Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc. Jack Grushcow .

LINNAEUSPlant Sciences

Industrial Oil Seed Opportunities

Linnaeus Plant Sciences Inc.

Jack Grushcowwww.linnaeus.net


Current Key Factors

• Cost and availability of Petroleum• Environment• Entrenchment • Bio-tech Advances• Patents• Regulatory• Canadian Infrastructure


We need to look forward…

to new industrial chemistry


Overview

• About Castor Oil

• Core Technology

• Lubricant markets and economics

• Marketing Strategy

• Regulatory Strategy


Castor Oil



Industrial Applications of Castor Oil

• Over 1,000 patented industrial applications

• Industrial chemistry established since 1900’s

• Long recognized for outstanding properties including oxidative stability and lubricity

• US Strategic stockpile up to ’70’s

• Only commercial source of HFA


Ricinoleic Acid

OH

Ricinoleic acid: a reactive fatty acidcapable of numerous oleochemical

conversions


Problems with Castor

• Contains Ricin potent bio-terror weapon

• Main producers are India, China and Brazil

• India and others seek down stream capability

• Supply limited and variable

• Significant price fluctuations

• Largest user seeks alternative source


Linnaeus Plant Sciences Hydroxy Fatty Acid (HFA)

Technology

Arabidopsis thaliana

Hydroxylase Gene

Expression in Model

Expression in Conventional

Oilseeds

Ricinus communis(Castor)


Advantages of (GM) ApproachGM Approach

Goals•High oleic•Low saturates•Low poly-unsaturates

•Limited profiles

Conventional Oils

Canola, Soybean, Corn

Industrial Oils

Lesquerella (Castor) Vernonia

Goals

•Agronomics

•Infrastructure•Limited regions

Conventional Approach

Combine Conventional and Industrial

OilsHigh oleic oils,

Castor Goals

•Higher functionality•High oleic•Low polyunsaturates•Multiple crops


Ricinoleic acid (12OH-18:1 9)

Lesquerolic acid (14OH-20:1 11)

Auricolic acid (14OH-20:2 11, 17)

Densipolic acid (12OH-18:2 9, 15)

min0 2.5 5 7.5 10 12.5 15 17.5

Four novel hydroxy fatty acids


Comparison of Fatty Acid Profiles

Hyroxy Fatty Acid (HFA)

Fatty Acid

NameLinnaeus

Oil*Canola

OilCastor

Oil

Hydroxy Fatty Acid

Ricinoleic & Others 15.6 0.0 89.2

C16:1 Palmitoleic 0.3C18:1 Oleic 59.1 60.9 3.5C18:2 Linoleic 11.3 21.0 4.2C18:3 Linolenic 3.4 8.8C20:1 Gadoleic 1.0C22:1 Erucic 0.7C12:0 Lauric 0.0C16:0 Palmitic 5.1 4.1C18:0 Stearic 1.7 1.0 1.8

% Fatty Acid

*Expressed in Brassica napus (hydroxy fatty acids include ricinoleic and densipolic acid)

The HFA clearly replaces oxidatively unstable polyunsaturates


Soy Lines with HFA

0.0

10.0

20.0

30.0

40.0

50.0

1 2 3 4 5 6 7

Line Number

Per

cent

age

'16:0

'18:0

'18:1

'18:2

'18:3

ricinoleic


Industrial Applications For Linnaeus HFA Technology

HFA Vegetable

Oils

Base Oil FeedstockReactive

Component

Lubricants*

Functional Fluids*

Fuels

Oleochemicals

Paints, Coatings and

Inks

Polymers and Foams

Process Oils

* Discussed in current presentation


Linnaeus HFA Oil As a Lubricant - Target Markets and Drivers

Engine oils• Fuel economy, low phosphorus (ILSAC GF-4)

& sulfur, reduced emissions, long drain Hydraulic oils• Improved lubricity and environmentally

sensitive applicationsTwo stroke oils• Aquatic toxicity, reduced emissions &

smokeChain bar lubricants• Environmentally sensitive applications


Total Fina ElfEnvironmentally Friendly

Products

ApplicationTotalFinaElf EF

Products CommentsBase OilMotor Oil HTX766 Synthetic ester based oil 4 Stroke Engine Oil HTX822 Synthetic ester based oil

Hydraulic Fluid

Hydrelf Bio 46, Total Biohydran (SE, TMP), Fina Biohydran RS

Synthetic ester based oils, Vegetable oil based

2 Stroke Oil Total Neptuna 2 Synthetic oil basedFuel Aquazole Emulsified diesel fuelChain Bar Oil Total ChainBio Natural biodegradableFeedstockBiodiesel Colza Rapeseed methyl esterReactive Diluent

Polymer Raw Material Rislan B Reaction of hydroxy group

•Total Fina Elf products overlap application areas for the HFA technology•The Linnaeus oil is likely to offer specific benefits over current basestocks used by Total Fina Elf e.g. better lubricity from HFA, lower cost vs. synthetic esters


Why Combine Conventional & Specialty Oils?

