Base Carbon Inc. (BCBNF) Earnings Call Transcript & Summary

I am Michael Costa, CEO of Base Carbon, I am here with Wes Fulford, our President. We're going to run a very similar format that we've done in similar calls like this. As usual, we know how busy everybody is and very, very grateful for everybody taking the time out of their day on a Tuesday morning to meet with us. I know a lot of people are going to be listening to the recording as well. So thank you guys for taking the time out. Whatever time of day it is for you guys. To frame this call, we've spent a lot of time on prior calls talking about the margin of safety based investing, the execution within our portfolio and the manner in which we've allocated capital in the initial turn of capital into this operating portfolio. All of that's very, very intact. And everybody here has either listened to us live, talk about this or has listened to us on these recordings, talk about the way we think about allocating the value of the risk of this firm's capital into this developing market. As I've said, all of that's incredibly intact. But I think what we're ready to begin talking about today because the market has started to move there as our expectation has been, is to talk about what's really exciting us in the upside of this business. We've talked to you guys repeatedly in our -- about our projects in this initial 3 projects, the initial turn of the capital in this business and all equity capital financed by the way, every dollar in our project is equity financed. We've talked repeatedly about how we've protected the downside. We've talked about how we've allocated capital so that we can turn our portfolio thoughtfully and efficiently. And we've told everybody how we've had multiple options and optionality to the upside. The upside is starting to come to the fore for us. And it's -- we're both excited for it. And as I said, grateful for it, but it's also very humbly, what we expected. We've measured thrice, we've cut once. And we're starting to get to the point in time where we have real upside in this business, and we're very, very excited about it. The -- when we talk about upside. What we see is the potential for multiples of money and significant price expansion. And I'm also getting -- I'm getting a text message from our lawyers right now that I didn't say anything about forward-looking statements, please be mindful that this presentation will have forward-looking statements. So now that the lawyers have been have satisfied, I can carry on. In any event, the last call we had in May, we did about around share price. I think our share price is around $0.84. We've traded in a range since then. We're sitting here 4 months after that. What's transpired in the time between now and 4 months ago is we've had significant advances in the project portfolio and we've had significant advances in the marketplace overall in terms of the optionality of our business. I want to also keep in mind and have people keep in mind that this -- and I think it's really lost on our business being in the junior market is -- and I challenge anybody on this call to go find more than 1 or 2 that might be similar to our business that our junior market businesses that generate free cash flow they have no debt and they've never had debt on their balance sheet. They have a significant cash balance in which they operate their business and support their projects. They have no significant contingent liabilities across their business, i.e., we're not a junior mine that needs to go out and raise hundreds and hundreds of millions of dollars to have a chance of generating revenue and free cash flow. We do that now that has "near mine" -- I will use the same analogy, near mine expansion optionality in virtually all of their projects. It just -- this kind of business doesn't exist in our opinion. And I think that it's the fact that environmental markets and carbon markets are starting to be understood and priced not only by our shareholder base and the investors that are prospectively looking at our business but by markets overall and what we're seeing just in the broader marketplace in the carbon markets sets us up incredibly well for the next 6, 12, 24 months in this business, but also in the marketplace. All of that said, I think that to use the -- to probably gloss over it a little bit more than one needs to. We're way closer to the bottom of the market for the perception of our business, environmental markets businesses, carbon businesses. And we have material upside events that we've been playing for. We've been playing for since the day we started this business 4 years ago is what we underwrote this book for and they're coming to fruition. And the first one that we've spent some time -- we spend a lot of time in our disclosures preempting people on this, and we're now ready to start talking about it in detail where we're at in terms of the CORSIA market. So with that, I know people are probably more interested in hearing about that than me right now on this. So I will pass it over to Wes and to talk about CORSIA.

