Cielo Waste Solutions Corp. (CMC.V) Earnings Call Transcript & Summary

Mr. Allan resigned.

Okay. Usually, when people resign from a corporation, they don't get remuneration beyond their resignation.

The remuneration was in recognition of Mr. Allan being founder and leader of the company for 17 or 18 years.

So the company -- the Board decided that point to pay him roughly, based on his base salary of $420,000, about $1 million exit package. I just want to make sure we're all clear, and all the shareholders are hearing exactly what has transpired. Am I correct on that?

The Board respected the existing contract then agreed to implement it.

Okay. All right. Thank you.

A point of clarification, [ Gary ]. [ Gary ], hold on. Just a point of clarification, it was $324,000 over the term with respect to the per year. That's what it was.

So his base salary was $324,000 per year?

$324,000 per year. $324,000 per year. That's correct.

Right. And I believe the annual information form says he get paid for 27 months.

Yes, that's correct. I just wanted to make sure we had the right numbers, right?

Okay. Fair enough. So I might be off by a little, let's call it, 3/4 of $1 million, $750,000 then. Is that fair enough? Close enough?

Yes. Yes.

Our next question comes from [ Ben Dee ].

Can you hear me?

Yes.

So I just got a question about your production. I'm the CEO of [ Power Forest Products ], primarily timber in Pacific Northern and forest products in BC. Two-part question with a little bit of backup. You guys have mentioned the use of railway ties and wood waste as feedstock, brings me to my question, is there something significant about the railway ties that make them good for the production? Or is any wood good to be used, like wood waste for the production that you're looking for?

Really wood feedstock in general, will suffice to -- for our process to be able to generate a usable distillate. The railroad ties essentially are a paid stock that we do not need to pay for on the front end. So paying for a feedstock in this -- with this process it's not economically feasible to operate. So the wood feedstock that Cielo commenced or started this process on has now become a very competitive market. So wood waste is now predominantly being purchased by pelletizing facilities. So we needed a feedstock that wasn't having a rising cost.

Yes. Okay. Very good. And secondly, to follow up my question is that if you are -- if any wood is usable? And cheap wood is preferable, of course, then is there any possibility of looking at hog fuel from sawmill production because on the coast currently with the pulp mill closures and curtailments on the coast with pulp mills in BC, we're seeing an abundance of hog fuel. And I'm wondering if there's a possibility that the company could look at using that or possibly bringing some of the operation down to where this material could be used relatively cheaply, and could be a good fit for using this material. It is a possibility. It's something we could look at in the future. Right now, we're focused on leveraging our experience with wood biomass as a feedstock and nailing down the process and having a commercial facility. It's likely that we'll continue with an R&D division at that point where we assess alternative feedstocks.

Our next question comes from [ Sergey ].

Good afternoon. I'm going to ask -- like there's a couple of questions been already asked prior to me. But kind of coming back to the feedstock, like the thing is I'm not sure like why Cielo buys feedstock, like isn't the whole idea of the company, you're pretty much cleaning up this planet from like actual garbage, wouldn't be Cielo more likely to charge taking -- because the whole idea like when I started investing into this company, the idea is like Canada and North America sending out garbage and paying China to take their c*** out pretty much and bearing their landfills. And idea is wouldn't they rather pay Cielo to take our stuff, our garbage and we process it and turning it into renewable fuel. And another thing, too, what about plastics? Because I think -- I mean that's great like railroad ties and all that. That's excellent that Cielo is focusing on that. But I think the key selling point, it's the plastics that they have to focus on because that's what doesn't get decomposed in the ground, right? And when I spoke to Don Allan prior to that, like a year back, they're saying that Cielo is able to process 7 -- all 7 types of plastics, and that's the only company in the world that has the technology to do so. And like what's going on with the plastic part of it?

Okay. So [ Sergey ], a couple of things to unpack there. So with respect to the first question comment around the feedstock, you're 100% correct. We are looking for feedstock that has -- we have 2 sources of revenue in this model. We have the ability to charge for the product that we process and get to an endpoint and then sell as a commodity, such as a fuel of some sort, diesel, naphtha, kerosene, as we've stated publicly. The other revenue source is a tipping fee, bringing in the waste product into the company and into processing. So you're absolutely right. There isn't a model. And Ryan Carruthers, our EVP, who answered the previous question -- previous caller's question, from Ben, is correct and we are sourcing feedstocks, specific feedstocks that are going to derive an income stream into Cielo beyond, of course, us having to pay for waste feedstocks. I think a common problem that some biorefineries face is they're going to have to reconcile the cost that they have to pay for crops, such as corn or soy or other feedstocks that cost them money on the front end to be able to process as well. And so our thesis certainly isn't that. Our thesis is that we want to source, and have sourced specific feedstocks that are going to be paying Cielo for the processing of that feedstock as well. To your second question with respect to plastics, we certainly have full intentions on -- in our R&D process understanding the -- as our CFO has so eloquently put it many times, input, reaction, output, with respect to what is it that we're putting in, what kind of reaction we get and what is the output or what is the outcome of the processing that we are doing in our process. So plastics 100% is on the list, and we stated that publicly. The fact that we don't have them at the front of the line is purely a business decision that we made around existing feedstock agreement we have with CP Rail and the fact that we have a business model around an understanding of wood waste feedstock, railroad ties, of course, is a form of wood waste. And we want to make sure that we're able to be quick about this, and not take any more time to commercialization. So plastics is certainly 100% on the list. We're not trying to not do it. But we have to -- there's a business aspect of this with respect to the feedstock that we currently have and that we're currently using and being able to be nimble and not take any more time to commercialization than we absolutely have to. Does that make sense?

