Bioteq: The business of recycling mine wastewater by biological H2S gas

H2S is a critical problem in water and wastewater industry, it corrodes pipes (see the picture) and generates offensive rotten egg odor problems. Moreover, it is extremely toxic in very small concentrations in the air. Now a Canadian startup Bioteq Environmental is installing mine wastewater treatment plants based on a bioreactor that generates H2S gas to reduce the metal content of these residues. The plants must smell like hell and be extremely dangerous to the environment but they are sited on remote mining locations. This company, apparently, is a good investment opportunity.

I quote an analyst: "Bioteq Environmental is an undiscovered gem of a company that cleans the wastewater that comes off of a mine while simultaneously extracting the metals which are left in the water. Bioteq operates three plants and has three more under construction and four on tap. Bioteq is past the technology testing phase and about to enter a period of dramatic growth. With plants with life spans that last 40 to 50 years, and with minimal ongoing capital expenditures, Bioteq is about to become a cash cow. In four years, with 15 plants churning out on average $3-4 million in cash flow, Bioteq could climb close to $9 a share, or more than 400% higher than its current stock price. "

I have yet to form an opinion on that, but I am qualified to talk about the technological aspect. The idea is to have a biological reactor on site, where sulfur bacteria fed on sulphur rich substrate feedstuff liberate the H2S gas in abundance. This gas is bubbled through the mine wastewater and the H2S reduces the metals and precipitates them as copper, nickel, zinc, cobalt, etc. sulphates. They can extract copper for $0.60 a pound or nickel for $2.08 a pound.

The original idea of using sulphur reducing bacteria to remediate abandoned mines is being tried by the EPA noe for almost two decades. In the figure left above (EPA) they injected manure into an abandoned mine (Orphan Boy Mine) and let the H2S generated to precipitate the metal content of the water. In about ten years they succeeded in reducing metal content to reasonable levels. No recuperation of metals was intended. I have never heard of high concentration H2S gas except for separation of heavy water, which is an order of magnitude more complex than mining technology.

My questions:

(1) The process of biological generation of H2S does not seem really patentable.
(2) The steady operation of a biological reactor in a remote site seems difficult.
(3) Biological reactors are sensible to temperature and local conditions.
(4) They are alternative ways of generating H2S, such as chemical reduction.
(5) H2S can be bought as liquid gas and transported to the site.
(6) The recuperation of the metal from the precipitate liberates sulphur - another problem.
(7) Alternative technologies: Reverse Osmosis. This technology is coming of age, membranes are cheaper and the technology is safe.
(8) H2S is extremely poisonous gas. It may not be a safe workable technology.
(9) H2S is corrosive and equipment maintenance will be a headache.

A wastewater engineer's problem is to reduce or eliminate the generation of H2S so I am unfamiliar with the opposite problem of generating it cheaply and abundantly. I use the Pomeroy formula based on effective BOD and temperature and reaction time. With BODeff = 1000 mg/lt and temperature of 32 Cent. and a reaction time of 5 or 6 hours, such as the conditions of the Rosh Ha Ayin - Biuv Dan WWTP (25 km) I get H2S in the range of a few hundred miligrams/cu m. Very smelly and corrosive, but enough to produce copper in kilogram scale?

Post Scriptum (July 1) : I just read about an explosive detecting handheld device purportodly working as a magnetic interpherometer activated by typical chemical bonds in explosives, but which is a fraud, but made 100 million dollars for its promoters. Could this be an ecologically attractive and basically feasible idea, whose main purpose is to sell stock? I dont know.

I miss my little girl (2)

My little girl is sambatzit modiin whatever that means and is down in Gaza with our soldiers. I dont know what they are doing to rescue that unlucky boy kidnapped by our enemies, the Islamic butcherers, and to end the bombardment of Sderot. But I miss her, she must be sleepless for many nights, stressed and under pressure. On the other hand, what teenage girl has these interesting life experiences? She could have been an American Jewish Princess, bored to death with meaningless parties and insipid boys.