- Best of Both Worlds

**RBOT = Rotary Bomb Oxidation Test (ASTM D2272)*** Based on blended oil data(10-60% HFA content)

Castor Oil*•RBOT** Oxidation = 29 mins

•Pour Point ~ -33C•Viscosity @ 40C = 255 cSt•Timken OK Load = 30 kg

•4-Ball: Scar = 0.6, Coeff. Friction = 0.04•High reactivity

High Oleic Canola Oil*•RBOT Oxidation = 15 mins

•Pour Point ~ -15C•Viscosity @ 40C ~ 37 cSt•Timken OK Load = 20 kg

•4-Ball: Scar = 0.7, Coeff. Friction = 0.08•Very low reactivity

Linnaeus Oil***•RBOT Oxidation = 18-25 mins

•Pour Point ~ -15C to -21C•Range of viscosities ~50-120 cSt

•Timken OK Load =20-30 kg•4-Ball: Scar ~ 0.6, Coeff. Friction ~ 0.06

•Moderate reactivity

* Source: Vegetable Oils – Structure and Performance, S. Lawate, et al, 1997, Tribology Data Handbook, CRC Press, Ed. Rich Booser


Linnaeus Oil Can Substitute Synthetic Esters

- Comparison

Property Test MethodTMP

TrioleateHigh Oleic Canola Oil

10% HFA Linnaeus

Oil*Kinematic Viscosity ASTM D2270

@ 40 ºC 50 cSt 37 cSt 50 cSt@ 100 ºC 10 cSt 8 cSt 10 cStVI 201 212 180

Pour Point (ºC) ASTM D97 -33 -15 -18Flash Point (ºC) ASTM D92 >300 >300 >300

Toxicity Possible

neurotoxicity None NoneCost ($/lb) ~ $1-$1.30 ~$0.65 ~ $0.75Need for Viscosity Modifier* No Yes No

* Based on blended oil data ** To obtain ISO 46 viscosity grade


Linnaeus HFA Oil As a Lubricant- Benefits

• Will enable satisfaction of market drivers (previous slide)– Better lubricity, lower emissions, improved fuel economy,

lower ecotoxicity, • Lower cost vs. synthetic esters• Oils with varying viscosity can be made by altering HFA

content- currently this is a big shortcoming for vegetable oils- beneficial for formulation Blue Angel hydraulic fluids (can

allow elimination of viscosity modifier)

ISO Grade Required % Hydroxy

ContentISO 46 ~10%ISO 68 ~20%

ISO 100 ~60%ISO 220 90%

Based on blended oil data


Motor Oil Opportunity

What is the potential U.S. motor oil market?

Replacing 10% of 1.1 billion gallons

Automotive Other Bio potential

110 million gallons @ 50 110 million gallons @ 50 gallons/acre would require 2.2 gallons/acre would require 2.2 million acres!million acres!


Value Proposition

• Canola oil $.40 CDN per pound

• Motor oil $1.25 USD per pound based on $2.50 quart

• Add pour point and anti-oxidant package

• What about emission credits?


Toxic Waste Metals from Used Engine OilTCLP Analysis: EPA 7470A and 6010B Methods

Element Reporting Limit (ppm)

Canola M.O.

Mercury 0.0002 ND1

Arsenic 0.40 ND

Barium 0.40 ND

Cadmium 0.04 ND

Chromium 0.20 ND

Lead 0.20 ND

Selenium 0.80 ND

Silver 0.10 ND

Sample oil derived from 2000 Ford Ranger Truck @ 3,300 miles (5,310 km) August 10, 2001. The oils remain nontoxic after normal engine use and can be disposed of or recycled safely.

1ND = None detected (Aspen Analytical Lab)


USPS Ford Explorer Observations

• Significant reductions in CO,CO2, HC and NOx

• 1.3% Improvement in fuel economy

• Approximately 300lb reduction in total tail pipe emissions per vehicle per year.