Thanks, Michael, and welcome, everyone. Thanks for joining us today. As some of you may have noticed we press released what we believe to be a very material development at our Rwanda project this morning, and we wanted to key in on this announcement as well as spend a little bit of time explaining what's happening at the project level as well as an overview of one of the key markets we've been targeting for the sale of our inventories. At the project level, following the launch of an updated methodology for energy efficiency and fuel switch measures in cookstoves last fall, VM0050 or VM50. Our project development partners, DelAgua, began working towards updating the previous VMR006 methodology that the project was originally registered under to the new standard earlier this year, early 2025. The new VM50 methodology has more stringent and improved monitoring measurement reporting as well as better alignment with evolving market demand from a methodological integrity, credibility and quality standpoint. Late last week, Carbon Credit Registry Verra officially completed their review of our submission and has now approved the application of this new methodological standards for our project first within the Verra registry. Our future carbon credit issuances from the project we utilize this new VM50 methodology and over the coming days/weeks, i.e., in the short term, we expect to complete the requantification of existing Base Carbon inventories in conformance with VM50. Following requantification, as you've seen in our press release, the company expects to hold a revised inventory balance of approximately 1 million to 1.2 million CORSIA aligned carbon credits likely in the mid point of this range to be finalized during this requantification process which represents an approximate 45% reduction to our current VMR006 inventories of 1.9 million credits. In addition to this, as disclosed in our Q2 financial reporting this past August, our project partner, DelAgua, will hold approximately 240,000 credits post requantification, which were issued in July and the third project issuance and remains subject to a revenue-sharing agreement with Base Carbon on those inventories. Under the new VM50 standard, we continue to anticipate approximately 1.7 million credits as you'll see on the right of this slide which remain to be issued over the initial life of the project, which should continue at a more regular and predictable semiannual issuance schedule from this point forward. We've talked about CORSIA at length in calls prior, i.e., the carbon offsetting and reduction scheme for international aviation. CORSIA requires airlines to offset growth in aviation emissions, about 85% of 2019 baseline emission levels, and airlines currently have limited near-term options to decarbonize, simply put. Aircrafts rely on energy dense jet fuel and alternatives such as hydrogen or electric propulsion remain years away from commercial viability and even sustainable aviation fuel or SAF, which can reduce life cycle emissions is expensive and produced in very limited volumes. This lack of emission reduction alternatives creates immediate compliance demand for CORSIA-eligible carbon credits to much cheaper alternatives to reducing emissions for the airlines than SAF currently with an embedded sort of price per carbon of somewhere around $300 to $400 a tonne based on our internal work. And the market can see demand of 146 million to 236 million tonnes during Phase 1 of CORSIA alone, according to research conducted by the International Air Transport Association, or IATA. CORSIA Phase 1 covers emissions from 2024 to 2026. On the supply side, to date, there's only being 1 project approved for CORSIA, which is the Guyana ART TREES project, a jurisdictional REDD+ project or Forest Protection project, which has produced only 15.8 million credits to supply. CORSIA eligibility has certainly been front and center in our business plan and in general, developing a portfolio of what we'll call pre compliance credits, which eventually become deliverable into global compliance markets. High level, there are 4 key requirements to deliver credits into Phase 1 of CORSIA demand. You'll see them, 3 of them listed on the left-hand side -- left-hand the slide up top. First, the credits must be generated from the approved program and methodology. With Verra becoming an approved program late last year, and the project and current inventories conforming to the new VM50 standard, we will soon satisfy those requirements. Secondly, the project requires the letter of authorization from local government or the credits need to be correspondingly adjusted in accordance with UNFCCC standards, the LOA corresponding adjustment as we've discussed historically, is very simply an assurance or guarantee for the ultimate carbon credit buyer and retirer of those credits that the same credits will not be double counted or double claimed by a local government towards their own climate level goals or NDC, a country's nationally determined contribution which is their official climate action plan under the Paris Agreement. In December of 2023, we announced an LOA with the government of Rwanda, the first project to do so within the Verra registry, therefore, we also meet this requirement. The third requirement relates to the period during which the carbon abatement avoidance or carbon removal activity occurred, referred to as vintage. And Phase 1 of the CORSIA program requires 2021 vintages or newer. We meet the vintage standard as we currently only hold 2022, 2023 to 2024 vintages in base carbon inventory. The fourth program requirement, high level again, not listed on this slide is the requirement to deliver CORSIA buyers protection against relocation of that letter of authorization by government. There are a number of insurers willing to underwrite this risk at a cost ranging from 3% to 5% of sales, and our project partner has already contracted with one of them on a previous sale. Post VM50 requantification, this insurance piece is essentially the final step required to achieve a CORSIA eligible label from Verra for inventories as well as DelAgua's inventories that are subject to a revenue sharing agreement with us. And we understand that Verra is working hard to finalize the policy and coverage requirements which we anticipate to be concluded likely next month. I also note that following requantification reinsurance we should be able to achieve a CORSIA scope label from Verra on our inventories, which is a precursor to the final CORSIA eligible label once the insurance standard has been met. Moving on to the bottom of this slide, we'll see several noteworthy and exciting price indicators for CORSIA eligible carbon credits. On the bottom left, the ICE or the Intercontinental Exchange December 2025 futures contract has risen at $20.50, up over 30% year-to-date. On the right side of this first chart is the MSCI CORSIA Phase 1 pricing forecast ranging from $26 to $63 per tonne of carbon equivalent, clearly reflecting that structural supply [ short ] that exists in today's market, as I explained earlier. And late last year, on the middle chart there, IATA teamed up with Xpansiv to foster sort of momentum and liquidity in CORSIA markets via a quarterly auction with aviation buyers. The chart in the middle reflects actual auction clearing prices, the first auction in November of last year at $21.70, the spring 2025 auction at $22.25 and a live 2025 -- October 2025 auction currently underway, which should close within the next week. We don't know exactly where the current auction is going to be priced or clear -- to be clear. However, we've heard that the prices are up over March and anxiously anticipating more data on that front. The punch line for all attendees today and the key takeaway from this slide is that pricing is up in a dramatic fashion and patience is virtue when it comes to credit monetization. I'd now like to take a few minutes to share a recent video. For those of you who haven't had a chance to watch, which was launched and showcased by Verra during Climate Week a few days ago. The timing of this video couldn't have been more impactful. Frankly, given New York Climate Week is one of the largest environmental conferences globally. Michael and I were in attendance. And we feel that video does a fantastic job of helping people conceptualize and digest the real community and household level impact delivered by our projects to millions of local Rwandans. It's also a testament to the strength and importance of this project within Verra's registry as the first cookstove project to successfully migrate to the new VM50 methodology. So with that, Sarah, can you put the next slide and go ahead and play. [Presentation]

