Leaf Resources’ green technology reshapes pine chemical market

Leaf Resources (ASX: LER) is making strides in its mission to become a global supplier of sustainable natural chemicals with an expansion of its pine chemical plant on the horizon.

The company’s two highly complementary ‘green’ technologies aim to replace petroleum-based chemicals and plastics as the world shifts from its reliance on fossil fuels to a more sustainable bio-economy.

Known as the Glycell Process, Leaf’s proprietary technology converts non-food plant biomass into lignin and industrial sugars to produce useful, sustainable and renewable chemicals, biodegradable biomaterials and recyclable biomaterials.

The second technology is the result of the company’s diversification into the organic pine chemicals manufacturing market at the end of 2020 via the strategic acquisition of Essential Queensland.

Essential Queensland had developed a process to extract rosin and terpenes from pine logs and was already in the late stages of plant construction at acquisition.

In March, Leaf unveiled the completed Apple Tree Creek plant and announced the successful first production of terpene and rosin.

Since then, Leaf  director Terry Gray confirmed the plant moved to continuous operation as it ramps up to meet its targeted full operational run rate of 8,000 tonnes per annum.

The company recently secured loan facilities and is assessing the potential for a material expansion. Leaf believes there are significant growth opportunities with the potential for multiple plants in Australia and internationally.

The Glycell Process

Leaf’s Glycell Process is a pre-treatment technology that works by breaking down plant biomass at a lower temperature and pressure to generate a higher yield of cellulose than conventional approaches.

Glycell pre-treatment is followed by enzymatic hydrolysis which converts cellulose into cellulosic (industrial) sugars – these are a major feedstock for the multi-billion-dollar bio-based chemicals, bioplastics and biofuels markets.

The process also yields valuable co-products including lignin (used to coat biodegradable packing, for example), hemicellulose and refined glycerol (for applications including cosmetics, animal feed and lubricants).

Leaf’s transformational move to acquire Essential Queensland

Leaf came up against operational challenges last year, particularly as a result of the global pandemic, but it recommenced trading on the ASX in late December after finalising a $3 million fundraising and the scrip acquisition of 100% of the issued capital of Essential Queensland.

Essential Queensland believes it is embarking on the “biggest step change that the US$10 billion pine chemicals industry has experienced since the 1950s”.

Leaf considered its process to extract rosin and terpenes from pine as “highly complementary” to the company’s biomass-to-functional industrial sugars technology.

More than two-thirds ($2.05 million) of Leaf’s fundraising was allocated to optimising the Apple Tree Creek plant.

Apple Tree Creek plant expansion

First production of terpene and rosin from Essential Queensland’s newly constructed Apple Tree Creek plant began in March.

Operations are currently being fine-tuned with the plant continuing to ramp up to meet Leaf’s targeted 8,000tpa run rate of pine chemical production.

The company has been working to boost chemical production capacity at the site and said talks were underway with various parties to increase both the supply of raw materials and sales offtake of rosin to meet this increased plant capacity.

Leaf also recently secured a $1.3 million loan secured against research and development rebate receivables, as well as a $2 million facility agreement with Altor Capital.

These funds secured  the purchase of front-end wood handling and chipping equipment with a processing capacity to support chemical production capacity up to 32,000tpa.

Meanwhile, Leaf noted in an investor presentation its intention to achieve growth by establishing multiple plants in Australia and internationally.

A timeline in the presentation revealed its plans to “begin assessment of greenfield and/or brownfield expansion” in mid-2021.

The pine chemical market

According to Leaf, the global pine chemicals market is worth more than US$10 billion (A$13.3 billion) and has been estimated to grow at a compound annual growth rate of over 5% in coming years.

Rosin and terpenes from pine are used in a variety of consumer products such as perfumes, cosmetics, food additives including soft drink flavours, adhesives, fragrances in soaps and household cleaners, disinfectants, synthetic rubbers, printing inks and even resins in automobile tyres.

Essential Queensland’s view that market demand and the price of pine chemicals will continue to grow in line with global demand for sustainable renewable chemicals is supported by diminishing pine chemical supply sources due to high extraction costs and inefficient “old world” practices including labour-based tree tapping production methods.