• It doesn't work without HFA


USPS Ford Explorer Emissions EPA AnalysisDr. Duane Johnson Supt., Northwest Ag Research Center

Director Institute for Bio-Based Products MSU

0

1

2

3

4

5

6

7

8

PPM

Non-Methane

HC

CO CO2 / 10 HC X100 NOx X10

5W30

CanolaM.O.

1 Probability: *= 0.05; **=0.01; ***=0.001; ****=0.0001

% Gas Reduction NMHC: 25%

CO: 48%

CO2: 1%

HC: 32%

NOx: 80%

***1

**

*

****

****

Emissions data from paired oil evaluations show significant decreases in all tailpipe emissions.


Data of test candidate

Fuel consumption with Titan GT 1 acc. to EG3 Test

PORSCHE MERCEDES-BENZModel 911 Carrera Coupé E 220 CDISpeed 280 km/h 198 km/hFuel Gasoline DieselCubic capacity 3,387 Liter 2,151 LiterPower 221 kW (300 PS) 92 kW (125 PS)Max. revs 6800 1/min 4200 1/minIn comparison with SAE 15W-40: Fuel/Diesel-Consumption -6,4 % -3,2 % Emissions NOx -24 % -16 %.


Why the Lowered Emissions?

• Petroleum oil molecules range from 20-40 carbons in length and remain somewhat volatile when in contact with hot engine parts. In fact, thirty percent of HC and twenty percent of CO exhausted from an engine are from the motor oils. Vegetable motor oils are 55 to 65 carbons long and are virtually nonvolatile (no VOCs).

• Without oil as a contributor of VOCs, engines can combust fuel at lower operating temperatures. This increases engine oxygen uptake providing a cleaner burn and engines run leaner (less fuel).


One Example –US Navy

• Total Oil Spilled (U.S. Navy statistics): 181,453 gallons 1,402 spills reported

• Monthly use 600,000 gallons• Replace 10% or 720,000 gallons/yr• Requires 14,000 acres• Generate $7MMUS annually


Additional Lubricant Markets

• Hydraulic oils 210 • Metalworking Lubricants 68• *Diesel additive 66• Two-stroke oils 19• Chain bar lubricants 3

2001 US Market in Million gallonsNational Petroleum Refiners Association*Canadian market estimates based on 2005 mandate


Production Strategy

• Develop transgenic lines - several labs• Use Bunge/Canamera HEAR Model

– Bulk up seed– Contract grow/IP protect– Contract custom crush

• Cargill, DOW and others follow similar model

• Provinces interested in supporting IP


Marketing Strategy

• Use Kyoto/Monitization issues• Leverage Government policy: Some

Provinces have ongoing initiatives. Fed’s evolving

• Target Military as well as fleets• Possible partnership with TOTAL or

others• Control sales to maximize value capture


Marketing Strategy continued…

• Bio-lubes have historically suffered from poor oxidative stability, high pour points.

• Bio-technology is the solution – this is NEW• We are NOT traditional providers of veg. oil• Marketing/positioning requires

environmental and life cycle consideration – this is how margin will be created.

• Get high on the chain - OEM or better


Regulatory Strategy

Current CFIA Environment

• Regulations/Guidelines in major transition

• Introduction of Mol. Farming 12-18 months

• New “guidelines” promise to be challenging

• Opportunity exists to influence direction

NOW


Regulatory Strategy continued…

• Highlight environmental benefits• Participate in all policy forums• Ensure that we go in under PNT

guidelines• Use HEAR as model• Stress edible aspect (GRAS) of HFA’s• **Go for food and feed status


Forecast

According to The Chemical Market Reporter:

“Annual growth rate for bio-based lubricants is projected at 7-10% compared to 2% for overall lubricants”


Future of Oil Seeds

• Next “canola” requires biotechnology • Canadians are world class producers• Infrastructure is in place for “big”

products• Huge win - solve the expression problem• One possible platform technology:Look to Castor’s mechanism for

bioreactors…


Genomics/Proteomics of CastorHow does Castor do it?

• Long standing collaboration Prof. A. Slabas

• World leader in lipid metabolism• 2.5MM committed over next 3 years• List of known enzymes targeted• Photoaffinity etc. for new discoveries • Leverage 5 years of experience with

Castor• Support of TOTAL


Summary

• There have been dramatic improvements in biotech methods and tools

• Systems exist to efficiently clone genes of interest

• Patents allow control of novel materials• Regulatory approvals increasing• It is possible to own a feed stock• Plants hold the answer to CO2 issues

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Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc. Jack Grushcow .

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