Thanks, Sarah. Unfortunately, the background music didn't play, which makes the video a little more -- not as palatable or whatever we're looking for than it is. But we have a link to it in the PR. I encourage you to go back and review for those listening on mobiles that can't see the screen and the textual translation, but moving on to the next slide, over to you, Michael.

Thank you, Wes. And look, one of the things I've said this on these calls before, and this is before we jump back into the dollars and cents of a public company, there's always been the duality of profit and purpose within this business. And I think that the video that you just saw is very -- these are real people with real life problems that from my perspective, make my life look -- any problem that I have as a champagne problem. And it's stuff like that really connects through why taking the portions of environment and taking them out of externalities and bringing them back into commerce as it's happening around the world through compliance programs like CORSIA, and the knock-on benefits to humanity thereafter is really, really important. So anyways, I will get off my soapbox and get back on to the profit box. As this is a shareholder call, but I did think that was important to say. What I want to talk about in the outlook are a number of different things. As I said at the top of the call, I want to talk about where we see the upside in this business. And as I said, this is not, hey, we stumbled upon some stuff. These are very specific thesis that we underwrote from day 1. There's risk in them. We had no idea that we would get the first CME on the Verra registry in Rwanda. But we did. We're very grateful for it to the Government of Rwanda and all the people that haven't done work there. If you look at the slick slide that our corp dev team put together in front of you, the little hand box at the bottom is the base of this, which is our equity cost of capital and getting back to the dollars and sense of what we do. We've spent a lot of time talking about the NCIB here. We spend a lot of time of our professional day thinking about our equity cost of capital. And the point I want to get through to people, it's not on the NCIB and the share repurchases. It's not, hey, we're just repurchasing shares because the stock is cheap. That's -- that our stock, in our opinion, is beyond incredibly cheap, which is why we feel very, very comfortable allocating capital that way. But as a public company, this isn't a fund or a PA or just a stack of cash. Our equity cost of capital is the -- is our benchmark, is -- and it's a place that we can allocate capital and as everybody knows that we have. To put it in context, just over the NCIB program in full, we've repurchased about -- we sold -- we raised CAD 50 million at a $1 in the late fall of 2021, the last capital raise we did, which was the 1 that was co-underwritten by Raymond James and the Bank of Montreal, BMO. And of the 50 million shares that we issued, we've repurchased just about 50% of those over the course of the NCIB and other compliant market purchases that we've done. But we've used about right around 20% of the cash that we raised there. So 50% accretion back in, 20% out the door. And the 20% out the door, this isn't -- it's not a trade it is using the free cash flow as we've turned the engine of our business. So we've created a portfolio that has all of the downside case protection. We've talked about nine ways from Sunday on these calls. We've generated a base case. We've generated free cash flow. We used that free cash flow to bring back in nearly 50% of the capital that -- or the shares that we use to raise that capital, and we still have this upside in place. To us, that is -- and I'm speaking as an owner here alongside of all the other shareholders because as you guys know, Wes and I are both and all the broad group of our partners, are significant shareholders and long-term sticky shareholders of this business. That accretion gives us so much leverage and optionality of all of the upside on the back end. So in the back end, meaning as time plays out, as time approaches infinity within this business. So the punchline there really is that we still own the growth. The people that remain shareholders that chose not to sell shares into the normal course issuer bid. It's the most tax-efficient way. We can both return capital to shareholders, the leverage and the accretion from it is always a function of the price you pay. But at the prices that we've paid and we continue to pay, we continue to be active, it's -- the leverage is huge, and it inures all of the growth, all of the optionality, both organic growth on our balance sheet as well as novel growth of the ports of environmental industrials and the compliance and broader carbon markets that we're spending tonnes of time looking at, those continue to inure to us with a smaller and smaller denominator. That's inherently valuable to us. And to put in frame, I think, everybody knows these numbers. But on the enterprise, it's about 20% that we've repurchased. So again, the punchline there is our equity cost of capital is the