My 2 cents on Toowoomba

After reading the debate, I read the official project. My 2 cents is that the project makes sense and the debate is local politics. The wastewater will be super-treated and sent to a reservoir. It should have been presented as an agricultural or industrial project, to weaken the natural "yuck" reaction. Extracts from the official viewpoint:

What is Water Futures – Toowoomba? A plan to provide Toowoomba with water. Includes:

+ Boreholes 600m and 700m deep.
+ Compulsory rain harvesting tanks for new buildings and rebates for tanks on existing buildings.
+ Water demand restrictions, education, rebates, etc
+ Indirect potable reuse – water from the Wetalla Water Reclamation Plant is treated to a very high (6 star) standard and mixed into Cooby Dam. It is then taken from Cooby Dam and treated again at the Mt Kynoch Water treatment Plant. Estimated cost $68 m.

What if something goes wrong?

Treatment processes will be designed to “fail-safe”. This means that if a process stops working, water stops flowing. There will be a total of 7 barriers between untreated wastewater and our taps:
Barrier 1: Wetalla Water Reclamation PlantBarrier 2: UltrafiltrationBarrier 3: Reverse osmosisBarrier 4: Ultraviolet disinfectionBarrier 5: Advanced oxidationBarrier 6: Cooby DamBarrier 7: Mt Kynoch Water treatment Plant

Is anybody else doing this?

Unplanned indirect potable reuse (when treated wastewater is discharged into a water body which a downstream community uses for water supply) has been happening for hundreds of years. Examples:
360+ wastewater treatment plants discharge into the Thames upstream of London.

Toowoomba discharges into Gowrie Ck, which flows into the Condamine River. Dalby takes some water from the Condamine, and discharges treated wastewater into the Condamine. Chinchilla takes water from the Condamine downstream of Dalby.

Planned indirect potable reuse has been practiced for at least 30 years. No adverse health effects have been found, even where specific studies have been carried out. Examples:

Orange County California, since 1976. Purified water is injected into an underground aquifer to stop seawater intrusion and replenish water supplies. 95% of water injected into the seawater barrier enters the aquifer. Has used reverse osmosis since 1977 and advanced oxidation since 2001.

Fairfax County Virginia, since 1978. Treated wastewater is discharged into the Upper Occoquan Reservoir, which is a source of drinking water for 1.2 m people. Averages 8 – 10% of water supply, under drought conditions can make up 90% of water in reservoir.

Singapore NEWater since 2003. Process similar to Water Futures. Tested for more than 2 years and signed of by independent international expert panel before using. Currently 1% of supply, up to 2.5% by 2012. Majority of water (70 ML/day) is supplied to high technology industries because it is already treated to the standard they need – otherwise have to treat the town supply further.

Windhoek Namibia since 1967. Process and plant has been upgraded twice to incorporate new technology and meet increasing needs. Currently 25% of water supply.



My conclusion: The Toowoomba project is a planning and public relations failure. Wastewater will be treated to an unheard of ultrapure quality and then mixed with natural rain water. It is too good. Worse is more natural and acceptable: discharge secondary wastewater to an artificial lake and then let it discharge into the river, and then pump it up to the drinking water treatment plant. Cut all notional continuity between the sewage and the water. Aquifer recharge would have been another acceptable technology.

It seems to me that the proponents of the plan thought that it was so advanced (RO) that they had to make people know. They tried to push down their throats the idea of drinking sewage. In fact, people is drinking recycled water all over the world and never thinking twice of it. Had Toowoomba upgraded its old river uptake station, no one have objected at all.

The Toowoomba Experiment

An Australian town with the most improbable name of Toowoomba is planning to recycle sewage and reuse it in supplying about 25 - 30% of the place's drinking water. The nearest town where recycling for drinking is done is Singapur, about 1% and that for industrial use. Israel does not supply recycled water for drinking.

Twooboomba has a wet climate, with 1,000 mm rainfall per year, so the experiment is unrelated to any water scarcity situation. It has a stational supply problem, easily solved by a dam. But dams are taboo in Australia´s supersticious political environment. They perturb the spirits of the aboriginal dream underworld. So they are exploring the sewage drinking alternative, a technology thought to be at the front of a perceived technological frontier.

