Investment buys quota | Company hopes to sell 30,000 tonnes of quota to run at full capacity
A Saskatoon company is attempting to breathe life back into a mothballed canola crushing plant north of the city.
Virtex Farm Foods is proposing to reopen the crushing plant previously owned by BioExx Specialty Proteins, an Ontario company that extracted soluble protein from canola seed.
BioExx closed the plant last April and was granted creditor protection later in the year.
The BioExx plant has since been sold to a numbered company, 5085732 Alberta Ltd.
Virtex Farm Foods has been leasing the facility from its new Alberta owner since November and is hoping to use it to run a farmer-directed canola crushing business that produces non-genetically modified oil from Clearfield canola varieties.
“The non GMO canola oil market is … doing fairly well and it’s got a tremendous upside potential,” said Rick Pender, president of Virtex Grain Exchange, a group marketing venture.
“The non-GMO versus GMO labelling issue that’s going on in the United States right now is raising a lot of consumer awareness.”
Pender, who devised the plan to resurrect the plant, said Virtex is selling quota in the crushing facility in 40-tonne blocks.
A one-time investment of $2,000 buys a farmer the right to deliver 40 tonnes of Clearfield canola per year.
Producers will be paid at the point of delivery and prices will be based on nearby canola futures at ICE Futures Canada, zero basis.
“What farmers buy … is quota,” Pender said.
“Right now, it’s $50 a tonne and we’re selling it in 40 tonne truck load lots, so basically a Super B. They buy that once and then they have the right to (deliver that amount of canola) every year.”
Growers who buy into the operation will also share in the company’s annual profits, with 50 percent of annual net income divided equally among farmer investors.
Pender said crush capacity at the plant is estimated at 30,000 to 35,000 tonnes annually.
The company has already sold most of the available quota, much of it last summer to farmers who are part of Virtex Grain Exchange.
Farmer equity in the venture will be $1.5 million if Virtex Farm Foods sells 30,000 tonnes of quota, which is enough to run the plant at full capacity.
Virtex’s lease agreement contains a lease-to-own provision that would allow it to buy the plant outright from the current Alberta owner.
The BioExx plant was built in 2009 and was scheduled for expansion in 2010.
It extracted protein from canola to make human-grade food and nutrition products.
BioExx secured a $2.95 million repayable loan from the federal government’s Agri-Opportunities Program in late 2009, three years before it was granted creditor protection. The money was to be used to expand the plant’s crushing capacity.
Pender was involved in a venture a few years ago that proposed building a $200 million debranning plant near Rosthern, Sask., 65 kilometres north of Saskatoon.
Promoters of that project said the $200 million plant would produce bran for health bars and 140 to 180 million litres of ethanol per year, using material left over from the debranning process.
The Rosthern project never got off the ground.
Pender said the deal fell through in 2008 when the Ontario company behind the venture failed to secure financing.