symbol GTL. Thank you, Peter.
Peter Middleton:
Thank you. Good afternoon.