In an era when grain companies are adding or building canola crushing capacity to the tune of 850,000 tonnes, it is rare to see an announcement for a 40,000 tonne plant.
“That is tiny,” acknowledged Chris Carl, chief executive officer of Bio-Extraction Inc., a Toronto firm that plans to build a small crushing facility in Saskatoon next spring.
It’s hard to fathom how such a facility could compete with Cargill’s plant 16 kilometres southeast of the city, which is in the process of doubling its crush capacity to 1.5 million tonnes.
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How can BioExx go toe-to-toe with Louis Dreyfus Canada and James Richardson International, two grain industry giants that have announced plans to build 840,000 tonne and 850,000 tonne facilities respectively in Yorkton, Sask.?
“We don’t see ourselves being competitors to the big plants but more just specialty products oriented and therefore able to operate on a smaller scale,” said Carl.
The key to the business plan is that BioExx plans to add a third high-value product to the traditional mix of oil and canola meal, a pricey protein concentrate that can be incorporated into aquaculture feeds and other applications.
Carl said the company should generate about $500 per tonne for the combination of its protein concentrate and canola meal byproducts compared to $160 to $180 per tonne for plain canola meal.
“We anticipate that our business model, uniquely enabled by our protein-retentive extraction technology, will allow us to build and operate profitable plants of moderate scale,” said the company in a News release
news.
The business model significantly reduces the risk of investing in the canola business during these times of high oilseed prices and it also enables the company to build a series of plants in rural areas that lack enough consistent canola production to support a large facility.
The company intends to build one plant a year over the next five years, roughly doubling the size of each subsequent facility but never exceeding 250,000 tonnes of capacity.
Not all plants will be built in Western Canada. BioExx has been experimenting with its patent-pending continuous counter-flow design on soy and rapeseed as well, with an eye toward establishing plants in the United States and Europe.
BioExx recently signed a memorandum of understanding to enter into an exclusive supply agreement with Viterra, Canada’s largest grain company.
Viterra will supply the Saskatoon plant with 40,000 tonnes of No. 1 canola annually. The arrangement is for five years but can be extended for another four if both parties agree.
The two companies have also agreed to work together on research and marketing initiatives surrounding the facility.
“We believe the BioExx technology offers an interesting and compelling oilseeds extraction platform,” said Fran Malecha, Viterra’s chief operating officer.
The technology revolves around using a special solvent to extract oil from the seed, while operating at a low temperature throughout the process.
“At no time from start to finish do we ever exceed 50 C,” said Carl.
In a typical extraction process, much of the canola protein is denatured because the oilseed is exposed to damaging heat or the protein becomes non-soluble, leading to an expensive and yield-limiting separation process.
By retaining the protein in its soluble state, the BioExx process makes it easier and less costly to separate. That way, it can be used to produce a concentrate with a minimum of 65 percent protein, which is what the aquaculture industry wants.
In the lab and at the BioExx pilot plant in Prince Edward Island, the company was able to retain 90 to 95 percent of the soluble protein found in canola seed.
The company has also confirmed that the low-temperature extraction process creates an oil with higher than normal nutrient levels, which it might be able to market as a premium product.
BioExx is also open to joining with a biodiesel plant. Carl said due to the economics of the protein concentrate, the company could conceivably provide the plant with cheaper oil, helping ease the margin squeeze facing today’s biodiesel operations.
The Saskatoon facility is expected to produce 8.8 million litres of oil, 16,400 tonnes of protein concentrate and 15,700 tonnes of meal. It will employ 20 to 25 people and should be operational by fall 2008.
Carl said much of the financing has already been arranged and the remainder of the $10 million should be in place by the end of 2007.
An agreement is in place to acquire land on the north end of Saskatoon. The winter will be spent finalizing the engineering plans, ordering equipment and securing adequate feedstock for the plant.
