Water solutions company Phoslock Environmental Technologies Ltd [ASX:PET] is back on our radar once again with today’s 9% spike in share price.
PET have been an interesting case to follow, having climbed from just 45 cents a share in May to today’s price (at time of writing) of $1.42.
The surge came as a result of PET securing a ‘very large’ Chinese lake project which requires ‘large quantities of Phoslock to be applied at many sites and will continue over a number of years’.
PET has grown so extensively from this project that, as of 23 September, they are now a part of the S&P/ASX 300 index.
Today, the announcements of an additional contract for another Chinese lake project has pushed PET’s shares up even further.
Chinese lakes packed with dirty opportunity
PET has now been approved to start working on China’s second biggest downtown lake, East Lake, located in Wuhan city.
What’s significant about this sign on is that it opens up opportunities to treat other lakes in the same area.
Wuhan City has 68 lakes that are greater than 100 hectares in size. What’s more, most of them ‘are grade 5 (very poor) or worse in water quality’.
And as these lakes are part of the Yangtze River Basin, its integral their water is restored to acceptable quality.
The Yangtze River Basin is a vital piece of the Chinese government’s South-North Water Transfer Project, which involves channelling Yangtze River water northward.
This is all in an attempt to restore China’s extreme water scarcity. Eight Chinese provinces have absolute water scarcity, meaning there is less than 500 cubic meters of water per person.
As such, PET Chairman Laurence Freedman believes ‘this province alone is likely to provide the Group with many years of Phoslock remediation works.’
A road of potential for Phoslock
This latest contract seems like a dream project for PET — or rather, the continuation of a dream project.
Back at the end of July, Chairman Freedman noted that their big Chinese lake project was a massive endorsement for Phoslock products:
‘We are extremely pleased with the rapid and massive increase in demand for Phoslock[…] The methodology adopted by the local government is unprecedented and is likely to be recognised in the future as the global benchmark for Best Practice in water pollution rectification.’
And now the Wuhan City contract has expanded Phoslock’s reach into a whole new area.
Consider that each province basically has its own state water deputy — a figurehead that decides what not to do regarding sanitation and the like.
So by landing this project, it’s almost a shoo-in for more work in that province in the future.
For Money Morning
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