The Green Gum technology is an investment with significant potential. The Green Gum process (I.P. based) uses scrap rubber to manufacture rubber granules of flour consistency.
This technology uses a low energy consumption and environmentally friendly recycling process, and makes it possible to greatly increase the clean utilisation of scrapped rubber tyres. The resulting granule products are used in expensive industrial base materials, and may be applied for the substitution of a part of pure rubber in the rubber industry, as filler in the paint industry and for the substitution of plasticisers in the plastic industry.
The present infrastructure includes a milling plant with associated patented process that is able to produce super fine rubber granules (180 to 150 microns) for the efficient recycling of rubber for a range of industrial and commercial applications.
The patented process uses less energy that traditional methods and as such, has a much smaller carbon footprint. The existing Green Gum Kft manufacturing plant is located in Western Hungary, approximately 150km from Budapest and approximately 130km from Vienna.
Green Gum Kft was established in 2011. It is envisaged that the full local and international business will be carried out by Green Gum Kft. Green Gum will also concentrate on the Research and Development of products and manufacturing technologies. Owing to the fact that the company has been established for some years, it should be able to receive significant tax incentives and tax write-offs. Production is planned to commence in 2018.
Green Gum plans to produce over 15,000 tons per year once machinery testing at the plant is complete. The need for rubber granules in road building and road maintenance alone is expected to be in excess of 35,000 tons per year over the next five years with considerable use of the product throughout Europe.
Executive Summary: (Business Model and Income Streams)
Used tyres from passenger vehicles, trucks, General Collections
|Annual quantity collected||8,000 tons|
|Collection Payment from collection source||€65 per ton|
|Freight overheads (Depending upon distance)||€30 – €45 per ton|
|Average Income||€30 per ton|
Vulcanised industrial rubber (metal and cloth free)
|Annual quantity collected||8,000 tons – 10,000 tons|
|Collection Payment from collection source||€70 – €75 per ton|
|Freight overheads (Depending upon distance)||€30 – €45 per ton|
|Average Income||€35 per ton|
The annual quantity of rubber (tyres and industrial waste) sourced from Italy:
16,000 tons – 18,000 tons
The source material is shredded using a special purpose custom built shredder in a single operation) 5cm – 10cm pieces. The end product is sold to industries including cement manufacturers power stations and other industries that require pure rubber cut to custom sizes.
|Production Quantity||Approx. 3 tons – 5 tons per hour|
|Sale Price||Approx.€40 per ton|
|Cost of Sales (Production costs)||€20 per ton|
|Average Income||€20 per ton|
|Income on total quantity collected (16,000 tons @ €30 per ton)||€480,000 (Maximum)|
|Income on total quantity collected (7,000 tons @ €30 per ton)||€210,000 (Minimum)|
|Sales (3,000 tons @ €200 per ton)||€600,000|
|Total Income||€1.2 M (Maximum)|
Base income per annum, derived from Collection Compensation Payment received from Italian collection source PLUS sales of end product in Hungary. Therefore the two main income streams are collection fees and sale of processed product.
Background and Current Status
The technology has been developed over a number of years by expert engineers. The total real estate was purchased for approximately €1.3 million in 2012 and the plant and the building was renovated during the period 2012 to 2015. The basic machinery which is suitable for the production of extremely fine or coarse rubber granules, was built, tested and calibrated. The physical infrastructures for the total material movement and size separator, all based in the multi storey mill were completed in early 2016.
The original business model was based on the production of fine grain rubber granules but in 2016 it was expanded to the collection of used tyres and waste from within the E.U and subsequently processing in-house the collected tyres and waste rubber for sale to a wider range of uses as compared to the original business model.
The new and now current business model for 2017 necessitated changes in the manufacturing infrastructure, the addition of new custom-built machinery and further investment and additional financial resources.
