Revenue Model Question?...TheRock07, or anyone who would like to discuss this please do.
I've been crunching some numbers regarding the HP-L Lignin market potential as stated by LEC in the latest financials, and the revenue model posted by TheRock07 in a previous post dated June 14/11 and have some input and questions regarding Lignol's potential revenue model moving forward.
No doubt that the global ethanol market is huge. Global estimates are that the world ethanol market will reach 27.7 Billion gallons by next year 2012. (see link
https://www.prweb.com/releases/ethanol/fuel/prweb1584644.htm)
Using TheRock07's calculations and the potential market for HP-L Lignin stated in LEC's financial, I've calculated that Lignol may only be able to produce approx. 444 Million gallons of ethanol annually as a by-product of their patented technology.
Here's how I came to this conclusiong and please I would like to read some feedback when possible. First off Lignol's MD&A states the following:
HP-LTM lignin can be used in place of oil derivatives and as a base product enabling
the development of many new specialty chemical product applications which have a potential
industrial scale market opportunity which has been valued in excess of US$2.0 billion.
So if HP-L Lignin has a potential annual market of US$2 Billion, then using a selling price of $1500 per ton or 0.75 per lb, that would give them an annual production capacity of 2.666 billion lbs HP-L Lignin.
Now from TheRock07's revenue model, which I believe to be correct, for every 6 lbs HP-L Lignin produced, 1 Gallon of ethanol is produced as a by-product. I don't know what the cost to produce the ethanol will be, but those costs should be more than offset by the sales of HP-L Lignin.
So by my calculations, 2.666 billion lbs of HP-L Lignin ( which is the equivalent of the $2 Billion annual market for HP-L Lignin stated by the company) would give way to the production of 444.4 Million gallons of ethanol annually,
No doubt, Lignol's market is vast. $2 Billion annually for HP-L Lignin and another $890 Million in annual ethanol sales as a by-product is great, but this approach may not be what ultimately makes the production of cellulosic ethanol competitive for the overall market, as it seems the overall market for HP-L Lignin is not big enough to sustain the production for ethanol demand. JMHO
Again, any input is appreciated. Still quite bullish, just don't believe Lignol's approach will be able to replace a major portion of the ethanol producers, but it will make for a great niche business that will be worth $$Billions. For a company with a $12 million market cap, the current potential should speak for itself.