Northstar Clean Technologies Inc.

So I'm joined today by Rosemary Pritchard, our CFO, and by Carson Seaton, our Director of Corporate Development. And as always, thanks very much to the Kin team for hosting the webinar and helping us through this. So as always, kind of normal process that we've had for our quarterlies in the last year or so. So any questions, please post them on the Q&A. And then Carson will be monitoring those and pick them up at the end of the presentation. And then we can cover those. Today, I'm going to run through the financials. They're in the simplified format that we've used before. So I'm just going to run through them. But of course, we've got Rosemary on the call. So if there's any detailed questions that have come around, as a result of the filing or the MD&A or the detailed financials, please put that in the Q&A and Rosemary can address it at the end. The other thing that we're going to do today is we are going to do an investor update and we've been having a chunk of questions that have come in essentially since we did the announcements in Q3. And so the first question I'm going to answer today is what really happened in the Q3 funding? So of course it was All interconnected and pretty complex. So I'm going to walk through that in a bit of detail this afternoon. The second question that we're getting is, well, listen, if Calgary is fully funded, why did you just launch it a venture? So what's that all about? And so I'll kind of do my best to outline the kind of work Calgary sits on. how all that funding comes together and where that also sits with Northstar. And then the last thing, and this is obviously a bit of shameless marketing on my behalf, but why should anybody think about investing in the venture? And almost talking about where we think the company is at and why we think this is a good time to invest, which is of course not advice and related to our forward-looking statements. um but just of course the ceo arm with the view of where the company's at we also are uh in the engineering offices in calgary and there is some construction going on in the floor below so apologies for the uh for the background noise okay so um let's have a quick chat about uh about the financials so look as often you know as i chatted to uh As I've chatted to investors that have said, the two things that a pre-revenue company and that everybody looks at is number one, what's your cash balance? And number two is what are you spending? So if you look at the cash balance, of course, Q3 was buoyed by the 8.5 million or 8.48 million that came in from Tamco. And this is obviously all reflected in the detailed financials that have just been posted. The second thing is spending. I can assure you, and I think I've chatted about this in the last quarters, we are very tight on cash management. We're very tight on spending. None of this funding is doing anything other than going to build the Calgary facility. And we've been working extremely hard and managing expenses. The last thing I would add is the revenue side, which has grown, of course, that isn't $64. That's actually $64,000 in the top right-hand corner. And that's come from the shingle collection at Delta. And then obviously the last thing is the net comprehensive loss. which is of course being reduced because of the reduced spending, et cetera. And all of this to say, obviously we have Rosemary here to answer any detailed questions, but on cash and expenses, cash is obviously up with the investment and expenses are being, in my opinion, pretty tightly managed. So as we think about the Q3 perspective, and that's the kind of first question I threw out there to address today, Look, as people heard me talk about this, I always talked about three legs of a stool in terms of the funding for Calgary. So project debt, government grants and strategic equity. Now, the interesting thing about that for me is that's a great analogy, because if you take any leg of the stool away, the stool falls over. And actually, that's exactly what that's the complexity of what this looks like. because BDC, and we'll get into it in a little bit more depth in a minute, but BDC needed $6.2 million worth of equity to come in before the loan agreement could go live. Emissions Reduction Alberta, although it was a government grant, wanted to see the funding from BDC and the funding from TAMCO to come in to make sure that Everything that we submitted to them as a budget was covered and recognized by both the BDC and the TAMCO loan. And TAMCO, similarly, although they were coming in with equity almost first, wanted to concurrently see the loan agreement go into place and the contribution agreement from Emissions Reduction Alberta. So all of this closed simultaneously. So that's why the slew of PRs with the information came out. almost at the same time because this all happened simultaneously. So the one thing that's really important about this was these weren't checks that were written that we currently have in our bank account. So a lot of this is staged. A lot of it's conditional on meeting milestones. And so one of the things that we have to do in Calgary, which is really, really important, is manage working capital, manage capital spend, manage the funds that we're receiving from BDC and Emissions Reduction Alberta. And I'll talk through the complexity of that a little bit, but just to say, this is the level of detail underneath this that says, this isn't why we have $25 million sitting in our bank. So Emissions Reduction Alberta, you know, you've seen, we've presented the stuff on the left-hand side, which is kind of, you know, what we are awarded, the percentage and the quotes, et cetera. On the right-hand side is what's actually happening. So the Emissions Reduction Alberta Award is milestone based. So after milestone one, completing of detailed design, what we actually do is we We say the milestones have been completed and these milestones have already been pre-agreed. So we