Eco Innovator November 2011


Algae Can Help Declining Fish Stocks

Along with its potential for clean energy, algae can also help solve the problem of overfishing and declining ocean fish stocks.

Brisbane company Qponics Ltd plans to grow algae to sell into the high-growth, billion-dollar, global omega-3 oils market. The company is developing what it says is a unique production system for quality DHA (Docosahexaenoic acid) and EPA (Eicosapentaenoic acid) omega-3 oils.

The company plans to build its first operational plant in the Camden area 60 kilometres south west of Sydney. This will integrate the cultivation of algae into a sustainable aquaculture-horticulture process.

Qponics says the global DHA/ EPA omega-3 oil market is presently $2.5 billion. It exceeds 85,000 tonnes and is growing at 14 per cent. This growth has been assisted with products incorporating omega-3 emerging as strong players in the functional foods sector.
But more than 95 per cent of this market consists of fish oil.

"There is rapidly increasing demand globally for DHA/ EPA omega-3 oils. Deep-sea fish are presently the most common source but their numbers are in global decline, and most vegetarians around the world do not consume fish or fish oil. These factors signaled a major market opportunity for omega-3 oils produced from algae," says Qponics' chief executive, Dr Graeme Barnett.

"Because we will continuously farm the oil-producing algae, which are single-celled photosynthetic plants, there are no issues about sustainability and our omega-3 oil will be vegetarian-friendly."

"Our aim is to sell ethically produced DHA/ EPA omega-3 oils to a wider segment of the global market, which will present a more viable option both to companies that use omega-3 in their products and to end-consumers of products who are looking for quality, healthy alternatives to fish-based products."

While DHA and EPA Omega-3 oils are essential in healthy brain development, the company cites studies in Western countries that indicate most adults and over 70 per cent of children may be deficient in these oils.

Qponics recently formed a three year research partnership with UniQuest, the research commercialization arm of The University of Queensland. Dr Barnett said the research contract will help select the best strains of algae and provide a significant boost to the company's market entry.

"Utilizing the excellent resources available at the University has been a strategic decision by Qponics to accelerate the development of our DHA/ EPA omega-3 oil products."

Associate professor Peer Schenk from UQ's School of Agriculture and Food Science says the joint research will help provide a product with major health benefits.

"Consumer demand is increasing for omega-3 oils rich in DHA and EPA as a nutritional supplement to prevent various neurological, cardiovascular and degenerative diseases," he said.

"My team is working with Qponics to develop a renewable source of organic omega-3 fatty acids, particularly for vegetarians, infants and pregnant women, as an alternative to traditional plant and fishbased sources, like flaxseed and Atlantic salmon.

"Our research involves collecting Australian algae strains from various freshwater environments and examining conditions for growth optimization with a selection of potentially high quality oils.

"It's an excellent opportunity for the University to work with emerging industries on developing a quality product that aims to make a positive difference to the health of consumers."

Qponics was founded as a private company in 2009 and operates from the Start Innovation Centre at the Brisbane Technology Park. In January 2011 it became a public unlisted company, and it recently gained admission to the Australian Small Scale Offerings Board (ASSOB), from where it aims to raise capital to fulfil its business plan.

Qponics anticipates its facility will have capacity to produce up to 200 metric tonnes of algal oil per year. The current average global wholesale price of algae omega-3 oil ranges between US$80-US$170 per kg. On these figures gross revenue could be up to between $16-37 million.

The company hopes to commence oil production in 2013-14. It is raising $5 million for project costs including a strategic partnership agreement with Urban Ecological Systems Australia, the trial and purchase of algae photo-bioreactors, extending its intellectual property and obtaining organic certification, sales and marketing, and working capital.

The offer is for sophisticated investors, and Dr Barnett said capital raising begun slowly. But it has now sold parcels for around $100,000 and has other investors in the pipeline and it recently extended its closing date.

Qponics says its philosophy is centred on the concept of ethical, organic and sustainable production from algae of high quality omega-3 oils in urban and semi-rural settings to ensure proximity to markets and distribution channels.

Its aims to operate algal photo-bioreactors integrated into an ecologically balanced aquaculture-horticulture system to ensure that operations eliminate environmental pollution and minimize carbon emissions and water consumption.

At a future time it intends to apply for certification to use the term "organic" for its algae oil products.

Qponics is one of three companies that will be pitching at an ASSOB Pitch Breakfast in Sydney on 10 November. The company is being assisted in its capital raising by BlueMount Capital.






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