Algae.tec hopes to harvest share price lift with initial $10m cannabis crop
Algae.Tec is winding down its original mission to create algae-based biofuels but hasn’t yet convinced investors they’re a hot pot stock.
The company bought into cannabis this year, but is not yet feeling the ‘cannabis effect’ on their shares as other ASX pot stocks have.
Algae.tec started as an algae-based biofuel researcher with aims to supply biodiesel and bio-jet fuel. It later pivoted into nutraceuticals.
Nutraceuticals – a combination of nutrient and pharmaceutical – are products derived from food sources that have extra health benefits beyond the nutrition of the food.
Algae.Tec (ASX:AEB) shares closed up 5 per cent at 2.3c on Friday, after the company released the a fireside chat-style Q&A with chairman Mal James. But they’re down significantly from an August spike of 6.5c.
Mr James, who last week stepped into the managing director role, says cannabis is now their main focus, but admits there is still work to do.
“If you look at the rest of them [pot stocks] they’ve either come into the cannabis space fresh or they’ve been completely cleaned out as to what their previous life was, so they’re solely in the cannabis game,” he told Stockhead.
“I dare say there’s a bit of shareholder fatigue.”
Indeed, Algae.Tec has survived for seven years by raising capital for promised projects. It is yet to post a profit.
From biofuel to marijuana
Algae.Tec listed in 2011 with bleeding edge algae biofuel tech.
It pivoted in 2015 into nutraceuticals, a strategy that might start generating revenue this month, and now calls itself a “specialist plant growing company”.
The biofuel technology has provided their only revenue for the last three years, Mr James says, but the concept is winding down as a viable business.
He doesn’t expect deals with Delta and Lufthansa to make jet fuel to go foward. A contract to build a biofuel pilot plant for one of India’s biggest private companies — signed back in 2015 — will be a “vindication of our initial foray into algae for biofuels” — but may be a one-off.
Revenue on the way
Mr James says the dollars should start rolling in over the next six months.
The algae-for-nutraceuticals part of the business should start making sales by the end of the month, he says, depending on how long it takes the US processing plant to extract the oils off-take partner Gencor wants from algae powder.
Initial cannabis revenues are expected in the first half of 2018.
Algae.Tec bought into an “heirloom cannabis varietals” crop partnership with Winter Garden Biosciences in Uruguay, and bought 25 per cent of United Biosciences last week.
It said in August the first crop is expected to deliver 1000kg of oils, seed extracts and fibre products.
On Friday, Mr James said in a cannabis Q&A that industry rates suggest it’ll be worth around $10 million.
“At this stage we’re anticipating that the crop will [take] 90 days or thereabouts [to grow] so we’re looking toward the end of the first quarter in calendar 2018 for the crop to be harvested,” Mr James told Stockhead.
“From there it will either be sold as flower and seed or more likely we will have CBD [cannabidiol] oil extracted from the plant.”
No commercial contracts have been signed yet, however, but they will be looking at Canada and the more permissive European countries. They could import oils into Australia, but not flower or seed because of the country’s strict quarantine laws.
“United has a number of buying groups who will acquire processed oil from the crop scheduled for Q1 2018.”