don't have to go into any more detail on, well, we think we've met milestone ones as part of the contribution with ERA, the milestones and the criteria have been laid out for hitting the milestone. So there's enough, take milestone one, for example, detailed design. know there's three or four criteria that we meet to say we've now completed detailed design and we send that to emissions reduction alberta they do the review they do the audit and and then and then they pay but just to be clear they pay you know kind of probably in our estimates kind of two to three months after the milestone has been completed now for something like a detailed design or something like um you know operations and testing That's relatively straightforward to do and doesn't have a big cash flow effect. But if you think about construction, when you bought all your equipment and you put it on site and you've spent all the capital and you don't get the you know, you hit the construction milestone, you submit it. And then a couple of months later, the emissions reduction Alberta funding comes in. You know, you have to manage that cash flow. And again, that's not to say that there are insufficient funds in the project. That's to say that the project and the cash flow and the accounting for the project needs to really manage how we look after cash flow. BDC is somewhat similar, and the draws, again, are based on how far you've completed the project. So when the BDC loan comes in, it doesn't come in as 8.75. $6.2 million worth of equity funds and the project needs to be drawn down first, then the BDC loan will start. But again, it will start based on how we're performing with the capital spend and how far we're going through on the project. I mean, obviously the one thing that, or the two things that are kind of important from a commercial point of view, and we've talked about this before, is that the loan is amortized over 15 years, two years interest only from signing the agreement. So that's interest only until June, 2025, and a fixed five-year rate at 8.35%. There is upside to that rate, i.e. we have the ability to bring that down on performance on the loan, but headline rate at 8.35%. And then the strategic investment from Tamco. So the headline finger is completely right. So the US $10 million is what the strategic investment is, but it's split into two phases. So the first phase was the 6.4 million US or the 8.48 that came in in July. And that of course secured BDC and ERA as we talked about the legs of the stool for Calgary. Phase two is conditional and it's conditional on us achieving ERA milestone three. So commissioning the Calgary facility and then moving into operations and testing on the Calgary facility. In a sense, if you think about 2024 and into 2025, as we think about commissioning and operations and testing in the second half of 2024 and into 2025, that's when this funding comes in, not only from ERA, but also from TAMCO. Now, as we said, as you can see on the other slides we talk about it, that's a binding term. So it's exactly the same as ERA. It's binding as long as we hit those milestones. But again, it comes down to cash flow management and making sure that we're managing the working capital in the project and in the company. And you can see that the pro forma ownership from phase one only was 18.75% for the prep shares. And obviously that would increase with debentures if those get exercised as we move into phase two. And just to be clear, when we talk about the debenture offer now that we're in the marketplace with those debentures from Tamco are a 10% interest, 29 cent convert and a 50 cent half offer. Okay, so let's also chat a little bit about why TAMCO are a strategic partner. And as I talk about the strategic partnerships that we have within Northstar, I mean, number one, of course, is McAshfold. You know, they were our first one that came across the line. And then second one coming in, but, you know, obviously super important are TAMCO. If you think about, and I'll talk a little bit about it later, but if you think about asphalt production out of the North Star facility. And you think about the circular economy, it can literally go into, we believe it can go into three industries. So it can go into the paving industry, it can go into the shingle industry, and it can go into the flat roof industry. The offtake from McAshfall for Calgary demonstrates that a multi-billion dollar company has done R&D and it can go into the paving industry. The offtake agreements for the three sites in the US and the strategic relationship with TAMCO demonstrate that in exactly the same way. And then the last one we're working on with respect to flat roofing, but those two clear strategic partners absolutely demonstrate the proof of the technology and our ability to use it in those industries. And our ability to use it in the shingle industry is fantastic. full circularity. So a shingle tile comes in, the oil comes out, and that oil can go back into making shingles. That's full circularity. And so a strategic alliance with a roofing partner is absolutely critical to us. The exclusivity that we have is for the first three plants in the US, and we're working on that now. And on the non-binding terms, the site selection criteria. So we came up with a confidential list with TAMCO on what the selection criteria would be. And we've already gone through that list and started to narrow down the potential locations for the US. The other thing that we did was we already have indicative terms for volume, price, commitment level, and quality and QA, et cetera. That's already been agreed. So the ability for us to move both location and off-take agreement, we believe is achievable in first half of next year. And I'll talk about that in a little bit because that to me is a really good kind of catalyst as we think about where we're going in the first half of next year. That's key three with the three legs. So how does it all fit together? And look, I