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Shore Capital says oil recovery bodes well for GEM BioFuels as Jatropha biofuels gain recognition

2nd Oct 2009, 9:42 am Shore Capital says oil recovery bodes well for GEM BioFuels as Jatropha biofuels gain recognition

Broker Shore Capital said the ongoing recovery in oil prices will strengthen demand for alternative energy sources, boosting the potential of companies like GEM BioFuels (LSE: GBF), which is nearing Jatropha crude oil production.


The company’s interim report, which was released on 30 September, showed a reduction in losses and a balance sheet of £167,150, down from the previous year’s £1,511,068.


The broker noted the significance of the post-balance sheet placing of 4 million shares that raised £0.5 million, which it said was a more important figure that the 16% reduction in losses to £323,000 in the first half. The money will help GEM to go forward with its plans to increase the acreage planted with Jatropha, a non-traditional vegetable used in the biodiesel industry, to 200,000 ha (hectares) from the current 55,700 ha by 2011.


Shore expects the biodiesel industry’s fundamentals to improve as oil prices are projected to increase, driven up by higher demand with increased government regulation and environmental targets boost the demand for alternative energy sources, which will likely remain the case for the foreseeable future. Shore said the biofuels based on Jatropha were yet to achieve large-scale availability, there was growing recognition of “the important role” it could play, which was supported by successful testing.


GEM is expected to achieve cost savings in its future plantation programmes by employing the partially mechanised plantation methodology, which has been successfully tested.


The company’s net asset value is estimated at 6.6 pence per share, while it last traded at 16 pence per share.

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