RE: FP Innovations & LEC Sign Deal...This is another excellent example of high-value commercial applications for Lignol's cellulose as well as product diversification opportunities for the forest products industry within a framework of environmental sustainability.
Once again....and a mark of Lignol,s excellence.....we are in another JV with one of the worlds largest forest research organizations
FPInnovations' staff numbers more than 500 and have world-renown expertise and intellectual property in developing materials that address the increasing global demand for natural and renewable products to replace fossil-carbon and mineral-based materials.
The Joint Development and Commercialization Agreement aims to develop new, high-value applications for the cellulose produced by Lignol's biorefining process which will ffurther enhance the economics of Lignol's biorefining platform and diversify the markets for their technology worldwide
Success under this agreement should result in the development of high value cellulose products that can have applicability to the Canadian forest products industry which has millions of tons of waste and diseased product.
It is this type of JV research and collaborative developments which will add diversified revenue streams and expedite commercial applications of Lignol's expanding product suite.
Re Lignol's revenue model, it is a dual approach that turns ethnanol production on its heels.
Lignol's objective is to develop a biorefinery that uses non-food feedstocks tr create high value HP-L products which will make ethanol production independent of gasoline price cyclicity and Govt subsidies.
It also strives to produce ethanol at cash costs independent of HP-L derivative that will match those of commercial gasoline refiners ( ie about $2 per gallon ).
If it is successful with HP-L derivatives ( as now seems to be probable ), it will still be a very profitable operation almost regardless of the ethanol refining costs ( within reasonable limits ).
If it is able to reduce ethanol production costs to $2 per gal, it will be successful regardless of the value of the HP-L products.
In my humble opinion, I think they will be successful on both objectives.
Lignol's proposed initial biorefinery is engineered to produce 20 million gal of ethanol and 55,000 tons of lignin per year......approx $120 million in gross sales.
Typical costs of corn-based ethanol $4 pr gal when oil is at $100 per barrel ( gasoline is now about $3 per gal )
That is, cash costs will be about $80 mi lion to produce 20 million gals of biorefined ethanol.
Lignol will do bettter than this, as it will use lower cost forest and pulp wastes as the feedstock.
But, even assuming a cost of $ 80 milion, the HP-L lignin will cover about $60 million of this cost resulting in a net cash cost of about $20 million or about $1 per gal.
Hence, a net margin on net ethanol production of 50 %.
Thats why a home run is quite possible here...........