think this is where we answer the question about, you know, how does this fit together and where does the debenture work? So a bit of a complicated slide, but basically on the left-hand side, this demonstrates the Calgary facility and everything I've just talked about. And then on the right-hand side, the debenture offer. So Calgary is a wholly owned sub of North Star. So as money comes into Northstar, it can get led down to the project. As we manage working capital, the same thing can happen. So if there's working capital at Northstar, if there's, for example, a delay in ERA funding coming in and there are a lot of capex is being spent, again, working capital can be loaned down to Calgary and then back up to Northstar. So there's an ability to manage working capital. If you look at those four things added up, the number is massive, right? So 24.35 million. But as I talked about before, it's the staging of this number that is really, really important. And so although it's fully funded, it requires careful cash flow management based on both the capital spent and the funds that are coming in. So all to say that in that box, there is enough cash, but it needs to be cash flow managed. So if you think about Northstar, Then Northstar has obviously general corporate costs, working capital. We have the costs still ongoing, of course, of the Delta pilot facility. And as we think about catalysts and we think about where we are going next, we need to think about funding for the Toronto facility and funding for the U.S. facility one with TAMCO. Now, that's not millions of dollars of development costs that we're going to be throwing into that, but that is the... understanding and working on those facilities with respect to land, with respect to offtake agreements, etc. We'll talk about that a little bit in a minute with respect to catalysts. But ultimately, that's what's in here with respect to the venture. And then also the added contingency to provide contingency for Calgary as well around the working capital managers, as we've talked about. So as we think about, so then as we think about, all right, well, look, why then with the debenture offering that, you know, supporting Northstar, what is it, what's our, what's our view on, on why people should, should invest in this and where do we think we are with respect to the company? So I think this is probably one of the most important slides we have ever created because it describes the two year journey or just over two years that we've been on since the IPO. I'll talk about the market cap last, but let's step through where this company is. And this is one of the clear reasons I believe that the debenture is attractive. is because of where the company is from where it came. So the patents we have, you know, a US patent for, you know, granted for the front end with the two follow-ons. Canada has got a green technology fast track and we filed the international PCT patent. In strategic customers, I talked about it. You know, we have a multi-billion dollar company buying the output from Calgary and we have a three plant exclusivity deal with a multi-billion dollar US shingle manufacturer. You know, when the IPO was launched, there were no customers, there were no patents. The technology was unproven. I mean, the plant had run, but what we have done in the operation of the Delta pilot plant last year was de-risk that operation, both from a plant operation perspective, but also from the customer feedback, which of course is reflected in the offtake agreements and the vendor feedback. So we've ordered the long lead. I'll talk about it in a minute, but we've ordered the long lead items for the Calgary facility. We have a set of PFDs and we have a set of P&IDs. So we have a de-risked operation. Has anybody built one of these before? No. Is there still risk to a new technology? There is, but I think it is significantly de-risked by the plant operation, the customer feedback and the vendor feedback. When we IPO, the commercial facility was unfunded. As we've talked about earlier, it's now fully funded. You know, we have government support from Alberta. We have debt support from BDC, and now we have a strategic investor. So all of that comes together to reassure, to provide reassurance for investors to a certain degree that we've got, you know, a box that has the funding in it to deliver the project. And the additional ask now, of course, around the adventure is funding for North Star. And from an environmental benefits perspective, there was a view that this had, you know, had good environmental benefits with respect to the repurposing of shingles. But now we're pretty clear. You know, every municipality we talk to, we talk about diverting 40,000 tons per annum from landfill for each facility. And if you look at facilities that have more than 40,000 tons, Remember, the commercial model that we're running at the minute has the North Star facility running six days a week and 10 hours a day. So if we put this in a city that had 250,000 tons of shingles, do we have the capacity to move the running time up? Absolutely, we do. We've been fairly conservative with respect to the commercial model. We've estimated a 60% reduction in the carbon footprint versus the base case. The detailed design work we're doing now will recalculate that. So we'll have a better idea of what that looks like. And as I said earlier, diverting shingle waste into new shingles is fully circular. So we arm, I see you arm waved about this being a circular economy solution. We suggested the ERA was a circular economy solution. But the Tamco R&D and the Tamco agreements actually fully proved that. So if you look at where we were in 2021 and you look at where we are now, that's, in my opinion, significant de-risking. The market cap, of course, has not lost us, right? So the market cap at $37 million, all that delivered on the right-hand side, and now a market cap of $20 million. I mean, that is clearly not lost on the board or