Icon said yesterday it was moving to acquire a 20% interest in a licence to produce biodiesel from algae feedstock.

Full rights under the licence will be provided to Icon and its entity for the Australian region for the exchange of 20 million ordinary shares and 5 million options to be exercised at 5c per share within two years and 55% of the ordinary shares in Icon Drilling, a wholly owned subsidiary of Icon Energy, that will now be renamed PetroSun BioFuels Australasia.

“The purpose of the transaction is to create a publicly traded alternative fuel company in Australia,” Icon said.

The letter of intent allows a period of due diligence to be conducted up to June 30 and is subject to documentation and final board approval of both companies.

With PetroSun taking 55% of PetroSun BioFuels common shares, Icon will retain a 20% interest and a capital raising conducted through an offering will cover the remaining 25%.

PetroSun BioFuels will be issued the exclusive licence agreement for the Australasian market, according to Icon.

“The rights granted under this agreement included the technology to cultivate algae on a commercial scale and refine the extracted algal oil into biodiesel,” the company said.

“The company will also be producing high-protein animal feed from the algal biomass, ethanol and potential excess electricity as additional revenue streams from plant operations.

“The production process will also have a beneficial affect to the environment, as algae consume carbon dioxide in the presence of sunlight. The source of the carbon dioxide can come from power plant emissions that would create carbon credits.”

According to PetroSun, independent studies have demonstrated that algae can produce oil yields in excess of 55,000kg per hectare annually – much more than annual yields from conventional crops such as palm oil (5000kg/ha), peanuts (890kg/ha), canola, rapeseed and sunflower (675kg/ha), soybean (450kg/ha) and corn oil and cottonseed (225kg/ha).

The worldwide cost of diesel has increased dramatically during the past few years as a result of higher crude oil prices and refining cost increases. This has stimulated a similar rise in the cost of biodiesel and its feedstocks.

“Biodiesel produced from algae offers an alternative that is not subject to commodity risks as is crude oil, corn and soybeans and is capable of supplying a sustainable feedstock,” Icon said.