Investors Begin To Differentiate Solazyme's Unique Technology [View article]
seekingalpha2013,
Thank you for writing that. Just for clarification, your scenario essentially states that you believe sugar production costs will amount to $1667 per MT of oil, which is a high cost, but likely not one that hampers the business model in its target markets even after factoring in the additional costs to mfg. Recall they're targeting markets >$2000/MT
However, I believe you make several assumptions that are incorrect.
1) Sugar to biomass is a hard one to prove, but table 5 of this link here (http://bit.ly/13if0cr) suggests the that concentration has a much larger range than 0.4 depending on strategies used. Looking just at the glucose results, I see in that this table that suggest yields of 0.28 - 0.69.
2) While it makes sense to use a 60% yield given the announcement of the achievement referenced in my article above, recall that the SZYM is still developing that oil profile. The typical yield will likely be >80% yield. Here's how a lot of the various patent information reads: "In various embodiments of the present invention, the harvested biomass comprises a lipid content of at least 5%, at least 10%, at least 15%, at least 20%, at least 25%, at least 30%, at least 35%, at least 40%, at least 45%, at least 50%, at least 55%, at least 60%, at least 65%, at least 70%, at least 75%, at least 80%, at least 85%, or at least 90% by DCW"
The company website also asserts >80%, which is probably what one should expect.
3) Also lets consider the sugar price itself. According to ICIS (http://bit.ly/16QcIHP), the current sugar price as of 6/7/13 is $0.1638/pound which translates into $0.3611/kg. This small technicality makes a big difference, but lets consider these additional points: A) SZYM is getting sugar below market value; B) One might theorize that SZYM can even use sugarcane prior to it being entirely refined thereby saving some costly steps.
So here's a possible scenario utilizing your calculations above with these thoughts in mind. Let's presume the company has spent the last 10 years honing down their practices and was able to replicate a sugar to biomass yield of 0.5. Let's also presume that they maintained an 80% lipid yield as their website suggests. Last of all, and this might be the hardest to assess, but lets presume their sugar prices is actually at $0.15/pound or $0.331/kg. What does this calculation look like?
1 kg* 0.5*0.8= 0.40 kg oil. 0.331/0.40 = 0.8275
This means that base sugar costs could be around $828/MT based on the possible calculations above.
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Str8ghtShooter,
Remember that most of those are patent applications rather than assigned patents. To date, Solazyme appears to have 13 assigned US patents according to the USPTO. I believe patents are accepted on the basis of who filed first though, so in many respects they're practically patents. You listed a nice collection though. Thank you for that.
Also, if there's been any symbiosis of late I doubt I had anything to do with it. My perspective has never changed in regards to what's going on here.
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
I've been in your shoes. I really have. But then I did a lot more research into what was coming out. Undoubtedly, there are a lot of failures still circulating out there, but I must tell you you're barking up the wrong tree if you think this is going to be one of them. Wish you the best.
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Durwood Dugger,
Thank you for reading. Based on your comment and your most recent article, I'm assuming that you have a healthy skepticism to the outlook of this industry. While you are right that I left out production cost metrics, I believe these will show their face over the next two years. That being said, while you might therefore conclude these results are disproving, I would actually contend that they have yet been given a chance.
You refer to Solazyme's growing losses and yet seem unaware of how they've actually been derived. Indeed an analysis of product revenues shows that the company is growing just fine and has actually been supporting a healthy gross margin around 60-70%. The reason for the losses has been due to inconsistent research & development and a significant increase in staff & operational expenses as the company ramps up its operations in preparation for its next stage.
As for the market demand, I still wonder why people continue to question this at all. The company is adding value to existing oil markets. If anything, their products will be chosen first over the existing market. As the CFO said in the latest interview, the base scenario (ie worst case scenario) is that SZYM is going to strictly replace existing oil markets. Given the quality of partnerships coming in, I would imagine that unless you deny the existence of a plant-oil market, this shouldn't even be a concern.
Yet for all these thoughts, there are values not made clear for you & me. We're talking about freeing up capital, reducing logistics expenses, reducing time to market, increasing quality & reliability, etc etc. These are the thoughts that management has been saying their partners are excited about. Its funny that investors are concerned about whether the value is there, and the partners are excited about the value outsiders can't even calculate.
Imagine having to operate your company's business around a single timed purchase from Asia every year. You have to have enough capital, predict if the order will be in order, have enough capital, find somewhere to put stuff & store it, etc etc. Now imagine being given the chance to make up to 52 purchases from the store next door. That's the difference between the existing plant harvest cycle and Solazyme's new business model.