management of this company. But if you go back to the slide in Calgary where we added BDC, ERA, and not even the Tamco investment, but the Tamco money to come in the debenture, that's $20 million, which is the same as the market cap of the company today. So my view is that our commitment and our commitment from the board and from management is we've really focused very hard on maximizing non-dilutive funding. That does not change. So we've tried, as we've done deals, as you've seen us do deals, that we have a premium in those deals that reflects our view of the strategic value of this company. And that strategy has not changed at all. The third one is all around managing costs. So it's the cash on one hand and the cost management on the other one. And then the fourth one that I think we are going to do and continue to do is deliver on that strategy. we've repeatedly said to the market that on the right-hand side of the slide, we would deliver on our strategy. And I think we've done that. And let me tell you what 2024 looks like. So the first thing that we need to do is clearly deliver on Calgary. So I had a board meeting yesterday and I can tell you that the focus of, delivering Calgary on budget and on time is absolutely clear. It's very clear in my mind, it's very clear in the board's mind. And you can see, even since the announcement of the funding, how far we've come. So the site is ready to go. It's ready to collect shingles. It's ready for the plinths, et cetera, et cetera, to be installed. We started detailed design and we did a process flow diagram design review And the good thing is our peers came to that. So McAshfall sent their engineering team and Tamco sent their senior engineer to it as well. We've now ordered the long lead items. So three long lead items that we identified that had the biggest effect on, I mean, cost, but most importantly, schedule. So those have already been ordered. And you saw the PR for that a few weeks ago. And the P&IDs are now not under review, but they're complete. So that's the process of instrumentation diagrams or piping instrumentation diagrams. And they are literally, they're now locked down. And so what that means is that for each one of the modules that we have, that can be packaged together and can go out for quotation for fabrication. So all of this to say that, you know, the the ruthless focus on Calgary is what I describe it is absolutely in place. And then, you know, I've been asked the question, well, OK, well, that's good. Well, why don't we just wait until Calgary is built? Well, not only will you see catalysts that describe where we are in the project, but you'll also see the catalysts on the expansion. Look, I mean. People are kind of like, well, why don't you just build Calgary and then wait and then start to develop this? Well, as most of you guys know, development permitting in major locations can take from 18 to 24 months. The Alberta funding, emissions reduction Alberta funding process took nearly a year. So all of these things have to be laid in place. So that they're ready to go when Calgary is up and operating. And so my view is that that is Toronto. And so in the first half of next year, I expect us to be able to outline to the market where we are on land. where we are in the offtake agreement, potentially where we are on a shingle supply agreement. And one of the things that was in the TAMCO slides was that we would work on them with development for the plant location in the US. And I can tell you that US plant one for TAMCO, we have identified, you know, a kind of prioritized area and are looking into that. And so I suspect that that will be another strong catalyst in the first half of the year. And as we said, we already have a non-binding, you know, heads of terms agreement for the offtake. So I think that will look exactly the same as the kind of first offtake agreements that we did with McAsphalt out of Toronto. And that will be ready to go in the first half of the year as well. So I think all of this to say, you know, when we get to Calgary commissioning an operation, This will not be a single asset business. This will be a business that has a single asset operating and clear direction for where we're going as a business next. So, I mean, the debenture, you know, the debenture pack has been out. We'll obviously put this up on the website. You know, conversion price, sorry, you know, interest at 12.5%, you know, percent, conversion price at 20 cents a share. forewarned at 30 cents a share. And importantly as well, you know, Tamco are a lead order for this debenture. That's really important. And I just want to point out the importance of that with respect to this business and them as a strategic partner. So Tamco have no contractual obligation for this debenture. They have contractual obligations for the debentures whenever we hit commissioning and operations milestones, but absolutely no contractual obligation for this. So them leaning into this as a lead order is all about them supporting this business and our funding, and to me is a clear demonstration that they're here as a strategic partner. So taking away from all of this and the questions that we answered, we chatted about the financials, we chatted about the details of Q3, I think how far this business has come and how much we've de-risked it has transformed where we were when I came into the business as the IPO to where we sit today. I think the risk of the business is significantly lower. I think you can be assured that in 2024, not only is this about actively managing cash and actively managing expenses, it's also about the ruthless execution of the Calgary facility, which includes budget, but also includes time. And I, on completion of Calgary, I want a clear plan that can point to our next facility in Toronto and our first US facility with our partners in TAMCO. So yeah, I think those are my answers to the three questions we've been getting and I'd hand it back over to the Kinty.

