Algae.Tec to tap nutraceuticals in move to commercial-scale production

ASX-listed advanced renewable algae company Algae.Tec has been given the green light to develop its algae production system on a commercial scale, after receiving official confirmation its technology works at an industrial level.

After 12 months working to prove its algae growth system in an industrial setting, the Perth-based company announced on Wednesday that it received a Validation Report from Sydney Environmental and Soil Laboratory, a National Association of Testing Authorities (NATA) approved company.

Algae.Tec chairman Roger Stroud said the algae yields achieved were of a sufficiently high level to justify the establishment of the dedicated production facility at Nowra, south of Sydney in NSW, and the company would now launch into the commercialisation phase of its development, in the hope of “rapidly delivering positive cash flows.”

The company, whose share price slumped from 26 cents in July to 10 cents due to funding concerns, says it is now focused on the nutraceuticals market – estimated to be worth $205 billion by 2017 – as the main means by which to establish a strong, profitable revenue base.

As part of this plan, Algae.Tec has entered an exclusive Collaborative Agreement with Melbourne-based company, Nutrition Care Laboratories – a significant manufacturer and marketer of high value nutraceuticals for many of the best know nutraceutical brands in Australia and internationally, with a focus on Asian markets in particular.

Algae.Tec says its shift towards making algae-based nutraceuticals – dietary supplements that support physical and mental health – and away from algal fuels, was influenced by the low capital costs of the former, as well as the potential for high gross margins on revenue, and significant market potential.

Its closed growth system is also considered to be perfect for nutraceutical products, with all inputs able to be controlled, producing a consistently high quality product. Algae.Tec products are also free of impurities and all agricultural chemicals, such as pesticides and herbicides.

“A decision has been made to focus, in the short term, upon the growing of high quality, high value, nutraceuticals, with an immediate focus on Chlorella and B-Carotene algae. Other nutraceutical algae products will follow,” said Stroud.

Chlorella is an increasingly attractive high protein, nutritional food source, which is highly sought after in Asia. B-Carotene is in demand as a nutritional supplement for vision, immunity and overall health.

Anticipated production of Chlorella, and B-Carotene, is expected to be 2,000 tonnes in 2014, up to 4,000 tonnes in 2015, with a target of 8,000 tonnes in 2016, and 10,000 tonnes by 2017.

Indicative wholesale prices for the Chlorella and B-Carotene are currently $16,000 and up to $90,000 per tonne, respectively. The algae is 100% used as the product. A healthy gross margin on revenue is anticipated as capital costs are expected to be in the vicinity of $7,000 per tonne.

Meanwhile, Algae.Tec will continue to develop its biofuel initiatives at the Atlanta, US facility it holds through its wholly owned subsidiary, Algae Energy Inc. Sources of capital are expected to be equity, tax rebates and internal cash flow.

The Company has entered into a long term lease at an industrial warehouse complex in Nowra. This will facilitate a rapid start up of production.