However, if you want straight costs. Recall that the S-1 stated the company believed in 2011 they could produce oils @ <$1000/MT when in the proper facility. Sugar costs have actually fallen since then: http://bit.ly/14u0hdK
Solazyme Provides An Alternative To The Oilseed Industry [View article]
H2KOLOB,
I'm curious why you're so convinced that the company is competing against the farmer (based on your last two comments). Rather, it would seem that Solazyme is helping the farmer out by providing a higher return on their output. They're opening up the amount of demand by allowing the farmer to provide feedstock capable of producing higher margin products.
The point about the yield per acre was to show that it now takes less resources (costs) in order to produce a similar amount of value. If it takes 7 farms to essentially provide a similar level of output in terms of volume & quality than it does of 1 farm producing another feedstock, a fair market will naturally balance out the supply and demand of each. Yes it is true that soy crush serves as another source of revenue. But what makes you doubt that algae biomass won't be be just as important? Additionally, what makes you think that sugarcane biomass won't be just as useful in reducing costs down the road?
I have a feeling this could lead into a rather tedious debate of speculation so unfortunately this will be my only reply. The floor is yours, good sir. :)
Solazyme Provides An Alternative To The Oilseed Industry [View article]
"ultimately competes with the acreage for growing food"
On the contrary, I would've hoped my article shows that it can be quite the opposite. This process can make use of acreage significantly more efficiently in some instances. If two similar products can be made with one utilizing significantly less resources, a free market economy will allow for the efficiency to eventually naturalize itself out. We're talking about many, many years (perhaps even decades) before NEEDING to have cellulosics & other sugar sources. Re-purposing of the land will just equate to more sugarcane/beet/corn etc production & less soy production (for example) & greater yielding outputs altogether.
Solazyme Provides An Alternative To The Oilseed Industry [View article]
There's a lot going on here. But from a pure production expense standpoint, it would appear we're looking at $466/acre for sugar & $408/acre for soy. But there's plenty of more factors to consider.
Either way, the primary concern I was attempting to address was the concept of indirect land use that biofuels is often criticized for. By using this process society may actually benefit from making much more efficient use of arable land. What might get even more interesting is when you start comparing the resources farmed on very niche areas of land.... ie coconuts.
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Thank you for writing that. Just for clarification, your scenario essentially states that you believe sugar production costs will amount to $1667 per MT of oil, which is a high cost, but likely not one that hampers the business model in its target markets even after factoring in the additional costs to mfg. Recall they're targeting markets >$2000/MT
However, I believe you make several assumptions that are incorrect.
1) Sugar to biomass is a hard one to prove, but table 5 of this link here (http://bit.ly/13if0cr) suggests the that concentration has a much larger range than 0.4 depending on strategies used. Looking just at the glucose results, I see in that this table that suggest yields of 0.28 - 0.69.
2) While it makes sense to use a 60% yield given the announcement of the achievement referenced in my article above, recall that the SZYM is still developing that oil profile. The typical yield will likely be >80% yield. Here's how a lot of the various patent information reads:
"In various embodiments of the present invention, the harvested biomass comprises a lipid content of at least 5%, at least 10%, at least 15%, at least 20%, at least 25%, at least 30%, at least 35%, at least 40%, at least 45%, at least 50%, at least 55%, at least 60%, at least 65%, at least 70%, at least 75%, at least 80%, at least 85%, or at least 90% by DCW"
The company website also asserts >80%, which is probably what one should expect.
3) Also lets consider the sugar price itself. According to ICIS (http://bit.ly/16QcIHP), the current sugar price as of 6/7/13 is $0.1638/pound which translates into $0.3611/kg. This small technicality makes a big difference, but lets consider these additional points: A) SZYM is getting sugar below market value; B) One might theorize that SZYM can even use sugarcane prior to it being entirely refined thereby saving some costly steps.
So here's a possible scenario utilizing your calculations above with these thoughts in mind. Let's presume the company has spent the last 10 years honing down their practices and was able to replicate a sugar to biomass yield of 0.5. Let's also presume that they maintained an 80% lipid yield as their website suggests. Last of all, and this might be the hardest to assess, but lets presume their sugar prices is actually at $0.15/pound or $0.331/kg. What does this calculation look like?
1 kg* 0.5*0.8= 0.40 kg oil. 0.331/0.40 = 0.8275
This means that base sugar costs could be around $828/MT based on the possible calculations above.