Okay, thanks, Aidan. A few questions coming in. First question is, when can we expect an update on supply and how are discussions going with municipalities around Calgary?

Yeah, so that's a really good question. So one of the things that we have been doing since kind of October here is engaging the municipalities around Calgary and talking to them about what their plans are for 2024, how we can work with them with respect to diversion programs. And there are other businesses in this area too who use shingles. So engaging with those guys to see how we can optimize. And that's also going to be a point where we engage with the Alberta government too. So those have been very interesting conversations where people are... I mean, I would say there's probably a couple of takeaways. Number one, I think municipalities and landfills are really happy to see a diversion alternative. And I actually think, you know, we've also had engagement with kind of roofing contractors and contractors in the local area. And they too are very, very keen to see a circular economy solution. I think it's been a bit of a, I mean, it probably should be a bit of a surprise, but to me, but people really do not, contractors, municipalities, landfills, even homeowners do not like putting shingles into landfill. And so the question that we have been working on and the plan that we're working on for Q1 is, okay, well, that's all very good, but what does it mean? So what is a diversion program for cows? What could a diversion program look like? How do we work with local contractors who are coming with roofing shingles? How do we work with local contractors who are currently working with managing shingles as well? And all of that to come together in Q1. I think we will likely consider about when we open the site to industrial providers, and then when we open the site to... to domestic and to roofing providers, et cetera. My view is that we will collect, you know, I mean, when I've talked about steady state operation and I've talked about, you know, when I've been asked the question, how much inventory would you have in a site when you're running 40,000 tons a year? And I've always said, you know, probably about a quarter's worth. I think that's our objective. ahead of Calgary commissioning next year is to collect that probably as a minimum through 2024. And that's, yeah, I would say that's how we're going to work with the contractors and the municipalities to try and get that volume secured.

