Don't get fired up about clean coal company yet

By Malcolm Berko

Published: December 23, 2007

Dear Mr. Berko: What can you tell me about a company called Clean Coal Technology that sells for $21 a share? I'd like to buy 200 shares because I'm told by my son, who is an engineer at Peabody Coal, that Clean Coal Technology has a patented system that removes all the impurities from coal so that it burns without polluting the environment. My son believes this company has contracts with China, which is one of the worst polluters in the world, to build a plant and produce pollution-free coal for China.

I tried to research the company but it's so new that I can't find anything about its revenues and its "supposedly” patented process. What do you think about this company and do you think the stock would be a good investment for me? I can afford to risk the money but would like additional information to help me make a decision.

T.R., Gainesville, Fla.

Dear T.R.: Clean Coal Technologies Inc. (CCTC-$16.26) came to life last October via a reverse merger and the stock zoomed from $1 a share to over $30. The company is located in Fort Lauderdale, Fla., and has yet to bring in a dime or dollar of revenues. But the current $21 price is a little off-putting to me unless there are some respectable revenues and earnings on the near horizon.

CCTC does have a patented technology, which removes more than 90 percent of coal's impurities, using a sophisticated thermal process in a closed-cell environment. The coal is crushed into small pieces then heated to temperatures in excess of 2,000 degrees at a controlled set of various atmospheric pressures. The noxious impurities (mercury, carbon dioxide, methane, carbon monoxide, etc.) described in the Kyoto Protocols are released and captured without reducing the coal's effectiveness.

Ex-Vice President Al Gore would love this system that produces clean coal power, eliminating the need for costly scrubbers or carbon future set-asides. And when this coal burns it doesn't release the venomous, greenhouse gas emissions responsible for acid rain or other environment contaminants. This is a process for which major greenhouse gas polluters (American Electric Power, Ford Motor, U.S. Steel, DuPont, Motorola, etc.) would pay dearly.

Your son's company also has a process that cleans coal but not as efficiently or as cost-effectively as the CCTC technology. Peabody's technology takes about five hours and removes about 55 percent of the pollutants. CCTC's technology removes 90 percent of the pollutants from the same ton of coal and it does it in a dozen minutes.

Then there's another bonus — CCTC's technology is sort of like making a silk purse from a sow's ear. It produces a better quality coal with a 15 percent to 25 percent higher BTU content, which increases its yield and market value. Meanwhile the volatile matters removed by CCTC's process are condensed into liquid crude that is refined into salable chemicals and fuel.

The process is similar to that used by Sasol Ltd. (SSL-$49.70), a South African company that was recommended by this column at $33 in March. SSL produces oil from coal at a cost of $38 a barrel from which they produce gasoline and diesel fuel.

CCTC doesn't have a centime in revenues and probably won't until 2009. Unfortunately, CCTC's revenues won't originate in the U.S. Rather with the assistance of the U.S. Department of Commerce, CCTC recently signed a $100 million joint venture agreement with China's Shanix POAR to build and operate its first clean-coal facility. Because of the significant environmental benefits, the Chinese government has provided an 80-acre parcel of land for CCTC to build and operate its first facility.

China has enormous coal deposits and this plant should be completed in early 2009. Perhaps that's why CCTC's shares rose from $1 to $30 so quickly.

I spoke with CCTC's chief executive officer, Larry Hunt, a coal man from Kentucky. He won't speculate about CCTC's future revenues or earnings saying: "I'd rather the results and not me speak for the company.”

CCTC only has 300,000 shares out and it trades between 3,000 and 10,000 shares a day. Management ought to split the stock (10-for-1) to increase the float, reduce price volatility and make it more affordable. I have no objection to a 200-share purchase. I think the stock is a rank speculation but possibly a reasonable rank speculation. However, you might want to write the U.S. Department of Commerce and ask for a copy of its two-page Oct. 22 release on CCTC. It makes for interesting reading.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.

Comments