Kevin
Solazyme Wants To Fill Your Stomach, Not Your Gas Tank [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Remember that most of those are patent applications rather than assigned patents. To date, Solazyme appears to have 13 assigned US patents according to the USPTO. I believe patents are accepted on the basis of who filed first though, so in many respects they're practically patents. You listed a nice collection though. Thank you for that.
Also, if there's been any symbiosis of late I doubt I had anything to do with it. My perspective has never changed in regards to what's going on here.
Kevin
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Investors Begin To Differentiate Solazyme's Unique Technology [View article]
Thank you for reading. Based on your comment and your most recent article, I'm assuming that you have a healthy skepticism to the outlook of this industry. While you are right that I left out production cost metrics, I believe these will show their face over the next two years. That being said, while you might therefore conclude these results are disproving, I would actually contend that they have yet been given a chance.
You refer to Solazyme's growing losses and yet seem unaware of how they've actually been derived. Indeed an analysis of product revenues shows that the company is growing just fine and has actually been supporting a healthy gross margin around 60-70%. The reason for the losses has been due to inconsistent research & development and a significant increase in staff & operational expenses as the company ramps up its operations in preparation for its next stage.
As for the market demand, I still wonder why people continue to question this at all. The company is adding value to existing oil markets. If anything, their products will be chosen first over the existing market. As the CFO said in the latest interview, the base scenario (ie worst case scenario) is that SZYM is going to strictly replace existing oil markets. Given the quality of partnerships coming in, I would imagine that unless you deny the existence of a plant-oil market, this shouldn't even be a concern.
Yet for all these thoughts, there are values not made clear for you & me. We're talking about freeing up capital, reducing logistics expenses, reducing time to market, increasing quality & reliability, etc etc. These are the thoughts that management has been saying their partners are excited about. Its funny that investors are concerned about whether the value is there, and the partners are excited about the value outsiders can't even calculate.
Imagine having to operate your company's business around a single timed purchase from Asia every year. You have to have enough capital, predict if the order will be in order, have enough capital, find somewhere to put stuff & store it, etc etc. Now imagine being given the chance to make up to 52 purchases from the store next door. That's the difference between the existing plant harvest cycle and Solazyme's new business model.
However, if you want straight costs. Recall that the S-1 stated the company believed in 2011 they could produce oils @ <$1000/MT when in the proper facility. Sugar costs have actually fallen since then: http://bit.ly/14u0hdK
Kevin
Solazyme Provides An Alternative To The Oilseed Industry [View article]
You failed to do your research. Try again.
Kevin
Solazyme Provides An Alternative To The Oilseed Industry [View article]
I'm curious why you're so convinced that the company is competing against the farmer (based on your last two comments). Rather, it would seem that Solazyme is helping the farmer out by providing a higher return on their output. They're opening up the amount of demand by allowing the farmer to provide feedstock capable of producing higher margin products.
The point about the yield per acre was to show that it now takes less resources (costs) in order to produce a similar amount of value. If it takes 7 farms to essentially provide a similar level of output in terms of volume & quality than it does of 1 farm producing another feedstock, a fair market will naturally balance out the supply and demand of each. Yes it is true that soy crush serves as another source of revenue. But what makes you doubt that algae biomass won't be be just as important? Additionally, what makes you think that sugarcane biomass won't be just as useful in reducing costs down the road?
I have a feeling this could lead into a rather tedious debate of speculation so unfortunately this will be my only reply. The floor is yours, good sir. :)
Kevin
Solazyme Provides An Alternative To The Oilseed Industry [View article]
On the contrary, I would've hoped my article shows that it can be quite the opposite. This process can make use of acreage significantly more efficiently in some instances. If two similar products can be made with one utilizing significantly less resources, a free market economy will allow for the efficiency to eventually naturalize itself out. We're talking about many, many years (perhaps even decades) before NEEDING to have cellulosics & other sugar sources. Re-purposing of the land will just equate to more sugarcane/beet/corn etc production & less soy production (for example) & greater yielding outputs altogether.
Solazyme Provides An Alternative To The Oilseed Industry [View article]
Solazyme Provides An Alternative To The Oilseed Industry [View article]
Either way, the primary concern I was attempting to address was the concept of indirect land use that biofuels is often criticized for. By using this process society may actually benefit from making much more efficient use of arable land. What might get even more interesting is when you start comparing the resources farmed on very niche areas of land.... ie coconuts.
Solazyme Provides An Alternative To The Oilseed Industry [View article]
sugar -
http://bit.ly/10U0Ivs
soy -
http://bit.ly/101M3CV