Okay, thank you. Next question is with regards to McAshfault, how's the relationship so far at this point in time? And any updates to speak to?

Yeah, I mean, I think really good. I mean, you know, we've spent a chunk of time on Ms. Cole talking about Tamco as a partner. McAshfault have been excellent. So one of the parts of the design of the, or design options for the backend of the Calgary facility is, of course, the asphalt storage and also transloading from our asphalt storage onto the McAsphalt trucks. We've got a detailed design that literally includes the detailed design as supplied by McAsphalt for the storage. They are world-class operators, but they operate storage facilities asphalt storage facilities across the world. As you know, they're the Canadian sub of Colas, who are a multi-billion dollar global asphalt company. And so they have facilities everywhere and we have their detailed design for that. So that's a really good example of them just saying, well, this is what we do. Here you go. You can incorporate this into your design. And they were in the In the process flow diagram review, they were in the P&ID review. So all steps of the way as we're doing design reviews, we have the expertise here from a cash flow. And as we look at optimizing production flow and all that kind of stuff, we've started those conversations already. about what that's going to look like through 2024. So great support from them on a technical side and kind of logistics, determining the logistics options too.

Okay, thank you. Next question is on ERA. Is there anything left for Northstar to fulfill on the ERA grants?

So the contribution agreement is done that has been established. Each milestone has criteria that needs to be met. So, you know, whether it's number of drawings done, whether it's percentage of equipment on site, whether it's, you know, level of, you know, each milestone, we have been through and agreed a set of criteria for that milestone. When that milestone is reached, then we send in the paperwork and then ERA send us the money. But nothing, those are all locked down. Those are all in the contribution agreement that we signed in July. So we know exactly what they are. We know exactly how to meet them. And yeah, it's just a matter of process now to meet those milestones and write them up and send them to ERA. Is that good?

Yep, thank you. Next question, any updates on the Toronto facility and any idea what areas you might be looking at?

I mean, obviously we can't discuss areas that we're looking at, but as you know, I've said often, Toronto could probably have four facilities, north, south, east and west. It's also about collection. If you build a facility on the west, you're not getting anything from the eastern GTA because it takes you three hours to drive across it. So it is all about optimal deployment. I believe that in the first half of next year that we will have, that will be a catalyst whereby we can describe not only where our first plant is going, but also what the offtake agreement looks like and potentially what the supply agreement looks like for the front end as well. So discussions are ongoing on all of that. And I think that's an important catalyst in exactly the same way that I think the US plant one is an important catalyst too. I think it's important for us in this company to understand absolutely deliver on calgary of course that's a that's an absolute no-brainer um but as i said the uh having a clear path to what comes next um number one being toronto and number two being you know the the u.s facility with tamco i think um i think are critical so yes first half of the year is when i think we can be we can be more clear but lots of discussions for toronto on uh on location, on offtake and on supply.

Okay, thank you. Next question. Have there been any talks of global licensing agreements?

No, I mean, I actually, you know, I actually think that we will have real understanding and interest in licensing agreements once Calgary is built and operating. I think if you think of trigger points where people want to think about licensing, I also suspect that we would probably want to see three to five facilities built before we would think about licensing because I think process improvement Plant five, sorry, I mean, plant two will be better than plant one, plant five will be better than plant four. You know, in my kind of estimation, that's probably three to five plants worth of operations so that somebody can come in and say, well, listen, you know, how did you improve Calgary and where are you at with the kind of the performance improvement curve, which kind of jumps as you go and then starts to round off probably around plant four or five. So no discussions as yet. but something that is clearly in our business model, whether North America or globally. I will say that if you look at the statistics from last year, 16.5 million tons into landfill. We've heard from one of our kind of close industry partners that that could be higher again, is estimated to end higher again in 2023. But even at 16.5 million tons, that's over 400 North Star facilities in North America alone. So if you look at what ARMA have come out and said, the shingle manufacturers, so they've come out to say they want to divert 50% of all shingles away from landfill by 2035, and they want to divert 100% away by 2050. So 2035, you know, 12 years away, we would have to build over 200 North Star facilities to meet that ARMA goal. So there's a real premise to focus on North America. But I do think licensing is part of that solution. And I think global licensing will come into that frame as well.

Okay, thank you. Next question. When do you expect tipping fees to start in Calgary?

So, as I said, I think we will be engaging externally to be ready for the roofing season, which is, you know, everybody in Galway knows is kind of Q2 on. If we have any other agreements ahead of that, we would likely, so we, sorry, I should say, 100%, we can receive shingles on the site today. So we have the capability to bring shingles in today. And so any contracts ahead of that could access the site. So I think Q2 on is a firm number with potential upside earlier than that.

Okay, that wraps up our list of questions for today.

Perfect. Well, thank you all, um, for, uh, for, for attending. Um, and as you know, you know, we can be reached through communications, um, Carson's details are, are, are up there too. Um, yeah. And, and I think, um, you know, I think this company's in an awesome position. Um, it'd be great to, you know, secure, um, with, with, uh, with a successful completion of the venture, of course. Um, and, and I think that will take us, uh, handily into next year and get in Calgary.