Aurora Algae unveils new business plan

Posted Oct. 27, 2010

Aurora Algae Inc. is in the process of constructing a demonstration-scale facility in northwestern Australia, which is expected to be operational by the end of the year. Plans for an adjacent commercial-scale plant are also underway.

The company, formally known as Aurora Biofuels Inc., recently changed its name to reflect a new focus. According to Aurora CEO Greg Bafalis, the original focus of the business was on biofuels development, but with the name change Aurora has shifted its focus to algae production. "When I joined the company it was really apparent to me that the platform is algae-and what you can make from that algae," he said. "So, we've transitioned into what I call higher value products, such as omega-3 EPA. Moving towards those higher-value products allows us, with our current yields and current cost structure, to actually go out and build a commercial facility in a profitable manner."

While Aurora plans to initially focus on the production of high-value algae-based products, the company hasn't abandoned the idea of biofuels production. "We haven't completely dropped biodiesel production," Bafalis said. "I would say instead of being the primary product, it's more of a byproduct in our process." Ramping up and optimizing a new technology is always an expensive and time consuming process, he continued. "By going towards higher-value products, it gives us the time to go out on a very large commercial scale and prove out our system, grow our algae, and find the optimizations we need to get the costs in line to produce a product like biodiesel," Bafalis said. "We think the evolution will be there, and down the line-whether its five years or 10 years-maybe the costs will come into line, and at that point we'll not only to serve the attractive markets that we are going after in nutriceuticals, but also evolve back into the fuel markets."

Work on Aurora's demonstration-scale facility is nearly complete. "Over the past 10 months, we have been developing and constructing a demonstration facility in northwestern Australia," Bafalis said. "We currently have 38 micro-ponds, which are basically two square-meter ponds. We've been growing algae in those ponds for the past few months and gathering a lot of very important data. We are also in the middle of constructing six one-acre raceway ponds, which will come into operation at the end of the year."

Aurora is also in the process of permitting and securing land rights to build a large-scale commercial facility adjacent to the demonstration plant. According to Bafalis, construction on that facility could begin as soon as 2012. The goal is to have all the required permits in hand to construct and operate the commercial facility in hand by the fourth quarter of 2011, Bafalis said. "We've already secured a CO2 supply, and we're looking to actually be in a position to break ground in January 2012 and be operating by January 2013," he continued.

The exact production capacity of the two facilities has not yet been determined. "We're actually gathering growth data right now in Australia, so the definitive amounts have not been determined," Bafalis said. "We believe that those facilities will focus primarily on biomass production, so we're looking at somewhere in the neighborhood of 30,000 to 40,000 tons per year of biomass produced out of the large commercial scale facility. Out of that we'll extract our omega-3 EPA oil as well as produce some biodiesel."

According to Bafalis, Aurora has developed a pale green cultivar of algae. "In very simplified terms, it lets light penetrate farther into the pond and creates a much higher yield in production," he said. "So we are able to get better penetration of light, better use of energy, better efficiency, and therefore better yield from the algae. We have some proprietary process enhancements on how we mix our ponds, how we move the water, and the shape of the ponds, but it's basically the traditional open-pond concept."

The extraction process that Aurora has developed is based on existing industrial processes used in wastewater treatment and traditional agriculture, Bafalis said. "It's basically a traditional hexane extraction…and the harvesting that we use is basically a flocculation with other systems used in wastewater treatment," he continued. "We've gone the very traditional route, so that we can actually ensure that we can achieve the results we say we can."

Aurora has a total of 27 patents for its biology and technology platform. "We believe that based on existing data, we can achieve the costs that we need to make our process profitable," Bafalis said. "Without going into all of the proprietary details, I think that some of our cultivation and harvesting techniques allow us to do it in a very cost effective, energy efficient manner. Energy is your biggest cost in growing and producing algae, and we've been able to reduce those costs significantly with some of the enhancements we've done to this traditional equipment." While Bafalis said he can not disclose the projected price for Aurora's algae oil products, he did say that based on what they've seen in the marketplace and the projected cost of production, Aurora believes that the business will be very profitable.

According to Bafalis, one of the primary benefits of Aurora's new business plan is that focusing on higher-value markets will allow more rapid scale up and commercialization of the technology. "I think if we stayed on the biofuel-basis approach, right now we'd be like everyone else and talking about five to 10 year horizons," he said. "I think we've positioned ourselves nicely to go out and develop a large-scale business on a much more rapid basis with a defined plan to actually be in operation by 2013."