Current Assets and Manufacturing Plans for 2018
The assets of Green Gum Kft consist of real estate comprising of two separate adjoining areas located in 8460 Devecser, Western Hungary. The plant is designated as “Mill” Folio Number 486 (4,082 m2) and “Stores and Yard” Folio Number 478 (21,482 m2).
The plant area (4,082 m2) contains all the production facilities, administration building, staff facilities and additional storage facilities.
The other area (21,482 m2), contains the receiving infrastructure, weighbridge and storage buildings…
The approximate valuation of other tangible assets including the machinery, furniture and other fixtures, (excluding the value of the I.P) is €1.1 million.
The processing of the collected tyres and rubber waste (1.1.2) requires additional special custom built machinery for shredding and processing.
The process technology for the production of various quality rubber granules is protected by patent(s). The research and refinements to the manufacturing process were completed in December 2017 and the plant is ready for the production of consistent quality high volume output.
Volume manufacturing will start in 2018, and the following will be the priorities:
” Organising and setting up the sources of raw material. Following a lengthy research process under the current market conditions the most suitable source would be Italy. Taking into account the cost of the processing and pre-manufacturing preparations, the cost of the raw materials would work out at approximately €10 per ton. The cost of raw material at the beginning of the project was originally calculated as €130 per ton based on a different and less effective resourcing structure.
” Research into locating possible additional markets and the development of strategic business relationships which are to be supported by orders for the output and Purchase Agreements. It may also be appropriate to negotiate a Sales Agency Agreement with the Italian supplier of the raw materials. The Italian suppliers have expressed interest in taking the full output volume and the sale price would be approximately €250 per ton.
” Further development work in optimising the manufacturing process and hence the output volume. Building of long-term customer relationships and ensuring the reliable supply of the raw materials. The current planned output would be approximately 3,000 tons per year.
Negotiations are in progress with the above Italian supplier and prospective buyers. As a result of the above negotiations, the supply and sales agreements are likely to be concluded by the middle of March, 2018 with these partners. Production is scheduled to start in March, 2018.
Green Gum Kft is aiming to scale the technology and the processing and manufacturing processes at the existing mill so as to be able to meet known demand and supply industrial quantities to already interested parties such as European road builders who wish to use the fine rubber granules within their bitumen blends due to its flexibility properties.
Once existing plant capacity is reached (estimated at 15,000 tonnes p.a.) further production capacity can be developed locally to meet the expressed demand as well as an exploration of other geographical markets and end-uses of the product.
Total Area: 21,560 sq. meters, over two blocks. Railway loading facilities are located approximately 100 meters from plant. The M7 motorway to Austria is about 40 Km from Devecser.
Satellite view of the plant. Total area is highlighted and the arrows indicate storage silos and railway siding.
The Green Gum patented technology utilises the de-vulcanisation of scrap or waste rubber (e.g. automotive tyres) by converting rubber base material (rough grind 8-10mm) via a grinding technology into high quality and consistent sized end products of fine and super fine rubber granules 200 to 300 and 150 to180 microns in size respectively.
The resulting rubber granules are of a flour-like consistency and are available in industrial quantities. This material is suitable for the substitution of expensive industrial base materials and it may be applied for the substitution of a part of caoutchouc in certain industries, for example as filler in the paint industry or for the substitution of plasticisers in the plastic industry.
Comparison between the “normal” size granules and the ultrafine
(200 microns) granules produced by the Green Gum Kft process.
Electron Microscope tests conducted during initial machinery setup
The Green Gum rubber granules are used for the production of Styrene Butadiene Rubber (Butyl rubber), which is now the major general purpose synthetic rubber which accounts for around 37% of the world’s solid synthetic rubber.
Butyl rubber is a synthetic rubber, has excellent impermeability, and has better flexibility properties.
It is used in many applications requiring an airtight rubber and is used in the manufacture of:
Fibre optic compounds
Personal care products
Gasoline & fuel additive
Pigment concentrates for rubber and polymer modification
Butyl rubber can also be used for protecting and sealing and in certain equipment for areas where chemical weapons may be present.