Yes. I mean -- so pretty much it's on the list. It's just -- I feel like that'd be like a real ace in the deck, if Cielo can figure that out because that's what makes them kind of like stand out from any other companies. But -- and another little follow-up question, too. And again, it's all of you, the Board of Directors because you're obviously communicating to a lot of like government agencies and bodies like it's kind of -- and I talked to Don prior to that a bit and it's amazing like what's -- like you think we have probably the greenest government? Well, as they say, because like we have these NDPs and liberals who say climate, climate, climate, but it's amazing, why is like there's no support from the government side of things towards Cielo? Like I know Cielo raised money by diluting shares and doing all the private, I guess, privately, right? But how come there's no like -- for example, there's like solar farms in medicine had they probably what it lost like $5 million, just a pile of garbage and government throwing money at them like crazy. But like how come there's no support to Cielo, any kind of -- I think -- I believe Cielo received one grant of $500,000 sometime in the past, if I'm correctly -- I'm not -- but besides that, there's just like no support towards this company, and this company is pretty much trying to clean up this country, right, from all this overflowing garbage like what's going on in terms of that part of the business?

Well, you know what, great question. And we have, through the number of years that -- and I've been around -- or Cielo adjacent for more than just the time that I've been in the chair currently that I occupy, but we have a number of government conversations that have been -- had in the past. There's been a number of brand applications that have been done like you'd mentioned, the Alberta Innovates grant that had been approved for $500,000. A lot of this comes around to a commercialization question, around non-dilutive financing that we would receive from the government agencies such as SDTC or someone from web from WED, from W-E-D. A lot of it is around the commercialization as opposed to R&D. There's a number of things that we get in the way of tax credits, for example, with shred, with science, research and development and things of that nature that we are able to apply for. So -- there is -- it is a very broad space, and we would be more sustainable than renewable, currently. So we -- to meet certain bars, certain criteria within certain granting agencies is a bit of a moving target, quite frankly. And we're doing everything we can to attract that nondilutive aspect of grant money and there's all sorts of that type of thing as well. It has to be -- some of it's matching, some of it is straight-out grants. But yes, I mean it's a challenge. I think the solar and the wind and some of those other will say mature technologies that get some form of assistance. I'd question what -- how much they get because certainly, I know there's -- these are for-profit businesses. So they have to be making them somewhere. But that's -- yes, it's something that certainly when you talk to your local MLA or MP would certainly encourage you to voice those very same concerns because, quite frankly, we've been saying that for a long time. And it's nice when we have some evangelists out there actually saying the same thing.

And like -- yes, it is just simply strange. I mean you look at some numbers flowing out of the country towards climate, whatever, planet, like there's billions of dollars flooding out, and like nobody can throw $1 million at the company that's -- and maybe, I guess, to follow up, are there all these like bodies waiting for that R&D facility to be functioning and tested? Is that like a pilot plant or the facility is like a bit of -- like is everybody kind of waiting, including like third-party investors for it to be done and proven? Is that how it's kind of almost looking like down the road?

Yes. It's very much, we have the cart all we need as the horse. We know what -- we know what our process is able to achieve. We know it works. We've proven that concept. It really is about the -- quantifying the data, the economic data that we need to be able to articulate specifically to the funders, investors and the partners that we have waiting for us to do that very thing. So [ Sergey ], you're dead on there. I'm not sure if we have anyone else.

There are no other questions in the queue at this time. I'm sorry. I stand corrected. [ Andy R. ], your line is open.

With regards to the railroad ties and you're not paying for them, having worked around some excavator companies this past summer. I'm told that they're paying an awful lot to dispose of railroad ties. Are you guys receiving them free delivered to your location, like how did they get to you? Do you have no cost of acquiring them? And is the -- are these companies that are disposing of them? I know you have a contract with CP. Is that the only source of these ties? Or have you approached other markets. So I'm understanding every excavation that runs into railroad ties that some of them go through CP to somewhere in Ontario. And is that to Cielo or is that old news?

