Aurora Algae Targets $100M Raising, Then IPO

A U.S. company seeking to fuel Western Australia state’s booming mining sector with biodiesel from algae is poised to raise an additional US$100 million from private investors mid-year ahead of a probable share market listing.

Aurora Algae would use funds to build a facility producing commercial quantities of biodiesel for use in mining trucks and other byproducts from algae in Karratha, a fast-growing mining town in Australia’s Pilbara region, which accounts for a quarter of the world’s trade in iron ore by sea.

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Geese swimming through algae

Construction of the commercial facility is due to begin later this year for completion early in 2013, supplanting an existing demonstration plant in Karratha.

Matthew Caspari, managing director of Aurora Algae’s Australian operations, said in an interview Monday that the California-based company aims to begin the process for a U.S. public listing by the end of the year, but wouldn’t speculate on its potential value.

Biofuels made from algae can be developed in arid areas, preventing the need to use agricultural land, and Western Australia’s vast, dry landscape provides an ideal place for harvest. The algae feeds on carbon dioxide, an environmental benefit sought after by large gas-export terminals in Karratha wanting to cap their carbon emissions.

Aurora has already raised over US$40 million from U.S. venture capital firms Oak Investment Partners, Gabriel Venture Partners and Noventi Ventures. They are likely to contribute to the US$100 million raising, along with an unnamed strategic investor that the company recently signed up, Caspari said.

Drawn by algae’s potential as a substitute for gasoline and diesel, ExxonMobil in 2009 invested US$600 million in a partnership with Synthetic Genomics Inc. of California to develop commercially viable biofuels.

So far though algal fuels haven’t been produced at scale and at a low enough cost to compete meaningfully with fossil fuels. Another company, Sapphire Energy, is making progress, having participated in a test flight of a Boeing 737 aircraft powered by algae juice in 2008 and beginning construction of a large-scale refinery in the U.S. state of New Mexico in 2010.

Caspari said Aurora can make cost-competitive fuels by also extracting Omega-3 oils from its algae and selling it to the dietary and pharmaceutical industries. The company is able to develop others types of product because it has researched the oil production qualities of different types of algae and developed its own refining technologies, he said.

“Profit, especially in the shorter term, is heavily weighted towards the Omega-3 product,” Caspari said. “And by having that higher margin product we’re able to sell fuel at parity with diesel.”

The company has forged a supply agreement with a major carbon dioxide producer in Karratha that Caspari declined to identify. It received about A$2 million funding from the Western Australia state government for its 2.6 hectare demonstration facility and hopes the government will contribute more to the 100-ha first-phase commercial plant.

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