The debate is heated. Extracts:

Leo: This debate has established some paradigms in Toowoomba and you should become familiar with them. Singapore has plant similar to that proposed fro Toowomba but Toowoomba proposes 25% and increasing of it water to be reclaimed water. Singapore has the biggest desal plant on earth. It built the RO plant as a strategic utility should its supply from Malaysia be cut of for their own regional political reasons. Singapore uses an STP 99% greywater - not hospital, industry etc. CH2M Hill says there is no precedent for the level Toowoomba proposes.

London is a case of “bad practice”. This has been agreed in Toowoomba. Thames water has a disgraceful environmental record. Prozac shows up in taps. Male fertility is low. “If you want to have a baby get out of London”, London doesn’t have any form of planned potable reuse.

(This Secret Diarist thinks Leo is referring to a study linking estrogen in Thames water with lower male fertility in 1995. The study has not been followed up to my knowledge.)

Fear is being put upon the community by proponents avoiding the fact and talking about “the driest continent on earth” where all the inhabitants live on the coast in the “wettest places on earth”. Fear about climate change eating everybody up. Fear that taps will run dry when in fact this RO project won’t do anything to ease the current drought (2011 before it can be used).

Toowoomba is awash with water from other sources. This is not about water supply it is about establishing a demonstration potable reuse plant in the “national interest”. The NWC submission states clearly: Jam it in between Council elections and use it as a precedent fro Brisbane and the Gold Coast - that is the “national interest”.

Paul: The people outside Toowoomba should be advised of some facts: Toowoomba City Council proposes that its residents drink a cocktail containing at least 25% recycled sewage. This is not done at these proportions ANYWHERE else in the world. NOWHERE. (Singapore, the only comparable example, uses only 1% - and has commissioned the largest desalination plant in Asia. Israel, Mr Turnbull’s example, has the world’s largest desalination plant and doesn’t use recycled sewage for drinking purposes.)

The plan has serious flaws which may end up costing Toowoomba ratepayers an additional $66 million plus additional compensation by the State government to Oakey Gowrie Creek irrigators.

The RO waste stream is to be piped to Acland Coal mine. They have not yet agreed to accept this. They think they are getting high quality recycled water not the RO waste stream. If they don’t take the RO waste stream (and even if they do - at the end of the mine life), Toowoomba City Council will need to find an alternate end solution for the waste. The most viable option in the NWC application is the use of 600 hectares of evaporation ponds costing $66 million (the less costly 68 hectare alternative is described by Council’s advisers as “full of uncertainties”).

The Water Futures recycled sewage project also reduces the volume of Oakey Gowrie Creek jeopardising the irrigators in this area. They are threatening legal action to protect their livelihoods.

While the Federal government has granted funding approval, it is conditional on a number of matters including a referendum and resolving issues such as the Oakey Gowrie Creek irrigators.

Jondaryan Shire has indicated that, as a water customer of the Toowoomba City Council, they should be included in any referendum. It seems fair that shires which will be expected to take the recycled sewage should be given a voice in this process.

One serious concern has been the Toowoomba City Council’s approach to this issue. There has been virtually no public debate on this issue. Toowoomba Mayor Di Thorley spends her time flying to water conferences around Australia to talk about recycled sewage yet she won’t discuss the issue with the Toowoomba community.

Leo: Scientific study has shown the reclaimed water as being purer than rainwater. Increased water supply is in the ‘national interest’. Therefore, no doubt, increased water recycling is in the ‘national interest’. Of course a successful plant will be used to calm irrational fears elsewhere. So it should. As for whether it solves the current drought - who cares? To be frank, Australia is a continent beset by drought, and probably increasingly so into the future. Whether it solves this drought is beside the point - it will help in the long run.

Paul: So Toowoomba residents should be the “lab rats” for the rest of Australia? Recycling projects may well be in the “national interest” but I don’t see politicians like Peter Beattie, Henry Palaszscuk and Malcolm Turnbull going to their own electorates and saying “it’s in the national interest that you drink recycled sewage, so we are going to put the national experiment in our electorate”.

