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Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc.

Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc. Jack Grushcow www.linnaeus.net. Current Key Factors. Cost and availability of Petroleum Environment Entrenchment Bio-tech Advances Patents Regulatory Canadian Infrastructure. We need to look forward….

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Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc.

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  1. Industrial Oil Seed Opportunities Linnaeus Plant Sciences Inc. Jack Grushcow www.linnaeus.net

  2. Current Key Factors • Cost and availability of Petroleum • Environment • Entrenchment • Bio-tech Advances • Patents • Regulatory • Canadian Infrastructure

  3. We need to look forward… to new industrial chemistry

  4. Overview • About Castor Oil • Core Technology • Lubricant markets and economics • Marketing Strategy • Regulatory Strategy

  5. Castor Oil

  6. 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

  7. Ricinoleic Acid OH Ricinoleic acid: a reactive fatty acid capable of numerous oleochemical conversions

  8. 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

  9. Linnaeus Plant Sciences Hydroxy Fatty Acid (HFA) Technology Expression in Conventional Oilseeds Hydroxylase Gene Expression in Model Ricinus communis (Castor) Arabidopsis thaliana

  10. Conventional Oils Industrial Oils Combine Conventional and Industrial Oils Canola, Soybean, Corn Lesquerella (Castor) Vernonia High oleic oils, Castor Advantages of (GM) Approach Conventional Approach GM Approach • Goals • High oleic • Low saturates • Low poly-unsaturates • Limited profiles • Goals • Agronomics • Infrastructure • Limited regions • Goals • Higher functionality • High oleic • Low polyunsaturates • Multiple crops

  11. 0 2.5 5 7.5 10 12.5 15 17.5 min Ricinoleic acid (12OH-18:1 9) Densipolic acid (12OH-18:2 9, 15) Lesquerolic acid (14OH-20:1 11) Auricolic acid (14OH-20:2 11,17) Four novel hydroxy fatty acids

  12. Comparison of Fatty Acid Profiles The HFA clearly replaces oxidatively unstable polyunsaturates *Expressed in Brassica napus (hydroxy fatty acids include ricinoleic and densipolic acid)

  13. Industrial Applications For Linnaeus HFA Technology * Discussed in current presentation

  14. 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 applications Two stroke oils • Aquatic toxicity, reduced emissions & smoke Chain bar lubricants • Environmentally sensitive applications

  15. Total Fina ElfEnvironmentally Friendly Products • 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

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

  17. Linnaeus Oil Can Substitute Synthetic Esters- Comparison * Based on blended oil data ** To obtain ISO 46 viscosity grade

  18. 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) Based on blended oil data

  19. Motor Oil Opportunity

  20. What is the potential U.S. motor oil market?Replacing 10% of 1.1 billion gallons 110 million gallons @ 50 gallons/acre would require 2.2 million acres!

  21. 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?

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

  23. 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

  24. USPS Ford Explorer Emissions EPA AnalysisDr. Duane Johnson Supt., Northwest Ag Research CenterDirector Institute for Bio-Based Products MSU **** ***1 * % Gas Reduction NMHC: 25% CO: 48% CO2: 1% HC: 32% NOx: 80% **** ** Emissions data from paired oil evaluations show significant decreases in all tailpipe emissions. 1Probability: *= 0.05; **=0.01; ***=0.001; ****=0.0001

  25. PORSCHE MERCEDES-BENZ Model 911 Carrera Coupé E 220 CDI Speed 280 km/h 198 km/h Fuel Gasoline Diesel Cubic capacity 3,387 Liter 2,151 Liter Power 221 kW (300 PS) 92 kW (125 PS) Max. revs 6800 1/min 4200 1/min In comparison with SAE 15W-40: Fuel/Diesel-Consumption -6,4 % -3,2 % Emissions NO -24 % -16 %. x Fuel consumption with Titan GT 1 acc. to EG3 Test Data of test candidate

  26. 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).

  27. 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

  28. Additional Lubricant Markets • Hydraulic oils 210 • Metalworking Lubricants68 • *Diesel additive 66 • Two-stroke oils 19 • Chain bar lubricants 3 2001 US Market in Million gallons National Petroleum Refiners Association *Canadian market estimates based on 2005 mandate

  29. 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

  30. 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

  31. 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

  32. Regulatory StrategyCurrent 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

  33. 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

  34. 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”

  35. 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…

  36. 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

  37. 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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