CAG 1.52% $1.30 cape range ltd

nice article from afr

  1. 934 Posts.

    Cape Range's long march to success
    Sep 12





    As readers will be well aware, Pierpont is a technological Neanderthal. He has not understood the mechanical principles of any invention since the typewriter and still thinks a semiconductor is a chap in uniform who punches tickets on long buses.

    The only thing Pierpont understands about new-age technology is that it always - always - takes more time and money to launch than the promoters say. Or, in the words of Niccolo Machiavelli: "It should be borne in mind that there is nothing more difficult to handle, more doubtful of success, and more dangerous to carry through, than initiating cult or more uncertain than to introduce a new order of things."

    Niccolo was probably waiting for Marconi to install a reliable telephone service so that he could give the Medicis the inside drum on what was happening in the Vatican that week. From Pierpont's experience with the Italian telephone system, Niccolo is doubtless still waiting.

    Shareholders in Cape Range Wireless will know how he felt. Cape Range is at the cutting edge of technology: the only problem is that it's been there for about 15 years and still hasn't quite got anything working.

    Its share chart could serve as a model for the technology boom. From a few cents in 1999, Cape Range ran to 77¢ at the screaming peak of the dotcom boom in March 2000 and is now back to 2.8¢. But it's still alive and is on the verge of bringing its two biggest projects on stream.



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    The heart and soul of Cape Range is its chairman and managing director, Ron Wise. Like all sensible doctors, Ron believes in the healing power of wine, to the extent that he has even set up his own vineyard in the Margaret River. Pierpont has enjoyed a drink or three in the company of the good doctor over the years and can testify to the medicinal qualities of Wise wine.

    Ron's shareholders, however, may have to get through a few more cases yet before their first dividend arrives. Back in the 1980s, Ron was an enthusiast for the Kalina power cycle, which was going to improve the thermal efficiency of coal-fired power stations by, from memory, about 3 or 4 per cent. That might not seem much to readers, but it would be a giant step in power station economics if the amount of energy they captured from burning a lump of coal could be increased from 44per cent to 48 per cent.

    The Kalina technology was flicked to a US company named Exergy Inc and Cape Range shareholders received shares in Exergy. In 1995, they were told that Exergy intended to list publicly and that its market capitalisation would be about $500million.

    Doubtless it does and doubtless it will, but it hasn't yet. The Kalina technology had a problem with ammonia generation at high temperatures. So instead of being applied in high-temperature coal-fired stations, it will be applied in lower temperature (350 to 400 degrees) geothermal and industrial waste heat processes.

    Siemens in the US and Germany are tendering to build 16 Kalina power stations, from which Exergy will receive royalties. This is good news for Cape Range shareholders who have been keeping Exergy scrip in their bottom drawers all this time because they can't trade it. Exergy has some debt, but hopefully somewhere out there, some day, some of the money it generates will filter through to investors, who now include George Soros.

    Having got out of the electricity game, Ron took Cape Range into wireless technology in 1997. Cape Range holds the worldwide rights to iPMA (internet protocol multiple access) technology, which aims to provide full telephonic services to remote areas of the world.

    Let's say a mining company wants to set up camp in the middle of nowhere and it needs 50 telephone lines, including fax, email and internet capacity. Ron can run copper wire from the phone connections to a remote station and hook into phone, voice and data services via satellite, fibre optic cable or whatever. Ron says his iPMA transmitters are effective over a 66kilometre radius, which is jolly handy.

    All very true, no doubt, but again it's taken a long time to happen. At present Ron is waiting for the Thai government to pick the first site where he can set up in that country. He is also trying to introduce the service into Malaysia, where nearly all the equipment has been installed at somewhere called Langkawi Island. All they need to do is demonstrate what the switch operator has to do following standard maintenance, but whoever in Malaysia is in charge of setting the schedule for the demonstration hasn't scheduled it yet.

    Like Kalina, iPMA has taken longer to get up and running than Ron originally thought. And in the process, it ate money. By the end of last December Cape Range had chewed through $27 million in operating and capex costs and cash was down to $108,000. Fortunately it found a fairy godmother in the form of a European investor called Farrant Ltd, which tipped in nearly $20million. This rescued Cape Range temporarily, but the company's interim report last week carried a note by the auditors saying that its continuation as a going concern depended on Malaysia getting up and running. Pierpont also noted that by June 30, Cape Range's cash was back down to $1.9 million.

    When Pierpont spoke to Ron in Los Angeles a few days later he was, as usual, sunnily confident. He thought the Europeans were solid backers of the project and he was adamant that the technology worked. He expected the Langkawi project to be approved by the International Telecommunications Union.

    That was good news, Ron explained, because the ITU is a body sponsored by the United Nations to improve telecommunications in the Third World. So when, say, some village in Bangladesh wants a telephone system - and doesn't have the money or skill to evaluate systems itself - it can ask the ITU and the ITU might recommend iPMA.

    So the villagers will be able to watch porn on the net, Cape Range will become a going concern and the shares might get above 2.8¢. Pierpont wishes Ron good luck and hopes his shareholders won't have to wait as long as Niccolo.

    Meanwhile, if any reader is ever tempted to invest in high tech, Pierpont's advice is to sit down first and draw up a list of all the new technology projects that have come on stream early and under budget. If you're short of paper, the back of a postage stamp should do.



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    AFR columnist Trevor Sykes celebrates 50 years in journalism today. Sykes, an outstanding business journalist, began his career in Adelaide as a copy boy on the fledgling Sunday Advertiser. He was covering federal politics when Menzies was prime minister and had a spell in the London House of Commons for Reuters. In 1969 Sykes switched to finance, in time for the Poseidon boom, and established a reputation for his forensic analysis of company affairs. A multiple award winner, he has been editor of The Bulletin, editor-in-chief of Australian Business and assistant editor, investment editor and a columnist for the AFR. He's written seven books, including The Bold Riders, a history of the buccaneering entrepreneurs of the 1980s. In 1972, Sykes created the Pierpont column, a guise he has used ever since to treat business with the irreverence and humour it so often deserves.

 
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