Given that nowhere else on this planet currently drinks recycled sewage at rates of 25% and above (and Council’s own advisers think it is high by international standards), it will perhaps be difficult to provide reports of comparable experience showing no ill-effects to humans.

Toowoomba City Council has scared Toowoomba residents by claiming that the water will run out if they don’t adopt the recycled sewage project. Then Council finally admits that it won’t solve the current problems because it won’t be online until 2011-2112. It also doesn’t solve Toowoomba’s long-term water needs.

Robert: Thousands of Toowoomba residents do not want to be the Experiment for Australia so lets see this one tried on in a Sydney electrolate.We have other supplies of water and they can be bought to the people in a shorter space a time than this reclaimed sewage water . We have a massive amount of water to the west of us at Chinchilla. This water comes up with the gas and it can be RO on site and then pumped into all towns along the way. It is enough water to supply this area for 20 years and in that time the governmnet of the day can build the dam we all need.These government needs to listen to the citizens and not use the scraemongering tactics when we are all suffering in this terrible drought.This crazy scheme is not to bring water to the residents but to bring water to the Ackland Coal company and a new Industral site west of Toowoomba.

Greg: Singapore health is still conducting extensive tests on removal of dangerous chemicals and compounds from effluent using RO and as of yet they have not come up with one particular membrane technique that is anywhere near successsful enough to warrant the risk of using more then 1%. Yet we have Toowoomba City Council telling us they can remove all the chemicals and extract 25% to 29% from our effluent. Perhaps Toowoomba will become a test case of how not to poison your community through stupidity and lies.

Mike: Do you really know why Singapore uses only 2-3% RO treated wastewater (not 1%) in its potable supply or are you just pretending you do? The real reason for the low blending ratio is that NeWater (as they call it in Singapore) is produced to make a profit and the Public Utilities Board makes more money selling it to industry than blending it with raw surface water upstream of the conventional water treatment plant (indirect potable reuse). Do you know why they make more money out of it selling it to industry? Because it is of far better quality than the drinking water! This means industries that require ultra high quality water for microchip manufacture, boiler feed and alike can spend less money polishing it with ion exchange and therefore are prepared to pay more for it.

Reverse osmosis filters out molecules for God’s sake! How many dead rats, dog turds, cleaning chemicals etc etc do you think fit through a 0.0001 micron hole? The stuff that squeezes through the membranes is WATER. It is as illogical to think of it as sewage as it is to think of the saliva in your mouth as sewage. It is WATER!
I know scientific argument does not wash with some people, and with the historical background of thalidomide, smoking etc I can understand why this is the case to some extent. Unfortunately, many people seem to have a deep seated distrust of anything scientific and assume anyone who uses bigger words than them must have some secret agenda.

I miss my girls

My 18 years old daughters is in the IDF unit in charge of the defense of the southern frontier of Gaza, just where the Palestinians bore a tunnel, attacked a guard post, killing two and kidnapping one of our soldiers. The unit is preparing whatever they are going to do and she is working 24 hours round and cannot leave the place. She just called by phone. I miss her badly.

Another daughter is in California. She is swimming couch and lifeguard in a Ramah Camp. She emails and writes that spent Saturday praying and sleeping in a bunk with a horde of clueless teenager American Jewish Princesses, the chattering class - par excellance. I miss her much.

I am sad. I miss my girls, booooooo.

The Moshav Swimming Pool Story

I was hired by a Moshav, a cooperative agricultural settlement South of Rehovoth, to help them in their swimming pool project. The contractor was one of the members of the settlement and while he was sincerely trying to do a conscientious job, he was no professional. On the other hand, the moshav management committee did not want to comment since they have to live with the person and tomorrow, he may be in the ruling committee. So they hired me to convince him to do some changes.

I found that he knew nothing about drainage, that floor surfaces have to have a certain 1-2% slope, in order to maintain its dryness. The architect design did not show any slope, so he interpreted the designs as no slope, 0% slope. It was nicely finished, with antislip ceramic floor, very nice to touch and walk on.

I took a bucket of water and trew its content on the floor. The water did not run nor drain into the drains, it stayed forming dirty water shlooliyot. The dressing room would be permanently wet, and probably develope and ugly mold and fungus odor.

