Here is the President's 2011 Letter
Mar 31, 2011
Dear Shareholder,
Early in each New Year it has been my practice to post my letter to our web page and I know that a body of our shareholders appreciates this by their enquiries at around this time each year.
The Company has been exceedingly active during 2010 in a number of areas.
Firstly, we have progressed well with the development of our technology relating to the mineral wastes arising out of recycled paper. The first filing of our patent in this area was made in late 2009 and last year we entered into a co-operation agreement with industrial partners and sought a German Federal grant to support the project. This was approved late last year. This is an exceptionally interesting process as, by combination of CalciTech technologies, the waste minerals from re-cycled waste paper is purified and processed into two separate value streams of end product: Synthetic Calcium Carbonate ("SCC") with which we are all familiar, which will be re-cycled to the paper making process; and Sustainable Meta Kaolin ("SMK") that we believe has the potential to be a low energy cement substitute. This is a new product stream for CalciTech and requires further development, which is why a reputable cement company is part of the consortium. Our small scale plant at the Leuna chemical complex was moved to an adjacent site during the year and is being upgraded to meet the demands of this project in addition to its normal materials testing and sample production program.
A number of paper producers have taken a strong interest in our process and particularly because of its sustainability - "closing the process loop of materials". Dr Charles Kunesh, our US Development Director, presented a paper describing this at the Industrial Minerals Congress held in Miami early this year and a copy can be seen on our web page for more technical detail. Dr Robert Higgs, our R&D Director, presented a similar but more technical paper at the PTS-CTP Symposium in Munich.
As a result of this progress the Company has spent much time this last year reviewing the satellite concept of plant installation on site at customers. This type of plant, exclusively for production of coating SCC, we had anticipated as falling into a later phase in our program, but is driven by our advances in re-cycled paper. It is a very different model to our merchant concept, located at the customer's premises. It is normally a sole source of off take against long term contracts on very competitively priced terms and always delivered in a high solids slurry. Whereas our merchant concept can usually be located near CO2 and waste or other materials source and has mixed applications for our SCC in a variety of industries, and industry supply on small and short supply contracts to a wider range of customers, usually in a dry form. As such we have approached potential commercial partners with joint venture concepts, but we have failed to negotiate terms we would consider acceptable to our shareholders at this stage.
We have therefore decided to concentrate immediately on bringing several merchant plants to building stage and intend to concentrate on the smaller, non-paper coating, plants of which we have identified a number through our business planning. All prospective plants are now in Europe and therefore will be implemented by our new wholly owned subsidiary CalciTech Synthetic Minerals Europe Ltd. ("CSME") based in the UK. The prospective plants would be circa 40,000 tpa and could be in Germany, France, Spain, the Benelux or UK. As CalciTech has developed a number of these projects to an advanced stage, we anticipate that CSME should be "shovel ready" on two plants, subject to final financing, by the end of June 2011.
With several plants completed we have no doubt that execution on other projected merchant plants in Europe becomes very straightforward. We would expect thereafter to build a number of larger satellite plants for coating material at paper mills.
During 2010, funding for both working capital and project purposes has remained difficult and interest rates are no reflection of prime rates. Your Company made an investor relations appointment last year with a view to carry out private placements in the USA. Despite considerable efforts and expense, the only form of financing that was readily available was in the form of "equity lines". We were advised that these forms of finance, which are unfamiliar to us in Europe, were not appropriate to a company of our nature and would not be beneficial to our shareholders. We therefore decided we must concentrate on the European markets we know for new finance. We also concluded that until the USA was less restrictive in its funding availability and your Company was able to secure a more senior listing, it would be better to concentrate on seeking developing territories for operations.
The purpose of establishing CSME in the UK was with a view to seeking London funding acceptable to Europe and a listing on the Alternative Investment Market, a second tier of The London Stock Exchange. I am pleased to say that Mr. Rod Thomas, who is managing partner of a well-known South West Midlands law firm and experienced with AIM listings, has been appointed a non-executive director of CSME. Although conditions did not develop in 2010 as had been the hope in late 2009, the financial environment this year is much more encouraging. Even as I write Chancellor Osborne is outlining in his budget speech a range of SME incentives some of which must be appropriate for CSME. We believe that a listing on AIM now is a viable way to provide the working capital needs forward and the equity investments needed in the early smaller merchant plants now planned. Many plant prospects enjoy grants to some degree and, we have been told, qualify for European Investment Bank funding. We will work with our London funding sources and those available in the EU Member States where plants are to be located.
In January 2010, I was pleased to welcome Mr. Michael Brickell to our board of directors in a non-executive capacity. Michael, who is UK based, has since agreed to stand in part time as Managing Director of CSME and provide initial offices and accounting services to the company in Cheltenham, England to keep down operational costs. Both Thomas Livingstone and Michael Watts have agreed to become COO and Marketing Director respectively and Dr Howard Browning, another of our non-execs will act as Chairman. Our objective as I have previously announced is to differentiate the activity of European operations from CalciTech technology development to facilitate financing at the correct level of the business and within the European Union.
It is clear that the territories where SCC and waste remediation of our type will be used are quite different, either in their evolutionary stages, the market practices or management styles. In particular the local funding requirements and the need to secure the maximum protection for our technologies will require different local relationships and partners.
Michael Watts visited with me, both China and India earlier this year. Michael has considerable experience of working in Asia for much of his career. It is clear that there is a huge opportunity to recycle carbide lime waste and also re-cycled paper mineral waste in China providing significant environmental benefits, including absorption of CO2 emissions, while making certain industries completely sustainable with our SCC. India is potentially a similar opportunity to China, but may take longer to develop. We are now determining an entry strategy in both instances and would expect to appoint professional representatives this year to guide us through this process.
Finally, I would like to thank our small group for their exceedingly dedicated efforts and all those supporters around us. I am confident that their success with our plans will allow us to seek a more senior listing that will recognise our real value and reflect in our share price. We look forward to all support in achieving our objectives.
Yours faithfully,
R A Leopard
President
