More Good News!Lignol Energy has enough cash to run to March, 2012
2011-09-27 08:58 ET - Shareholders Letter
Mr. David Turner reports
LIGNOL UPDATES SHAREHOLDERS AS PART OF ITS ANNUAL FILINGS
Lignol Energy Corp. has filed its management information circular in conjunction with its annual meeting of shareholders planned for Oct. 20, 2011.
In addition to the circular, the company also updated shareholders on a number of corporate matters. The text of the letter to shareholders is as follows:
To our shareholders,
The past year has seen a renewed interest in advanced biofuels, and now recognition from the market of the importance that renewable chemicals will also play in commercializing biorefineries; trends that play into the strength and appeal of the Lignol biorefining platform. While our value in the public markets has yet to reflect this change, Lignol continues to enjoy considerable support and increasing interest from industry and government stakeholders who recognize the importance of our technology and the achievements we continue to make.
We are seeing considerably more corporate interest in our technology than ever before and several high-profile IPO's have come to market in our sector at considerable valuations in the last year. It is against this backdrop that we have recently announced the engagement of CIBC World Markets and Capital West Partners to assist us with arranging investment from strategic investors as we prepare to develop our initial commercial projects. When considering our stage of development and assessing our accomplishments to date, Lignol appears well positioned to capitalize on the renewed interest in this sector and attract the necessary strategic partners and investors that will enable us to commercialize our biorefining platform.
In Fiscal 2011 we set out to achieve three primary goals:
Continued development of high-value applications for our HP-LA lignin;
Increasing the strength of our intellectual property portfolio; and
Development of strategic partnerships necessary to construct a commercial demonstration plant.
We increased the number of HP-LA lignin product development projects being undertaken in collaboration with industry leaders in both the corporate as well as research sectors, and commenced sales of tonnage quantities for several industrial trials and applications. The Company has previously announced several Joint Development Agreements (JDAs) for the development and commercialization of applications for its HP-L lignin with a number of its strategic partners in the resins, coatings and rigid foams sectors. One example of this was announced on April 11, 2011 regarding development and trials of Lignol's first renewable chemical product; a resin adhesive formulation using HP-L lignin for the production of Oriented Strand Board (OSB).
Lignol and FPInnovations are now engaged with a major forest products company in further industrial trials. Another example includes the success reported in July 2011 with the production trials of a new foundry resin formulation using HP-LA lignin conducted by HA International LLC (HAI) at a customer's foundry for the production of metal castings for ferrous and non-ferrous impellors used in a variety of pumping applications. We continue to negotiate the terms of a supply agreement with HAI and evaluation of other formulations within their product line to incorporate HP-L lignin.
Several of these arrangements involve shipments of HP-LA lignin for evaluation by partners and their customers to ensure functionality and quality under a range of conditions. As per the terms of the JDAs, many of these trial results remain confidential until both parties conclude a supply contract or an off-take agreement.
The Lignol intellectual property portfolio has increased to more than 60 patents in various stages of prosecution. In June, 2011, we received confirmation from the Canadian Intellectual Property Office that our first Canadian patent application had been approved. Our approach has not only been to develop patent protection for our process but also for the outputs of our process including unique application and composition of matter patents for our HP-LA lignin. We believe this represents considerable value to Lignol especially as this sector develops and the importance of biorefining and lignin in particular, becomes entrenched.
Our goal to develop strategic partnerships to construct a commercial demonstration plant did not materialize as we had set out to achieve at the start of Fiscal 2011.This was partly due to the fact that we did not complete our major body of engineering designs until this past spring and because we had not secured off-take agreements sufficient for a commercial project. It also became apparent that partners and investors would be seeking to invest in a commercial project instead of a demonstration scale plant. Accordingly, in July 2011 we announced agreement with the U.S. DOE to phase out work on the funding award for a demonstration project.
On April 18, 2011, Lignol announced completion of an engineering design package for a commercial scale biorefinery that would produce up to 80 million litres of cellulosic ethanol and 55,000 tonnes of HP-Lignin annually. The design package was developed with PAparagraphyry Engineering, one of the world's leading pulp and paper and biorefining engineering companies. Additional campaigns in Lignol's pilot-scale biorefinery are ongoing to refine the design basis and equipment selection needed for scale-up in order to complete an investment grade design and cost estimate for a commercial plant. We are examining opportunities in North America for commercial projects which take into account feedstock and synergies with existing infrastructure along with financial support from various governments and prospective partners.
It has become increasingly apparent that that the timing and scope of our initial commercial projects will largely be governed by the off-take agreements we establish for our unique HP-L lignin. As such, we have recently made a strategic shift in emphasis to focus more of our resources into delivering off-take agreements for our HP-L lignin in the coming year. During the past year, Colin South joined Lignol as Chief Technology Officer and several leading lignin researchers joined Lignol in preparation for an increased focus on HP-L applications development.
Lignol now has active development agreements in place with major companies across major elements of the value chain for our biorefinery platform. Both Novozymes and Metso have recently joined our SDTC funded industrial consortium; Novozymes, as our key partner for enzymatic conversion of cellulose to ethanol and Metso, as a developer and supplier of key customized components for our industrial process. Lignol and FPInnovations, one of the world's largest private, not-for-profit forest research organizations, recently announced a joint development and commercialization agreement to develop new, high-value applications for cellulose produced by Lignol. We have also expanded our "open innovation" and commercialization programs for HP-LA lignin applications to include leading research institutes and universities in Canada and the U.S., thus adding breadth to our capacity and reach into novel and high-value applications.
Lignol continues to believe that the information being generated from its pilot plant provides a significant competitive advantage over those competitors who have yet to build one. Our facility represents one of only a handful of fully integrated, second generation cellulosic ethanol pilot plants operating in the world today and the only known source of producing industrial scale quantities of organosolv type lignin and Lignol's unique HP-LA lignin and their derivatives engineered for specific industrial applications.
Another important benefit of continued investment in ourpilot-scale biorefineryis that we believe it will avoid the need for a demonstration-scale plant and allow Lignol to go directly to a commercial scale project.
With so many positive accomplishments in hand and active corporate engagements in place, we believe Lignol is well positioned to attract the appropriate investments needed to achieve its primary goals for Fiscal 2012. These include:
Achieving the cost targets set for cellulosic ethanol with Novozymes
Establishing off-take agreements for our products, especially HP-L lignin
Strategic partnerships and government funding for initial commercial projects
At this time last year we reported that we anticipated having sufficient cash to fund Baseline Operations until May 2011. As a result of increased non-dilutive contributions received from corporate partners and government programs, together with effective financial management, we have reported on continued extensions and now report that we expect to have sufficient resources available to fund Baseline Operations to March, 2012. The recent engagement of CIBC World Markets and Capital West Partnersis an important step for Lignol as we consider investment from industry and financial investors who have a strategic, long term interest in advanced biofuels, renewable chemicals and forest industry transformation. The specific form and structure of any financing will take into account discussions with financing sources and market conditions and ultimately influence our plans and objectives for 2012.
On behalf of Lignol's Board of Directors, management and all of our employees, we thank you for your continued support and we look forward to updating you on our ongoing progress.
We seek Safe Harbor.