The man said he did exactly what the architect´s designs ordered,which was true. He insisted that floors have to be with zero slope. That is how they had to be. Obviously he had invested much effort on getting the floor well finished, and the ceramic antislip tiles were very expensive to replace.

In the end, more by insisting and wearing him down than sheer engineering authority, he agreed to lift the floor tiles and do it again with a slope towards the central drain.

The swimming pool is nice and it wa opened on time. The things I do to earn a few piasters.

The kibbutz communal kitchen goes commercial

A kibbutz (communal settlement) has decided to transform its communal dining room into a commercial enterprise, including catering services. For that purpose, they need a permit from the Ministry of Health including a comprehensive water and wastewater plan. So they hired me and even paid me a retainer. Very nice and decent fellows.

The building must be about 50 years old, and the water and wastewater infrastructure has been repaired, renovated, etc. a number of times. The lower plant has been transformed into a vast network of improvised pipes and connections that no one really knows how it works. I took pictures and made a draft and found a solution to spearation of sanitary wastewater and treatable & recyclible kitchen effluent.

How true is the Hungarian saying that if you want to enjoy the food, dont go into the kitchen!

I give up and join the procession

There is no profit in swimming against the current. The world has decided that Israeli water technology companies are the thing to invest their savings in. Who am I to keep telling them that they are wrong, that there is no water bonanza in Israel or anywhere else? I am joining them, and from hereby on I join the chorus.

Yesterday I surveyed a business in Ezra and Yishmach Moshe (Mozes will be glad) streets corner in Bney Brak. The picture left is the main water system of the school, and it stinks terribly, as it was a very hot day. But reality cannot convince me, I was convinced by Globes. We must be wonderful, and I am a depressed pessimist (if not an outright antisemite and saboteur) that cannot see that.

World Pension Forum delegation of US and Canadian investment institutions visited Israel last week. California Department of Finance chief deputy director Anne Sheehan, who sits on the boards of California Public Employees Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS), was one of the delegates.

CalSTRS managed $201 billion as of June 2005. The pension fund is committed to pay pensions to 775,000 retired state public school teachers from the kindergarten through college levels. CalSTRS’s 12-member board decides on investments and sets policy. It has invested in Israeli companies, including Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC), Bank Hapoalim (LSE: BKHD; TASE: POLI), Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), Blue Square Israel Ltd. (NYSE: BSI; TASE: BSI), Check Point Software Technologies Ltd. (Nasdaq: CHKP), Clal Industries and Investments Ltd. (TASE: CII), ECI Telecom Ltd. (Nasdaq: ECIL), Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), Koor Industries Ltd. (NYSE: KOR; TASE: KOR), Lipman Electronics Engineering (Nasdaq: LPMA; TASE: LPMA), M-Systems Flash Disk Pioneers Ltd. (Nasdaq: FLSH), MA Industries Ltd. (Makhteshim Agan) (TASE: MAIN), NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE), Orbotech Ltd. (Nasdaq: ORBK), Radware Ltd. (Nasdaq: RDWR; TASE: RDWR), Retalix Ltd. (Nasdaq: RTLX; TASE: RTLX), Strauss-Elite Ltd. (TASE:STEL), Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), and Mizrahi Tefahot Bank (TASE:MZTF).

CalPERS manages $145 billion, and has invested in eight Israeli venture capital and private equity funds: Apax Partners, Carmel Ventures, Gemini Israel Funds, Giza Venture Capital, Israel Seed Partners, Jerusalem Venture Partners (JVP), Markstone Capital Partners Group LLC, and Pitango Venture Capital.

Investing in venture capital funds is part of an alternative investment plan. According to CalSTRS’s reports, alternative investments made a return of 24.9%, 18% better than the average. The fund published its results for its fiscal year in July 2005, and showed a positive performance for the third consecutive year, with a return on investment of 11.09%.

Sheehan was appointed by California Governor Arnold Schwarzenegger. She previously served as a senior manager at the California Building Industry Foundation (CBIF).