Singapore/Malaysia Rubber Price
The international average price of rubber is subject to the normal commodity market fluctuations.
The Green Gum Kft “dual” income source (manufacturing and collection) business model will balance out the normal market discrepancies and price variations.
One of the main advantages of the Green Gum technology is that the process uses substantially less energy for the production of these fine granules than the traditional methods that utilise nitrogen freezing or high-pressure water. Other competitive processes to this technology in use have high energy requirements and are unable to produce such high quality granules.
Whilst other known processes and techniques for producing rubber granules do exist, the disadvantage of these known techniques and processes is that they are not suitable for the preparation of various grades of granules with predetermined, fine or coarse granule size and the tyre grinds with the determined size of granules may only be prepared by the addition of further steps. A further disadvantage is that they are rather expensive and because of these high costs, they are not suitable for the preparation of grinds in an industrial quantity.
The Green Gum technology overcomes both of these issues and with consistent and smaller or customer requested granule size means improved bonding in recycled rubber applications.
The low energy footprint of The Green Gum technology also means economic industrial production volumes can now be achieved, where this was not previously possible.
Most synthetic rubber is created from two materials, styrene and butadiene. Both are currently obtained from petroleum. Over 454,000 tons of this type of rubber was manufactured in the United States in during the 1990-s increasing to over 600,000 tons during the early 2000-s. Other synthetic rubbers are made from specialty materials for chemical and temperature resistant applications. Tyres account for 60%-70% of all natural and synthetic rubber used. Other products containing rubber include footwear, industrial conveyor belts, car fan belts, hoses, flooring, and cables. High quality rubber granules can decrease the requirement for the petroleum based materials in the manufacture of synthetic rubber.
In addition to greatly enhancing the general bonding properties, it also makes it an extremely cost effective and profitable to use the Green Gum granules in the manufacturing of plastics and other similar materials such as bitumen.
The use of recycled rubber in plastics manufacturing processes is only possible with very high quality granules which are extremely fine and have special bonding properties due to their shape. The recycling of rubber products is currently limited by the quality of the recycled product. The Green Gum process makes it possible to greatly increase the clean and environment friendly utilization of scrapped rubber.
The use of rubber in bitumen base for roads is becoming more common throughout Europe. Mixtures consist of crushed stone granules, and other materials. Approximately 20% of fine rubber granules are added to the mixture thus producing a cohesive effect and an eminently usable product. These mixture technologies are in most cases proprietary, but the possible utilisation possibilities are constantly being researched. A liquid bitumen form is also in use and is being further developed for the repairs of road surfaces which have suffered small damage such as cracks, breaks and potholes. This process is possible only with the use of high grade rubber granules, and the savings produced in road repairs are extremely high.
The International Rubber Study Group (IRSG) is an intergovernmental organisation recognised as an international body located in Singapore, formally established by a Headquarters Agreement with the Government of Singapore. The purpose of the organisation is to prepare current estimates and analyse future supply and demand trends, while undertaking statistical and economic studies on specific aspects of the industry.
Global rubber consumption reached 24.6 million tonnes in 2010, 15.3% higher than in 2009, reflecting a strong recovery in the demand for vehicles and tyres. Global Synthetic Rubber production was 14.1% higher than in 2009, in line with the strong recovery seen in Synthetic Rubber consumption, while global Natural Rubber supply was 7.2% higher than in 2009.
Global rubber demand (both Natural Rubber and Synthetic Rubber) is forecast to reach well in excess of 35 million tonnes by 2020.
Global Synthetic Rubber demand is expected to grow by over 9.0% in 2018, while global Natural Rubber demand is forecast to rise by approximately 6% in 2018.
Partly due to the impact of higher prices, and assuming normal growing conditions, global Natural Rubber production is forecast to rise by 8.2% in 2012.