lens we view all capital commitments through. When you look at this business overall, we have -- and we've talked about this repeatedly, we have significant execution. We've delivered 3 projects to spec in a very foggy. And I saw one of our long-standing shareholders has clicked on this already in the comments, but in a very, very foggy carbon market environment. The -- I think there's just been a lot of confusion. And in a number of different ways in a marketplace and for us participating in it day to day, it's not confusing to us. And that's not a humble brag, but it's -- when you spend 80-plus hours on something a week, you can cut through that fog, and that's our job here as a management team for their shareholder base to do. In Rwanda, you heard from Wes on CORSIA. In Vietnam, we had the Citi Bank offtake in place, which returned an incredible amount of free cash flow to our business with great credit quality on the other side. We managed the risk to the downside. We generated payback in a very short amount of time with equity like rates of returns just from that and with optionality, both in terms of all of the call option on the remainder of the project, which we believe to be strongly in the money plus the expansion option that we have in Vietnam to be incredible optionality, incredible value for this business. And in India, within -- we signed that transaction 2 years and a month ago from where we're having this call and we've planned in that period of time, there's 6.5 million trees that are now on the ground. That is, to us, that is execution. But the upside that comes from that execution and structuring deals properly and having patient capital and having a patient business is where you make the multiples of money. In Rwanda, I want to refresh. CORSIA, Wes talked to you guys very, very technically about CORSIA. I'm going to summarize it to the 100,000-foot level. CORSIA and the CA to get to CORSIA, the LOA, the CA from the government, that's the passport. The Rwanda government has given a passport to those credits to allow those credits for international credit transfer. That's the LOA, that's the CA. That is the key external step that's required to be able to access this international market. The -- if you look at Rwanda, and you look at the -- just the trajectory of what's happened around the CORSIA market overall over the last 6 months. In March, the ICAO, the International Civil Aviation Association, as everybody here knows, this industry works on acronyms, but the ICAO came out with their estimate. For just Phase 1, of CORSIA demand into the end of 2026 at 100 million to 150 million tonnes. That doesn't include that only as a percentage of the U.S., it doesn't include some of the largest countries in Asia, that's just for Phase 1, 100 million to 150 million tonnes. Keeping in mind, we've given you guys the range of what we expect in our inventories of 1 million to 1.2 million tonnes of the VM50. And we view ourselves to have a significant say in the volumes over the short term in the CORSIA market from there, save any novel CAs, et cetera. Think about that delta. Round number is a little bit more than $1 million versus $100 million to $150 million. That's a -- I'll let people draw their own conclusions from there. In July, MSCI came out, and Wes alluded to this in his commentary or spoke to it, but I want to double click on it. They upped their prices of their -- and these guys have been pretty smart and pretty good. And these guys come from Carbon 1.0. They've been -- this isn't they're new to this market. They've been doing this for 20 years. We think they're very smart and very good. They've come out, they increased their price targets for CORSIA Phase 1, just Phase 1, forget Phase 2, CORSIA Phase 1 to $26 to $63. Again, put that in context. In September, the IATA, the International Air Transportation Association, increased their view on the tonne adjustment the ICAO put out by about 50% to approximately 150 million tonnes to 235 million tonnes. Again, I'll let people draw their conclusions from there. People are markets people. Our conclusion is the market is super-duper short. We have something that a lot of people don't have. And not only do we have something out the curve, but we have spot supplies. That's very, very valuable. In and around that September announcement from the IATA, the IATA came out urging sovereigns for more CAs. We need more countries that are allowing that passport. That are allowing those tonnes to leave their universe, their NDC to go into the initial -- the international market for international credit transfer. These people want CORSIA to happen. We want CORSIA to happen both as a business, of course, but also as individuals and happen in a real way in a good way. Again, put that in context. In Vietnam, the Vietnamese government in August, announced the development or the developing of their domestic carbon ETS emissions trading scheme. They've signed a bilateral agreement with Singapore for how credits would potentially move between the countries. Keep in mind, Singapore has an established and a very well-followed emissions trading scheme with