That's -- thanks for the question. And it is -- so we -- to answer your first question, we don't incur any cost. It's FOB to the site that we've selected with in conjunction with CP Rail. So in fact, we did publicly state that be receiving a tipping fee from CP Rail based on the quantities that they're going to provide. Currently, we have that agreement with CP Rail, and we have had, let's say, high-level discussions with other rail companies to be able to get us the product in the same manner and way, and whether we locate near or at the source as well is also possibly one of those things. The contract we have with CP, we're not able to disclose as to the specifics around the amounts and how much they're paying, that's confidential. But we are very confident in the other conversations we're having that we will be procuring the same amount, if not more, from other companies, other rail companies, some rail tie even manufacturers that are also producing some that don't meet their quality standards, so they have to dispose of those as well. There's a significant amount out there. And if you've driven around, at least on the western side of this country, you'll see them stacked everywhere along the side of the railroad track. So it's a problem that we're solving for not just CP, but for other rail companies as well.

The next question comes from [ Carmen Caldero ].

Just a quick question, a little update on what's happening with the R&D, like what stage are we at? Or are we getting close? And permits? Are they coming along? Or have you guys submitted anything else besides the railway ties and the other feedstock you were looking at, like plastic or anything? Are you getting that ball moving so that it's ready when you are ready to try testing it?

Carmen, thanks for the question. Yes. So we are -- and that's why we had announced the update on November 9th, that we're going to have that's specific to the operations of the company, that being primarily the R&D facility and where we're at and where we're going, et cetera, et cetera. So we felt it better to be able to present something in a webinar format online as opposed to on the phone and just tell you. So that's why we announced that early this morning, we PR-ed that event. So I certainly encourage you to tune in. But so far, so good. We're on time, on budget. Sort of the short version, but we'll have a lot more specifics. So we'll have some pictures, drawings whatnot, to be able to display. And with respect to AEP, yes, we're proceeding favorably with that. We're back and forth with them on the amendment that we provide or that we apply to with respect to our permit that we currently have. And with respect to the next round of feedstocks, we will be making sure that there's no operational pause and that we're able to apply for the next set of feedstocks that we're trying or want to test and get an understanding of what that input reaction output looks like. So everything so far we're running in parallel tracks to the R&D facility.

Okay. Good because it seems like everybody is just getting anxious in terms of having to wait around. So we want to make sure that once you get this railway -- the railway ties going and generate some money coming in that, that other permit will be ready to go and we can just keep this train moving instead of having to wait and stall in between, right, and get everybody frustrated and investors start popping out and everybody starts getting negative about the thing and everything starts to plummet again.

Yes. No, listen, Carmen, from your lips to God's ears, we had access to a DeLorean and Doc Brown driving it, we'd be in going into the future.

Our next question comes from [ Gary Defor ].

Probably this question for either one of the Ryans. Just my understanding is there's 2 catalysts involved in the process, one for the reactor and one for the desulfurization. I know we had a hiccup a year or so ago where there was something wrong with the catalyst that had to be sent down to Texas and caused delays, et cetera, et cetera. So just a couple of sort of questions related to that is, where are these catalysts sourced from? Like which country? Are these proprietary catalysts to Cielo or can other companies use the same catalyst for maybe some other purpose or for a competitive purpose? And then the last and probably the most germane when you're looking at trying to figure out what the economics are of the R&D -- through the R&D facility, are we on a fixed-price contract or a variable price contract for these 2 catalysts. Can you shed some light on that, please?

[ Gary ], thanks for your question. Really, it is -- they're proprietary catalyst used by Cielo. So as far as where we purchase this from -- or purchased those from, that's somewhat confidential. So that's about all I can share on that aspect. With respect to the R&D facility, it's a cost plus. So essentially, we had a contract price. And as we make significant changes, there are adjustments to the overall contract price. But thus far, we've still been within the boundaries of what the original scope and cost estimate was.

Okay. And maybe if I could, [indiscernible] ask one little follow-up question. With respect to the Fort Saskatchewan property, I guess the question is, I mean, we're going to go through this R&D process. We're going to test multiple feedstocks. It's going to take some time, et cetera, et cetera. Obviously, we do have a bit of a financing issue overhanging this company as it's always been. Why not -- now that we've got a tenant in there, why not sell off the Fort Saskatchewan property and pay off the debt, and at least take some of the debt pressure off the balance sheet.

Yes. Gary, you -- get out of my head. It's one of those things where we have to maximize the lease land that we have. So we do currently have a tenant, you're right, in Fort Saskatchewan. And that is for the building and real estate surrounding it to the tune of 15 acres. So we're currently in the process of looking for a tenant for the remainder of the 25 that is there that can be used as lay down and everything else and to really maximize a decent cap rate calculation around the sale of the real estate, we want to see that utilized as well from a lease standpoint. So there's -- and it's publicly for lease. It's not something that we haven't publicly stated that we are doing. So -- but we do need to lease up the balance of that developed space before we really maximize off the sale of the real estate. Otherwise, we're cutting ourselves -- we're kind of cutting your nose off to spite your face if we go too prematurely. Okay. I think given the fact that we don't have any other questions, Carolyn, I think we can end the call.

Thank you so much. The conference has now concluded. You may disconnect.