Africa-centered biofuel and oil company Energem lists on the AIM

Canada's Energem Resources Inc announced that it has been listed on the London Stock Exchange's Alternative Investment Market (AIM) and is trading under the symbol ENM. Energem is an energy and biofuels company primarily engaged in the African energy sector, with several concrete biofuel projects being implemented. Energem produces ethanol from molasses in Kenya, while the energy crop of choice for a large biodiesel project in Mozambique is jatropha curcas, the hardy shrub that yields inedible oil. Energem disposed of certain non-core mining and up-stream oil and gas assets, to focus increasingly on renewable fuels.

The company now identifies the following as its core markets:

• Mid-Stream Oil - refined oil product distribution and sales, storage and infrastructure development: operations in Nigeria and Malawi and a methanol blended fuel manufacturing and sales project in Beijing, China.
• Biofuels - production, sale and distribution of crude and refined biofuels, including: ethanol production in Kenya and a jatropha-based biodiesel development project in Mozambique (previous post)
• Trading and Logistics - procurement, supply and logistics management to industry in sub-Saharan Africa.

Energem believes that demand and growth potential in its target markets is strong and that the group is well placed in terms of its African expertise and experience to become a significant player in these markets.

Oil prices are expected to remain high whilst, at the same time, the pressure to reduce dependency on carbon-based and non-renewable sources of energy is likely to increase. This pressure is expected to develop the biofuels market in which the group is now focussed, with African countries acting as both consumers (Kenya) and exporters (Mozambique).

Mozambique
Energem has initiated its first jatropha curcas farming project in the Bilene District of the Gaza province in Mozambique. The project operations are conducted through the ventures wholly owned Mozambican subsidiary, Energem Renewable Energy.

The initial land allocated to the project (1000 ha) will be scaled up dramatically over the life of the project and it is anticipated that by the time this project reaches maturity the land size of the farming operations will be anything from 60,000 hectares to 200,000 hectares:
energy :: sustainability :: ethanol :: biodiesel ::biomass :: bioenergy :: biofuels :: jatropha :: sugarcane :: Mozambique :: Kenya :: Africa ::

The project enjoys the full support at all government and provincial levels and employs anything from 200 – 300 people, with this figure is set to increase.

It is intended that the commercial crop of jatropha seed harvested from the farming operations will be processed to produce a crude biodiesel which will be exported to the projects target market, in the European Union. Initial testing of research crops and oils produced therefrom fall within the EU specification for biodiesel.

Jatropha curcas has been specifically chosen as the projects principal feedstock crop. Jatropha is a hardy, inedible plant, whose seed produces a relatively high yield of oil when pressed. The cost of producing crude biodiesel from Jatropha is low when compared to current palm oil and rapeseed feedstock. The land on which the project is farming does not compete with ordinary feed crop land.

Kenya
Energem is the controlling shareholder in the Spectre International Ltd, which manages the Kisumu ethanol plant in Kenya. The molasses-based plant was initiated in the late 1970’s as a state-owned project that was subsequently mothballed in the eighties. It was acquired by Spectre in 2003, who immediately commenced with a rehabilitation project that resulted in the commissioning of the plant in 2004. The yeast plant was completed in 2006.

Energem is the controlling shareholder in Spectre with a 55% share. A local partner, with manufacturing and distribution experience in the region owns 40% while a development trust holds 5% for the benefit of the local community.

Independent valuation and an engineering report completed in March 2004 placed plant pre-commissioning value at US$24 million. The plant replacement value estimated at approx US$100 million, with Energem’s 55% interest included at the book value of US$24 million.

Currently a daily output of 60,000 litres has been achieved whilst Energem focuses on increasing the yeast production and maximizing the usage of natural by products. Production output of up to 120,000 litres per day can be achieved with a marginal investment.

Current products include industrial ethanol for blending with liquid (bio-fuels), potable alcohol for beverages and chemical industries, and yeast.

Besides having access to the water supplied by Lake Victoria the plant is located in the center of a sugar cane growing region where it’s most important raw material, molasses, is readily available.

The plant is well positioned to supply ethanol as a fuel additive to Kenya, Uganda and other nearby countries and this strategy is in line with local governmental aspiration and also complimentary to mid-stream oil activities of the Energem Group.

Through the introduction to the AIM the directors are seeking access to London's capital markets and a broader investor base: no new money is being raised at this stage and no existing shares are being sold by the current shareholders. Major shareholders include the Board, who in aggregate own approximately 28% of the shares in issue, RAB Special Situations (Master) Fund Limited, which holds approximately 17% of the shares in issue and RAB Energy Fund Limited, which holds approximately 8% the shares in issue. Canaccord Adams Limited is acting as Nominated Adviser (NOMAD) and broker to Energem.

References:
Energem: Energem Resources Inc - Announces listing on the London Stock Exchange - Alternative Investment Market (AIM) [*.pdf] - November 26, 2007.

Biopact: Energem acquires jatropha biodiesel project in Mozambique - August 02, 2007