set pricing and the set pricing increases materially in Singapore dollars. I'd encourage everybody to look up the Singapore ETS and think about what that means for businesses that can sell into that marketplace. And then in the summer, probably most importantly, the Vietnamese government signed a decree that outlined their initial procedure for project registration and credit transfer under international offsetting mechanisms such as Article 6. Again, talking about the beginnings of in Vietnam, how they're going to think about international credit transfer. The -- when we think about the countries that we operate in, there's a very specific reason. We're in each -- in each country we're in. Some of them are very, very different cultures and very different business cultures than what we're used to in North America. But all 3 of our countries have incredible rule of law. They have incredible cultures, incredible operating environments, and we're very, very grateful and very, very happy to be operating in each of those places. And what we see is our -- not just our base -- we're to the point in time in this initial turn of our capital that we know what our base case looks like. And I think we've demonstrated it both to ourselves, but also we've talked about it enough and the proof is in the pudding. The numbers are out there. We're a public company. All the numbers are out there. Everybody here can see it. But I think the proof is in the pudding of what we've done and how we've done it. And now we're often when you underwrite these things, the upside is based in duration, and we're moving into the period of time where we're starting to really see and beginning with what we've talked about today with the CORSIA line credits, which will move to -- as we click off the final administerial steps that Wes has talked about here, to CORSIA credits the -- over the short period of time here, the -- we're moving into the upside case, and we're incredibly excited for it. The final thing I want to say is we -- and this harkens back to again what I talked about on the equity cost of capital, we have growth in this business. There are a number of novel things that we continue to spend time and energy and resourcing on, not because we're just keeping our feet moving, but we think that they can be incredible capital allocations. But when we think about allocating capital there, that takes a piece of capital away from something else in our business, whether it be at the current time, repurchasing shares or the growth options in our balance sheet. We have or in the case of Rwanda, the value of the credit sitting on our balance sheet. So there's a balancing act between the expected return of growth in a project versus the value that we see where we're at now in our business or the value that we can get from accretion. We're -- a year ago, we just sat here and pounded the table to everybody that at whatever it was $0.45 we're going to buy every share from here until the moon. And I think that with the fullness of even just a little bit of time, I think, we've been right there. We're starting to move into the period of time where we start to see some real opportunity not because we don't -- our stock is beyond cheap in our opinion. But what we see are the expected returns and most importantly, the knowability of those expected returns going significantly up, whether it be the -- our expansion option in Vietnam, which is just incredibly, incredibly cheap, whether it be the 2, 10 million tree expansion options that we have in our ARR project in India, similar projects are selling credits for $40 to $50 in our opinion. In the global market, people can look at what Microsoft just did. The -- so for us, there's that -- I'll use another mining analogy again, but the best place to find the mine is next to the old one. That's what we've tried to do in these in terms of building those layers of optionality, but there's also other business lines within the environmental industrials, within compliance markets that we see significant optionality and opportunity for us to expand this business, and we're moving into a time where our equity cost of capital and the free cash flow in our business will be able to support that. So with that, we're very excited for where we're at today. We feel that it's been a slog getting here with -- again, I'll use the term the fogginess and the confusion in the market. But we're -- we feel like we're really at that turning point in terms of where this market is at, the understandability of it, things like CORSIA having the rubber really hit the road. And frankly, even on CORSIA. We've spent all of our time talking about CORSIA Phase 1. In 3 months from tomorrow, we're into CORSIA Phase 2. And that's a whole different animal and it's way bigger and it's way more important than CORSIA Phase 1. So it's -- there's really, really exciting stuff ahead for this business, for our portfolio itself, but also the going concern of it. And we're really grateful for everybody here being along for the ride with us. So with that, why don't I pause and we're going to curate some questions, and we'll pop over there.