“Globes”: Each quarter, venture capital fund managers wither in the face of CalPERS’s quarterly reports on their performance. Do you know how much that hurts them?
Sheehan: “The media petitioned the courts on this matter, and the ruling was that the reports must be published. California state law mandates the state pension funds to disclose their performance, and operate with maximum transparency.”

With that in mind, are there those who say ‘No’ to CalPERS?

“Absolutely. Because of the nature of investment in venture capital, the reports are basically a freeze frame that in many ways does not represent the big picture.”

What was the purpose of the visit to Israel?

“This was an opportunity for us to see what’s going on up close. We came to see the companies and funds we’re invested in, and examine investments in other funds and companies. A visit helps provide a perspective. The picture emerging from the newspapers’ international news pages doesn’t always reflect the picture on the ground. The picture I got is of a rapidly growing economy, an economy that reacts quickly to change. The State of California has a history of support for and investment in Israel, and the present governor, Schwarzenegger, is committed to continuing investment.”

Especially in funds that invest in technology?

“Not necessarily. During the visit, we were exposed to developments in water tech. As you know, California has a water supply problem. The economy is growing rapidly, and the state needs to supply the quantity of water needed. Israel has a lot of interesting developments in this area.”

Do you intend to enter non-financial investments in Israel and other investment areas, such as US and international hedge funds?

“We’re looking for non-financial investments in Israel, and we’ve previously invested in funds that invest in Israel. As for hedge funds, we don’t yet invest in them, but some pension funds in the US have already entered this area.”

What is the size of each fund’s investment team?

Sheehan gives a cautious and conservative estimate. “30 to 50 people divided into teams, each of which specializes in the relevant sector. Some of our investments are also outsourced to external management firms.”

As said, who I think I am to go against the current? These people made 25% a year, they have nothing to prove, so they must be right.

I MUST rethink the whole situation. Who is making money in the water industry in Israel?

Water Stock Pumping

Some people pumped up WALTER INDUSTRIES stock and make a lot of money. From 40 $ it went up to 60$ and now is about 38$. The pumping up focussed in WLT´s water business potential, its f! a! n! t! a! s! t! i! c! future... How else if ...

"the water infrastructure in America is in major disrepair. Some water systems in the Northeast are over 100 years old, with some even currently utilizing wood pipes. Our country’s water infrastructure has been the subject of numerous news articles and increasing government concern. Our extensive research with industry and government consultants, water municipalities, and public water utilities confirms this thesis. The numbers vary, but it is safe to say that hundreds of billions of dollars will be spent upgrading and maintaining the water infrastructure over the next few decades in America. Walter’s Mueller / U.S. pipe division will greatly benefit from this long-term trend of refurbishment and upgrade as it will provide virtually every aspect of the water system from the front end of the system to the home and back to the waste treatment facility. As a result of its market leading position in most of the products it sells, the combined Water business will have greater than GDP growth and will generate over 20% EBITDA margins in its infrastructure business with minimal capex and significant free cash flow generation."

People buys this type of talk. No one believes that water - stinks.

Am I Wrong?: Another Water Fund

They must have discovered gold in water, because people is raising money like mad to invest in the water business. How is that I cannot see any profitable venture in water? I must be wrong.

Globes reports: $12 million pledged for water technologies fund H2 Tech. Priority, the company setting up the fund, aims to raise $50 million within a few months.

Hedge fund and asset management company Priority Investments , owned by Oded Koritshoner and Ami Sessler, has pledges for $15 million of the $50 million it plans to raise for a new venture capital fund named H2Tech, which will focus on water technologies. Koritshoner and Sessler expect to raise the rest of the finance within the next few months. ”We conducted a thorough search of companies in the water field, from early stage concept to companies at the selling stage, and we came up with 10-12 companies with whom it would be definitely worthwhile starting negotiations,” said Koritshoner today.

The fund will be managed by Ehud Ram, who currently manages the small venture capital firm Spark Enterprise Ltd. ($25 million under management). Also due to appointed as managers are former MedNautilus president and CEO Amos Lasker, which managed the Israel-Italy MED 1 underwater cable, eventually bought by Telecom Italia, and Giora Shaham, a water engineer and former head of the River Administration, who oversaw the partial flooding of the Hula lake, drained in the 1950s.

