GEM BioFuels raises £3.5 million to expand jatropha plantations in Madagascar
Biofuels firm GEM BioFuels announces it has raised £3.5 million pounds (€5/$7.2 million), with a placing at 60 pence a share to give it a market size of £16.6 million pounds as its shares start trading on AIM today.
The company will use the money to expand its Jatropha curcas plantations in Madagascar and to acquire a seed crushing plant to produce 'crude jatropha oil' (CJO).
GEM BioFuels has been established to supply feedstock to the rapidly growing global biodiesel market. It believes that one of the most significant potential constraints on the growth of this market is the relatively limited supply of biodiesel feedstock, and that this provides a significant commercial and social opportunity.
The company has entered into 18 long term land agreements with Madagascan communes in relation to 452,500 hectares (in excess of 1 million acres) to establish plantations, ranging in size from 2,500 - 50,000 hectares with a further 40,000 hectares of natural forest containing substantial numbers of mature Jatropha trees:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biodiesel :: jatropha :: plantations :: Madagascar ::
To date the company has planted 13,300 hectares of Jatropha with a further 50,000 hectares expected to be planted between October 2007 and February 2008 and a total of 200,000 hectares being planted by 2010. Based on this, the Group’s production is expected to be 45,000 tonnes per annum (tpa) of CPO in 2009 rising to 210,000 tpa by 2014, as its trees mature.
To date approximately 13,300 hectares have been planted:
In addition GEM BioFuels has an agreement in relation to 40,000 hectares containing natural forest, including significant numbers of mature wild Jatropha trees. Separately, the company also has informal arrangements with a number of individuals for the delivery of wild seed to the group’s storage facility.
GEM BioFuels joins a growing number of new plantation companies who are growing jatropha across the (sub)tropics. Most recently, British firm D1Oils entered into a joint-venture agreement with oil major BP to expand plantations and to develop high yielding jatropha varieties (previous post). The entrance of a large oil company in this sector has given the crop's prospects a boost.
However, Jatropha has its drawbacks, as it can not be harvested mechanically and requires very cheap labor. This poses the question whether harvesters can really be helped to increase their incomes substantially; with a crop like palm oil, which is harvested manually too, the labor required to harvest comparable amounts of oil is far less. Moreover, jatropha oil is toxic and its processing poses some health risks (previous post).
The crop remains a typically underresearched plant. But this is changing rapidly. Leading biotech company Bayer CropScience recently announced it has launched a research program into improving the shrub (more here).
Finally, from an investor's point of view (whether large or very small), a major dilemma emerges: in case oil prices were to drop significantly over the coming years, jatropha plantations could become unprofitable. With palm oil - which functions as a food and fuel crop - this would not be the case, as demand for palm oil as a foodstuff grows continuously in any case. Jatropha oil is not edible, and could face a collapsing market in such a scenario. The capacity to switch from food to fuel production is a major and simple way to hedge against the risk inherent in the uncertainty over medium and long term oil prices.
References:
GEM BioFuels: GEM BioFuels to float on AIM - October 19, 2007.
Biopact: Analysts: labor-intensive Jatropha not a magic bullet - September 12, 2007
Biopact: D1 Oils and BP to establish global joint venture to plant jatropha - June 29, 2007
Biopact: Bayer CropScience to increase yearly R&D budget to €750 million to meet challenges of the bioeconomy - September 11, 2007
The company will use the money to expand its Jatropha curcas plantations in Madagascar and to acquire a seed crushing plant to produce 'crude jatropha oil' (CJO).
GEM BioFuels has been established to supply feedstock to the rapidly growing global biodiesel market. It believes that one of the most significant potential constraints on the growth of this market is the relatively limited supply of biodiesel feedstock, and that this provides a significant commercial and social opportunity.
Feedstock supply is set to become one of the defining issues in the global biodiesel industry. GEM BioFuels has been established to supply crude jatropha oil as a feedstock to this rapidly growing market . By utilising jatropha, which is a non-edible, high-yielding perennial crop that is grown on semi-arid land with low water requirements, GEM BioFuels expects to be able to supply significant quantities of raw material without any negative impact on the environment or the food supply chain. In fact, our operations in Madagascar will be positive for the area of operations from both an environmental and socioeconomic perspective. - Paul Benetti, CEO of GEM BioFuelsGEM BioFuels is initially focusing on the establishment of 'company managed' plantations of Jatropha trees in Madagascar and the extraction of the vegetable oil that is produced from its seeds.
The company has entered into 18 long term land agreements with Madagascan communes in relation to 452,500 hectares (in excess of 1 million acres) to establish plantations, ranging in size from 2,500 - 50,000 hectares with a further 40,000 hectares of natural forest containing substantial numbers of mature Jatropha trees:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biodiesel :: jatropha :: plantations :: Madagascar ::
To date the company has planted 13,300 hectares of Jatropha with a further 50,000 hectares expected to be planted between October 2007 and February 2008 and a total of 200,000 hectares being planted by 2010. Based on this, the Group’s production is expected to be 45,000 tonnes per annum (tpa) of CPO in 2009 rising to 210,000 tpa by 2014, as its trees mature.
To date approximately 13,300 hectares have been planted:
In addition GEM BioFuels has an agreement in relation to 40,000 hectares containing natural forest, including significant numbers of mature wild Jatropha trees. Separately, the company also has informal arrangements with a number of individuals for the delivery of wild seed to the group’s storage facility.
GEM BioFuels joins a growing number of new plantation companies who are growing jatropha across the (sub)tropics. Most recently, British firm D1Oils entered into a joint-venture agreement with oil major BP to expand plantations and to develop high yielding jatropha varieties (previous post). The entrance of a large oil company in this sector has given the crop's prospects a boost.
However, Jatropha has its drawbacks, as it can not be harvested mechanically and requires very cheap labor. This poses the question whether harvesters can really be helped to increase their incomes substantially; with a crop like palm oil, which is harvested manually too, the labor required to harvest comparable amounts of oil is far less. Moreover, jatropha oil is toxic and its processing poses some health risks (previous post).
The crop remains a typically underresearched plant. But this is changing rapidly. Leading biotech company Bayer CropScience recently announced it has launched a research program into improving the shrub (more here).
Finally, from an investor's point of view (whether large or very small), a major dilemma emerges: in case oil prices were to drop significantly over the coming years, jatropha plantations could become unprofitable. With palm oil - which functions as a food and fuel crop - this would not be the case, as demand for palm oil as a foodstuff grows continuously in any case. Jatropha oil is not edible, and could face a collapsing market in such a scenario. The capacity to switch from food to fuel production is a major and simple way to hedge against the risk inherent in the uncertainty over medium and long term oil prices.
References:
GEM BioFuels: GEM BioFuels to float on AIM - October 19, 2007.
Biopact: Analysts: labor-intensive Jatropha not a magic bullet - September 12, 2007
Biopact: D1 Oils and BP to establish global joint venture to plant jatropha - June 29, 2007
Biopact: Bayer CropScience to increase yearly R&D budget to €750 million to meet challenges of the bioeconomy - September 11, 2007
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