Eco Investor August 2016

Pre-Revenue Securities

Five Renewable Chemicals Projects

Leaf Resources has opened another front in the commercialization of its waste biomass technology with a joint venture to develop five green chemicals projects with an established US based global project developer, Claeris, LLC.

The joint venture vehicle is Leaf Development, LLC. This will combine Claeris' ability to develop large-scale renewable projects with Leaf Resources' Glycell process that can economically break down waste biomass and turn it into cellulosic sugars that are a feedstock for renewable biobased chemicals, bioplastics and biofuels.

Claeris will also invest US$500,000 in Leaf Resources at 12.5 cents per share, and receive about 1.56 million options that are exerciseable at 13.75 cents over a five-year term.

Leaf Resources' managing director, Ken Richards, said Claeris has a track record of sourcing funding and building large-scale commercial renewable projects. The joint venture with Claeris will lower transaction execution risk, accelerate the development of projects and help with more favourable commercial terms for projects.

It will also provide significant additional opportunities for deploying the Glycell process across other biomass sources in numerous jurisdictions. He said Claeris has identified development opportunities using empty fruit bunches in Asia and hardwoods in the US and will pursue these development projects.

Claeris said it believes the investment community and the chemical industry are both keen to participate in well-structured, well-credentialed and financially attractive renewable chemical projects.

The managing partner of Claeris, Michael Slaney, had some high praise for Leaf. He said "We have reviewed many emerging technologies in the renewable chemical sector, but we have not seen anything quite as revolutionary and potentially profitable as Leaf's Glycell process. After a detailed technical and financial review of the Glycell technology, we are convinced that Leaf has the best process on which to base a platform company of renewable chemical projects. We are confident that we can secure the key project partners necessary to quickly develop our first project."

The partners said projects with a feedstock capacity of 100,000 bone dry tonnes per annum make economic and technical sense.

The joint venture will use a Develop, License, and Own model (DLO) model, which the partners think is best for the renewable chemicals industry. Claeris will manage Leaf Development and be responsible for all aspects of project development.

The DLO model will result in the sharing of all development and license related revenues, as well as founders' equity in each project. The agreement allows Leaf Resources to own up to 75 per cent of Leaf Development by providing ongoing funding in return for increased equity.

The initial funding of US$750,000 will come from Leaf's internal sources. If Leaf Development meets project milestones a further US$1 million may be due on 31 October. The money would be used by Leaf Development for costs relating to the development of commercial-scale projects such as permitting, engineering, management and consulting fees. Further capital from Leaf Resources will help fund engineering design and feasibility studies.

The plan is for each project to be externally financed as a standalone operation, and for Leaf Development to recoup its development costs as projects come to construction.

Mr Richards said "We believe our arrangement with Claeris has put Leaf Resources firmly on its next phase of growth."

It certainly gives shareholders something tangible to get excited about and it will be interesting to see each project as it is announced and developed. Leaf Resources also has early stage joint ventures and memoranda of understandings with Monaghan Mushrooms and ZeaChem. So the company has plenty of irons in the fire. (ASX: LER)

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