I am familiar with Giora Shaham, and I am underimpressed. He is a bureaucrat minded person, active in Water Administration and the Ministry of Environment. He lacks economic sense, for example, he proposed a pipeline for the Hebron River, at a cost of 90 million dollars, in order to avoid contaminating the soil with Hebron sewage. What River Administration? There is no such thing.

Invest in Hell Hole?

Manya Shohat, a Russian revolutionary and one of the founders of the Work Group commune. A picture of the group.

I made 10% capitalist profit on my investment in TSEM, that godforsaken chip foundry in Migdal HaEmek, 10 km north of Afula. Where the fuck is Afula? Israelis say Afula is the hole at the end of the Ruler Road. The Ruler Road is the sole straight road in Israel, possibly of the Levant, straight as a ruler, built by British colonialists with Zionist manpower.

The road is something of a legend in Zionism, because it was built by a fluid and formless commune of Zionist communists of the Second Aliyah, young Russian revolutionaries with lofty ideals of utopia building, who contracted with the British administration to build this military infrastructure.

The reason the road is so straight is that it was designed to serve in case of need as a military airstrip, in addition to the legendary colonial lack of imagination, according to which the shortest line between two points is the straight one. Endless nightlong debates were held on the ethics of serving the British colonial domination of the Middle East, and on the capitalist, unnatural and soul-destroying engineering design.

The Zionist commune was called Gdud HaAvodah, the work group, and all the later great leaders of early Israel spent time working on roadbuilding. It is said that Israel's political institutions were conceived and agreed during the long nights in the roadgang camps of the Valley.

No one ever said a good word about the colonial overlords, so I do. It is a monument to Colonial Britishers's greatness and management talent that they hired this impossible ensemble of clueless Jewish revolutionary intellectuals as their road building contractors, and more astonishing yet, that they caused the road to actually be built. And it is a damn good road too.

What I am coming to is that in this malarial valley we Jews (under American Mormon leadership) are now building a chip foundry called Tower Semiconductors Manufacturing Ltd. (TSEM). The enterprise was a total failure and ate up billions of good American dollars, till a year ago Mr Russell Ellswanger took over the management and is causing what seems to me like a business turnaround.

Six months ago I started buying TSEM shares at dirt cheap prices (1.30 $), and slowly it has been rising in Tel Aviv Stock Exchange and in the NASDAQ (latest quote 1.73 $).I am thinking to sell TEVA and buy more TSEM. Lets review my thinking. TSEM is a chip foundry, making glass plates (silicon wafers) on which they print electric circuits.

The industry leader is TSM - Taiwan Semiconductor Manufacturing. It has 50% market share. Lets compare them (data from Yahoo, in billion US$):

Parameter TSEM TSM
------------------------------------
Market capitalization 0.13 48.0
Sales 0.644 9.0
Revenue Growth 55% 38%
Debt 0.55 n.a.
Profit margin n.a. 31%
------------------------------------

What I see is that TSEM is embedded in a wonderful industry, with the possibility of achieving 31% profit margin on sales and 38% annual growth. It is possible that already it achieves these parameters. If TSEM gets a hold of a small part of this immense and exploding and profitable market, well, that was the original idea.

TSEM debt is mostly due to investment, the money is there in form of machinery, possibly a bit obsolete, I dont know. TSM is frenetically investing and building new fabs in China and Singapur to manufacture ever more advanced chips of 9 nanometers or atom by atom.

Technological leadership is the key and they have it. They can manufacture very advanced machines. Since TSEM is also investing as if they expected money to be abolished tomorrow, and its sales are increasing at 55%, TSEM seems to be in business.

Once TSEM is in TSM's league of atom manipulation, it may become its most serious competitor. Once they are there, money is no problem. Extrapolating the INTEL experience, which is building its most advanced fab in Kyriat Gat (famous for the Samson and Dalilah romance), and not in Taiwan nor in China, Israeli workers may be able to pull this feat out.

Should I put my money on it?