Tuesday, March 22, 2011

Algae Army

Image them side by side, massed like a throng of stalwart soldiers protecting the realm.  It is a fanciful image, but a bit hard to maintain when with a closer look you realize I am referring to algae in a holding tank at a biofuel production plant.  Algae are among the simplest of organisms, some composed of only a single cell.  The most familiar algae are the multi-cell giant kelps that grow in the ocean.  There is nothing particularly appealing about algae  - except as potential heroes in the struggle to replace fossil fuels.

There are over 300,000 different types of algae some of which are particularly adept that producing oils in their simple bodies through photosynthesis.  That talent has attracted the interest of energy developers who want a cheap, renewable source of fuel for transport applications.  A mash up of data from scientists involved in the development of algae biofuel, algae can cost more per unit mass due to high capital and operating costs, yet can theoretically yield between 10 and 100 times more energy per unit area than other second-generation biofuel crops.  If accurate, the math is compelling even if the algae pond lacks the grandeur of a big oil rig.

We have been tracking the building algal-based biofuel sector and have found some forward momentum in recent months.  We are adding two new producers to the Algae Group in our Beach Boys Index  -  Algae Bioenergy Solutions,  Inc. and BARD Holdings, Inc.  Both are private companies and offer investors no immediate investment opportunity.  We suggest investors add these two to their watch lists as we expect the industry to continue moving forward at a fairly rapid pace.

Based in Georgia, Algae Bioenergy Solutions, Inc. (ABS) has completed the first phase in the construction of a biodiesel plant in Warrenville, South Carolina.  Algae are their preferred feedstock sources.  The plant is permitted for 35 million gallons per year but can be expanded to 50 million gallons.  The company is currently working on algae production facilities, which are expected to require $10 million in capital.  The company’s investor relations page makes a pitch for strategic partners and investors.

One possible partner is in the nutrient category, a critical cost for algae biofuel production.  Algae Bioenergy is working on reducing the cost of nutrients to feed its algae army by using wastewater diverted from treatment plants.  Waste water is a are a good source of nitrates among other nutrients preferred by algae.

We are also adding BARD Holding, LLC to our Algae Group.  BARD has developed a process to cultivate algae on a commercial scale that will significantly reduce the production costs of biodiesel.  In addition to algal oil BARD expects to produce dry algae cake for food and pure oxygen for the healthcare market.  BARD is using vertically mounted photo-bioreactors rather ponds to grow and process the algal oil.  Management believes the design saves space and labor, thereby improving long-term profit potential.     

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  BARD Holding and Algae Bioenergy Solutions are induced in Crystal Equity Research’s Beach Boys Index in the Algae Group.

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