Thanks, Michael. So we're over at 42 minutes, and we set it with the intent of keeping this fairly tight and with only 18 minutes left and letting people leave on the hour. We'll do the same with the Q&A here. So jumping right in, man's first question on the capital flows with respect to the stock price. I can start going back to our comments on -- in May on the latest investor update call, we explained some of the flows that we were seeing in the stock and the blocks that were overhanging this from sort of January on and some details around sort of the cleanup trade that was -- that occurred in late April of the spring. And with that overhang removed, we've really responded well from a price standpoint, marching the stock into the sort of mid-80% range with nothing but buying and no selling. So the intent over the last several months was certainly to set a new floor price for the stock, recognizing that with a 100% move in our share price, that there'd be shareholders coming out of the woodworks looking to take profits, but finding -- continuing to find friendly hands for the stock coming to market and cementing a new floor for our share price. With respect to recent flows. I don't know if you want to add anything there, Michael. But there is an intent and a strategy here. We still believe that at $0.88 or $0.89 whatever we're trading at this morning that this share price is a significant discount to not only our accounting book value of the assets on the balance sheet, cash, inventories and the carbon projects themselves but also a much more material discount to our internal DCF, which utilizes more market-based pricing scenarios and more realistic discount rates on those future cash flows.

There might -- I would add 2 little things. Number one, as the share count has gone down, the concentration of the largest stickier shareholders that are not going anywhere, management, Abaxx, some of the family offices, one of which we've disclosed to people, a couple of other ones which we haven't that are just -- they're beyond sticky. The float goes down and down and down. The second thing I'd say is we're still buyers. I keep telling everybody that. I tell it on individual investor calls, I sit on these calls, we are buyers. But what we're doing is we're finding it harder like the -- from where we were able to buy tonnes of paper down at $0.45, here, we're finding it very difficult to buy paper. When we're buying paper is in the instances where somebody comes in and hits a bid, and hits another one, it hits another one. And then we're -- we sit there at the end of the day we're like, oh, cool, we actually bought some paper today, and we high five. So I feel that the market is getting tighter and tighter and tighter. Whoever keeps doing that, feel free to keep doing it because we like buying the paper. Thank you very much. Other than that, on sort of regular days because there's a number of rules of ticks and this and that, we're finding it very hard to buy paper. So I think that just shows that this market has tightened up materially. Let's move on to the next one, Wes.

Great. I think we sort of -- you sort of answered on the last slide, man's second question there. So we'll move on to 3 and 4 here, which we can kind of lump together. It's around the credit inventories and post requantification balance. So as we press released during our Q2 financial reporting, August 14, through 13, whenever that was. Post quarter end, the third issuance from this project occurred where we saw 192,000 credits transferred to Base Carbon inventory to sort of satisfy the prepayment component under Phase 1 of our [ VRPA ] agreement with developer -- Project Developer, DelAgua in addition to another 371,000 credits, which are retained by the project developer in their Verra registry account. So post VM50 requantification, the 1.905 credits -- 1.905 million credits that we have in inventory today, inclusive of that July issuance and the prepayment credits transferred to us, plus the credits held by DelAgua in their own inventory will result in a range of 1 million to 1.2 million credits held by us, pick the midpoint of that range. and approximately 240,000 credits held by DelAgua, which are subject to a revenue-sharing agreement with the company. The haircut, the discounted inventory volumes is very much the same across current inventories held by both entities. Approximately 45%, plus or minus 1% or 2% on either side to be finalized during this requantification process with Verra. So that should be clear to attendees on the call, and this will again be available on a replay basis if there are any subsequent questions.

And the one thing I would add there on the DelAgua side, we have a great relationship with DelAgua particularly their new CEO. And I don't know, what is Rory's title, the 2 partners that run the business.

Chief Financial Officers.

So they are CEO, CFO. They are brothers, they're really smart, they're good dudes. And we talk to them not just -- and they're great operators. I think we've talked to people about that here, but they're thoughtful and commercial business people as well. So in terms of -- it's in our Verra account, it's in their Verra account, like there's very -- there's much less concern about us of having credits in their Verra account then we -- before we got to know them when we executed this project 3.5 years ago, now that we have a closer relationship and know how they operate. So I don't think people should look into that and be like, they're not in ours. We work with them. We talk to them on the regular and they're smart, capable, experienced business people as well as great operators in country.

And in reference to the 1.7 million credits anticipated, a question from the anonymous attendee. These will be held by DelAgua on a go-forward basis and subject to a contractual revenue sharing agreement with Base Carbon and those 1.7 million credits are the volumes anticipated under the new VM50 standard, and this is actually consistent with those volumes with our Q2 reporting and the disclosure within the notes to the financial statements. So it shouldn't be a surprise, that number to the market. We've previously disclosed the anticipated volumes. Moving on. Given you are free cash flow, no debt, with $10.4 million in cash, what is the purpose and actual cost of staying public? It sounds like a perfect Michael question. So over to you.

I think it's a great question. Look, public businesses, are we wearing our management and directors hats for those of us that are directors like we serve at the pleasure of the shareholders. So it's not a -- we're here to maximize the value of this enterprise for the shareholders. So it's not a, hey, what's the purpose of staying public. There's a lot of things that are super-duper annoying about being public. There's costs that are embedded in it. There's time that -- there's a lot of cost of time-based cost and monetary base cost of being public. With that said, and I do think this business is -- our money where our mouth is. We talked about the NCIB ad nauseam. The -- but this business is anybody that wants a portfolio and anybody that wants a team, this is business, is at risk. And I know it sounds a little bit gaudy at a level saying that on a public call, but that's just the fact of the matter. You can look at the marketplace for what we do as a whole. And there's been very, very small number of teams that have executed and very few portfolios that have navigated this, use the word again, this foggy environment. So the -- I think is the business at risk of somebody coming over at the top? Yes, there's always the risk of that in any public business. The question is executability. If somebody tries to come over the top on something like that. I think that's probably all I really want to say on that one, but it's -- I will double-click again until such time that and -- this business is public until it's not public. And as time approaches Infinity for every business, there always is some kind of eventuality except for the largest, largest business in the world, like, the Apples, who will probably always stay public. But in any event, we are committed to this. Wes and I have spent 4 years on this, our broader partnership group, Andy, Ryan, our friends at Abaxx. We've spent lots and lots of time and energy on this. we're going to continue to, and we're -- we serve at the pleasure of the shareholders, of which we are as well. So yes, that's probably what I have to say there. Feel free to add anything else, Wes.

