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Follow-Up: Solazyme, Inc. (SZYM)

Solazyme was recommended by Fast-Track Millionaire at $9.94 in Investment Digestissue 705, dated October 19, 2011.

Solazyme, Inc. (SZYM) surged 12% earlier this week after the algae-based biofuel company said it reached a deal with a Bunge Ltd. (BG) subsidiary to form a joint venture that will produce sugar cane-based oils for use in alternative...

Solazyme was recommended by Fast-Track Millionaire at $9.94 in Investment Digestissue 705, dated October 19, 2011.

Solazyme, Inc. (SZYM) surged 12% earlier this week after the algae-based biofuel company said it reached a deal with a Bunge Ltd. (BG) subsidiary to form a joint venture that will produce sugar cane-based oils for use in alternative fuels. The new venture will construct and operate a commercial-scale plant in Brazil with a 100,000-metric ton capacity. Bunge, a long-term Solazyme partner, brings the sugarcane, Solazyme brings the technology, and the fuel produced will be sold to the Brazilian market — no word on cost yet. The facility is scheduled to be online later next year.

“Let’s review briefly what Solazyme does: It grows special algae that can be dropped into a refinery and turned into fuel. It keeps the algae in the dark and feeds it sugar so that it can put all of its energy into growth. The company is also able to produce a number of other algae-based oils that can be used in non-fuel products like cosmetics: Sephora, the upscale perfume and makeup store, carries a line of its products. Solazyme, not content to let any opportunity pass, also has discovered a way to use algae to make food: algae-based flour. The markets for food and fuel, of course, are immense.

“With biofuel, the concern is scale — can the technology be deployed on a wide enough basis to make a difference? I’ve long said the answer is yes. Algae is easy to grow, and it grows incredibly fast. But don’t take my word for it. Exxon Mobil (XOM), which has laughed off biofuel for decades, has invested $600 million and hired one of the world’s leading scientists to crack the algae code. It is a vitally important area.

“The shares have given back some of their gains from earlier this week, and I should be clear that they are still well below their offering price. However, shares have doubled from their all-time low, which highlights the promise of biofuel and the market’s willingness to value Solazyme’s technology, which it uses to make biofuel, food and cosmetics. Year-to-date, the shares are up 26% versus the Nasdaq’s 18% advance.

Action to Take

“Solazyme is a strong buy under $15.00.”

- Andy Obermueller, Fast-Track Millionaire, April 7, 2012