Friday, May 06, 2011
A New Look at Ag Waste
Yesterday Novozyme (NZYMB: CO; NVZMY: PK ADR) released their estimate of the U.S. share in the world’s agricultural waste resource. Looking at “ag” waste as a resource might be a new concept for some investors. Let me extend a welcome to the 21st century.
The U.S. holds only 3% of the U.S. oil reserves – a resource that is rapidly on the decline given the world’s voracious appetite for oil as a transportation fuel and an industrial commodity. It is that paltry holding that has left the U.S. politically vulnerable to petro-dictators and terrorists.
Honestly, I doubt that if it were not for the very real threat presented by environmental degradation and global warming, U.S. policy makers would probably still be attempting to control access to oil resources. As it is the shift to renewable resources has got us looking at biofuels made from organic materials.
All of a sudden ag waste has taken on a new importance for cellulosic ethanol production in particular. Sweden-based Novozyme established a joint venture with Lignol Energy Corp. (LCE: TSC-V; LECFF: PK) of Canada to make cellulosic ethanol from wood chips and forestry waste. Lignol recently announced that it has recently completed the first phase of an enzyme and substrate optimization project.
With phase one behind the project, Novozyme appears to be looking at scalability. We believe this is a strong signal of how Novozyme management might view the results.
Novozyme estimates the U.S. commands a 25% share of the world’s current agriculture waste resource. This clearly puts the U.S.-based producers in an entirely different competitive position in the 21st Century energy sector - not to mention putting the U.S. in much better political position.
Investing in Novozyme, which is a well-diversified large cap, or Lignol, which is a small biofuel pureplay, could be a bit frustrating for investors not familiar with foreign exchanges. Both companies have stocks quoted on the Pink Sheets in the U.S., but trading is largely by appointment. The joint venture has made real progress toward producing cellulosic ethanol at prices that make economic sense.
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. Lignol is included in our Earth, Wind and Fire Index in the Biofuel Group.