Nothing further. I'm going to move back up to Harlan's question around Verra's comprehensive digitization plan, thoughts on how we leverage that. Look, this -- given the widget, we are financing and developing, ultimately monetizing this inherently digital in nature, a carbon credit exists in sort of legal contracts. Digitization of this sector is absolutely going to be something of focus and acquired on a go-forward basis from the ground level scoping, design, project implementation through to groups looking to fund projects or trade carbon credits or ultimately the buyers looking to require -- retire credits in an effort to reduce their emissions. This is ripe for digitization in the entire process on the tokenization front, given the ultimate sort of ledger, if you will, lies with the registry, the creator of the credits, the transferor of the credits and ultimately the sort of ledger that underpins the retirement of those credits. You can't really -- those are the groups that have tried to do this historically, namely one of them sort of noteworthy examples of the marketplace being [ Flowcarbon ]. You can't do this without being sort of indirect partnership with the registry itself. But we recognize that technology has a valid use case in this sector. We have a technology and licensing royalty agreement with Abaxx where we have the right to utilize all of the wonderful tech as of late the Abaxx digital title technology that could be very applicable to business that we spend our days and lives within and continue to evaluate how we can best deploy that technology within our business.

Yes. The one thing I'd add there, our business partner, Andy Fedak. Those of you that are Abaxx shareholders, will certainly know Andy or at the very least know of him. Andy focuses a lot on the tech side, and he is he's forgotten more about the tech side than I know. I'm tech stupid. But the -- he'll be quick to tell everybody that carbon is a data problem. And there's a lot of cool stuff that we can do over time on this, but we can't do it at this equity cost of capital, right? So we've got a block and tackle, and we've done the first round of it. We've got another round of blocking and tackling, but there's so much cool stuff that we can do there, especially given all the historic tech partnerships that we have. And it's something that Andy still spends portion of his day on and is very, very passionate about, and I think is a market leader in terms of his thought process there.

Do you all see a futures market developing imminently for CORSIA and compliance features or is this still firmly in the domain of bespoke OTC deals. I can start. You can add, Michael. But specifically on the CORSIA front, as I alluded to you during my commentary earlier, given the fact that there's only one project on the planet currently as we speak, that is eligible to deliver credits into CORSIA, which is the Guyana ART Trees project, the Forest Protection project, there really isn't a lot of open interest. So most of the trades we're seeing is via the IATA auctions. Again, attempt by IATA and the expense of exchange to bolster liquidity and price transparency. And just faster market adoption in general, most of the trades are coming through there? Or bespoke sort of one-off OTC-based trades direct with the airlines via the project developers. So as the sample set or universe of eligible projects continues to grow. We are obviously optimistic that we are going to be 1 of the next projects approved for CORSIA. Certainly, liquidity and pricing transparency will continue to evolve. And this is not unique to a novel marketplace. There are a lot of BCBN shareholders that are also Abaxx shareholders for us, would you ever consider posting asks for CP1 on their exchange? Simple answer is, absolutely.

Yes. Yes. And look, the thing -- we don't have time to get into the nuance and it's really not our, but there's also -- there's a material difference between -- given the projects that are -- this is the deliverability of certain projects into contracts and futures is really, really important to the CORSIA market. So the -- I think that the Abaxx contract has certain characteristics for us that are much more beneficial and aligned with our project versus some of the other ones out there. But the -- so the answer is yes, totally. And we do think that -- and not because Abaxx is our largest shareholder, and we work closely with those guys. But we think that to Wes' point, as there's more and more projects, open interest velocity of trade like all of that's going to go up and go up at an exponential level in our opinion. But you just like the marketplace is one project right now. That's actually CORSIA eligible. So if everybody -- and I'm not talking about the folks on this call, but the marketplace takes like a deep breath for like 6 months, there will be ours and certainly probably a few more that then all of a sudden, there'll be real supply to be able to trade around. We think the market is still beyond short even with that. Like we've connected the dots here for people. We've given so many footnotes in the presentation that we gave today that people can click through and make their own determination. We think it's beyond obvious. But from a trading standpoint, just think about like market infrastructure, like velocity -- there'd be -- I'd be shocked if velocity of contract -- open interest and velocity of contract isn't up materially over the next bid.

