HUN.L Regulatory News (HUN)

8 Jan 2010 12:59



GEM BioFuels Plc

("GEM" or "the Company")

Operational Update

GEM BioFuels Plc ("GEM" or the "Company"), the emerging Jatropha feedstock supplier to the global biodiesel industry, is pleased to provide the following update.

Crude Jatropha Oil ("CJO") production and Shipment

As previously announced, GEM has commenced commercial production of CJO. The first shipment of this production will occur in mid-January 2010 and will comprise two 20 foot shipping containers (approx 20 tonnes each), which are destined for Australia where they will be converted to biodiesel. A further 20 foot shipping container (approx 20 tonnes) is expected to ship approximately one week later and will be bound for East Germany where it will be used to produce electricity for inclusion in the local grid. These sales are based on individual 'spot' negotiations and do not form part of any on-going contract or off-take agreement. 

Off-take Agreement

On 16 April 2009 GEM announced that administrators had been appointed to Natural Fuels Limited ("NFL") and that the Company was in discussions regarding the future operation of its Off-take Agreement with NFL which was signed in February 2008. At present there has been no change from the previously announced position although the Company is in advanced discussions with potential alternate off-take partners and details will be announced as, and when, appropriate.

CJO Production Capabilities

GEM's recently announced commencement of commercial production is being carried out under contract using a third party oil extraction facility and is generated almost entirely from seeds obtained from the natural forest over which the Company has rights. The Company anticipates that a rate of production for 2010 of no more than 5,000 t.p.a could be achieved under this arrangement. The Company does not intend, at this point in time, to commission it own extraction facility.

In addition to it being the commencement of commercial production, current production arrangements have allowed the Company to successfully test the methodology of extraction, the appropriateness of the logistic support to commercial production and the commercial acceptability of the CJO.

Plantation Areas

As announced on 20 March 2009, the extent of GEM's current planted area is 55,700 hectares. In information previously made public, the Company reported carrying out physical plantings which total 64,900 hectares, which represents a difference of approximately 9,200 hectares. 

The difference represents areas planted but subsequently written-off. This write-off is a direct result of the Directors' adoption of a prudent approach towards asset management and results from their assessment that these areas are not likely to become commercially viable. It is worth noting that the write-off of an area does not mean that planting in the area was unsuccessful, just that the particular area is unlikely to make future harvesting commercially viable. 

The table below shows the current position of the Company's plantings.

The Company is not currently carrying out a significant planting programme for this planting season (2009-2010) as it consolidates its existing plantation areas with a view to maximising their future viability.

Enquiries

NOTES TO EDITORS

About GEM BioFuels

GEM BioFuels was founded in 2004 to capitalise on the opportunity presented by the local agricultural and socio-economic conditions in Madagascar to produce Jatropha oil for use as a biodiesel feedstock. Operations are based in the South of the island where the Jatropha tree grows wild.

The Company has secured 50 year agreements giving exclusive rights over 452,500 hectares (in excess of 1 million acres) to establish plantations, ranging in size from 2,500 - 50,000 hectares with a further 40,000 hectares of natural forest containing substantial numbers of mature Jatropha trees.

GEM BioFuels Plc was admitted to trading on AIM in October 2007.

Jatropha

Jatropha is a small tree/shrub, growing to about 5 metres in height and is well suited for use in the production of biodiesel. Jatropha trees are relatively drought resistant and suitable for cultivation in sub tropical regions. The high oil yielding seeds are mildly toxic and as such Jatropha is not a food and its use in biodiesel production does not affect the cost of living of the indigenous population. Biodiesel refined from Jatropha oil complies with international standards, including EN14214 in Europe, the major market for biodiesel.

Whilst the current production of Jatropha seed for commercial purposes is small, it is substantially increasing due to its attractiveness as a biodiesel feedstock because of its ability to grow on marginal land and the fact that it is non-edible and so does not fall foul of the 'food versus fuel' debate.