In the longer term, global rubber consumption is forecast to reach 35.9 million tonnes by 2020, with Natural Rubber consumption of 16.5 million tonnes and Synthetic Rubber consumption of 19.4 million tonnes
The current production of Synthetic Rubber granules in Europe is approximately 15,000 tons of low-grade products which is grossly inferior in quality to the products manufactured by the Green Gum technology.
The need for rubber granules in road building and road maintenance alone is expected to be in excess of 35,000 tons per year over the next five years with considerable use of the product throughout Europe, subject to continuous research by the road building companies.
It should be noted that the established size of a market is a reasonable indicator of the potential future size, however with the introduction of any new technology the market has the potential to grow beyond initial consideration. Green Gum Kft as a first mover has the ability to, in part, to create a market through technological innovation.
*The research results are considered to be relatively conservative.
Manufacturing centres will be built in Slovakia and possibly Austria. The technology is expected to be exported to Australia following the completion of the machine technology.
The Green Gum target market for its end products is seen as being primarily Western Europe, specifically Slovakia, Sweden, Norway and Austria.
The tyre recycling and eventual utilization has significant export potential to Asia and Australia. The State of Queensland is currently trying to solve a huge environmental problem caused by the illegal collection of tyres. Green Gum Kft has the technology to offer a solution to the problem.
Global demand for bitumen has generally remained constant at around 100 million metric tons per year. However, according to the Freedonia Group, between 2009 and 2014 global annual demand rose by from 101 million tons to 107 million. By 2019 the annual demand is expected to grow to 122.5 million tons. The bitumen market was valued at around $75 billion in 2014 and is expected to reach $94 billion by 2020.
The rubber granules are used in road building in the colder climates, because of their inherent flexibility and are mixed into the road building materials such as bitumen. The sale price is directly related to bitumen whose price is tied to the price of crude oil. Bitumen prices are volatile and for the purposes of general calculations, €500 per ton could be used for indicative calculations.
There are also possible opportunities in the long term for the use of rubber components in the manufacturing of automotive cabin components, which include dashboards.
The initial sale price of the rubber granules would be around €250 to €360 per ton. Target markets exist in Sweden and Austria and negotiations are currently on progress with an Austrian company who is well placed in the rubber industry.
Their requirement could be initially 4,000 tons – 6,000 tonnes for the first year. Based on this quantity, the minimum income for Green Gum Kft could be approximately €1,000,000.
1. The income figures are reduced to a “worst-case scenario” where the higher level of income from collections is not achieved until 2020.
2. Direct Tax liabilities are not included; See (9), (10), and (11).
3. The collections are based primarily on one region only and this is expected to increase by a factor of at least 200% by 2021. This increase however, has not been factored into the budget.
4. The sales of products i.e. processed rubber and rubber granules will depend to a very large extent, upon the requirements for road building and plastics manufacturing, but the Italian partners have indicated that they would be interested in taking the total production output.
5. In reality, the income figures could be considered at least 25%-50% less than what is achievable.
6. Costs include all running expenses, wages and associated costs and incidentals.
7. Due to relatively low overheads which will remain fairly constant over the next few years, these costs, i.e. Cost of Sales is not expected to exceed 35% of the total income. Increased energy costs have been factored in from 2018.
8. The potential of the Italian business is substantial and the Sales of Products in the tables above, represent a relatively small and very conservative part of the total income.
9. The above have not included any provisions for the VAT refunds and credits which are expected to reduce the effective tax figures substantially.
10. Once the collections have been in progress for six months, the company accountants will make the most appropriate decisions as to the minimising of any tax liabilities.
11. Tax liabilities are also expected to be reduced by the training of unskilled labour into skilled and semi-skilled labour.
12. The expense figures were derived from actual test operational runs with the current equipment, during 2015, 2016 and 2017.
13. The website disclaimer applies