Are biochar projects off the table now given alternative uses of capital, (NCIB existing project expansions). I'll start, Michael. And the answer is unequivocally no. As we've highlighted on previous calls, we have exclusivity on biochar opportunity in North America, biochar opportunity, which we continue to derisk. Again, we need a -- we need a very strong grasp on the knowability of sort of development capital required to commercialize an operating business, given biochar can be difficult at the best of times based on feedstock variability, moisture content and chip size and you name it. But continue to progress opportunities within biochar and other carbon removal and environmental and industrial businesses, whereby we can bring an element of contractual cash flows to the project like we did within Vietnam at the time of underwriting. Anything to add there, Michael?

No. Look, again, the -- we've talked about the -- we're now to the upside on what we've done in the first iteration of turning this portfolio. The -- we understand how to derisk the front end, and we're not going to take -- if we were -- it does all stem through our equity cost of capital. If we're trading at like multiples and multiples of here, we have the ability because of that cost of capital to go out on spec more. But without that, we're going to do it with protecting the ability to turn capital quickly and protecting that downside case and ensuring a base case. And again, it is through the backdrop of what our equity cost of capital is and where the -- where capital can be allocated on our balance sheet. So we really like those businesses, as Wes said. We spend an incredible amount of time. We're still very close to one that we really like, and we think there could be something to do there. But we're not going to do something that's reckless. Forget even reckless. We're not going to do something that we're going to come out to this group and people say, "What are you doing?" Just because there are some people saying, well, you haven't announced a new novel project. We know it's in our book. We know the value and the expansions there. And frankly, if you turned it and you said we were a mining company, let's say, I keep using an analogy with everybody today, I guess, instead of a carbon company, and we had 2 producing mines. The third one was going into production at the beginning of next year and 2 out of -- one of them had major expansion opportunities. The other one had like huge multiples of money in terms of capital -- expected capital return expansion, and we're really close with the other project developer. If that mining business went out and bought a new mine that was like way upstream and early-stage exploration people would say, "What are you doing?" So I think that those analogies seem to be kept in check, but we do like the biochar business and I think that with the fullness of time, we'll end up doing something there. It's just a question of when, not if.

How you'll be able to maintain your profit margin? I think this would be the last question, sorry, but how will you be able to maintain your profit margin on future purchases from your partners given the market transparency of expected higher for future credit prices, especially CORSIA? In the case of Vietnam, we have a high degree of knowability on the CapEx that would support a 50% expansion of the devices in country, really just subject to inflation. In the case of India, same scenario. The price of the trees will be very similar to what we deployed in Phase 1, the first 6.5%. And the way we provide sort of upside is to our development partners is really just through capital structuring or funding structuring, having a share of the upside available to our to our development partners in country as we've done with the first 3 projects. And so yes, the answer in a nutshell is that we would expect to maintain the same sort of margins as we go forward because at the crux of this is really we are the risk capital with the development of capital, all of the requirements from a program standpoint for CORSIA to deliver credits and have that CORSIA eligibility tag are on the come, post our dollars going to the project really only once you've got a project registered with Verra or other are you able to apply for letter of authorization from the government. We're not -- we're taking the development risk, we're taking the operational risk with being first dollars in and do so with a very like fiduciary and analytical capital deployment, leveraging our resources and our team and our network of experts to diligence and risk the capital going into these projects accordingly. Anything to add there Michael?

No.

So I think that sort of concludes most of the questions, and we're already 5 minutes over. So maybe over to you for closing comments.

Look, the -- as usual, thank you, everybody, for being here and for being interested in what we're doing. I think it hopefully came across in today's call. I've talked repeatedly on these about the difference between waiting and doing nothing. The -- we've always been very prospective on the upside case in this business and in our projects. And we're now in the first innings of upside, and we're super-duper excited about it. And the cool thing about upside is that as you derisk it, it becomes base case. So it's -- we're really excited about the -- what the market has given us and the combination of good underwriting, deep diligence and luck that we've gotten to be able to have this book where it's at in this business. And the really, really cool thing about it is that this isn't just a blowdown analysis of, "Hey, what could this book be worth?" The thing that's totally missed in all of this is the going concern about what we've done. We've done it in the public eye, telling everybody everything we're going to do and why and how ahead of time and repeatedly, and we've still been able to do it. And so I really say that without legitimately, without an ego, this isn't a "hey look at us", but it's, "hey, there's a huge going concern value embedded in this business in Base Carbon as the fog lifts within the carbon markets, both in terms of how people perceive environmental market businesses and as well as in the markets themselves, evidenced by what we've talked about today on CORSIA." So again, very grateful for everybody's time. If people have individual questions, please reach out those of you that have a regular dialogue with us, just ping us. And we'll look forward to the next one of these really soon, and have a great day, everybody.

Thanks, everyone.

Cheers.