Clean Energy Transition Inc. (GDO.F) Earnings Call Transcript & Summary

This discussion will include forward-looking statements. It's very important, especially for investors to understand the risk involved with considering those. On our website and in all of our public filings, there is detailed legal language around what to consider in relation to forward-looking statements. Hi, everyone. Thanks for listening to this management update for Clean Energy Transition, Inc. This is being recorded on January 29. I'm Sean Samson, President and CEO and a Director of your company. On this recording, we plan to do 3 things. First, I'll look back at last year and run through what we accomplished in 2024. Second, I'll discuss where the company currently stands. Third, I'll run through what we hope to accomplish this coming year through 2025 across our various businesses. Ordinarily, I would then move straight into questions, but I will instead come back and answer those next week. I'll plan to post something on Tuesday, February 4. I have some questions that have arrived already because the info@ e-mail is always open. Some of those I plan to cover today with the content, but I also want to give the opportunity for more to arrive. So if something comes to mind, as you hear this presentation, please reach out through either www.transition.inc or directly by e-mail to [email protected]. So 3 things today, what we did, where we stand and now where we plan to go. Okay. Let's start with 2024. A year ago at this time, we were in a much different position. We held an immense amount of debt on our balance sheet. We owed the government taxes and a COVID loan. Management had worked for free for years. We were struggling with the stone business. Things were grim. A bright spot was the rise in the share price at EV Nickel, the company we had spun out and at that time, I also ran. EVNI had some good success. The story I was telling there resonated with investors, we are drawing in new money interested in the deep value. Different company, but still it was a benefit for ours. In early February, we announced that our independent directors had sold a block of our EVNI shares, and we repaid the $1.8 million debt facility with the nonbank lenders in full, including $315,000 of additional interest. This freed up all of our assets, which have been held in security -- which had been held in security since March 2020. We also repaid our $40,000 CBA loan before the increased deadline, that was the COVID loan, and the $233,000 we owed to the Canada Revenue Agency. It was a governance mine field because of the close connections and overlap between our company and EVNI, but it was a very shrewd decision by our independent directors to make those moves. Later in February, we announced the sale of our Orillia Quarry, which was freed up because we had cleared the secured debt. The property was sold for $1.85 million, netting the company $1.74 million. Over the 15 quarters of operation, the Orillia Quarry, which was the primary producer of that stone, that Rogue Stone business, that sold almost 54,000 tons of stone for just under $5 million of sales. Selling Orillia was, of course, bittersweet. The stone business for us was an opportunity to apply our technical and commercial skills to try and make money from the ground. We had some success. It was briefly cash flow positive, but then we were hit hard by what I have called in the past, the triple whammy. That was the pandemic plus cost inflation on fuel and labor. And with minimal pricing power, we weren't able to pass along our rising costs to higher prices as quickly as we wanted because the large customers buying the stone from us also bought from multiple sources, and they played off us against larger quarries with lower costs. And the third part of the whammy were the rising interest rates, which made our nonbank project debt cripplingly expensive. We worked hard at it, but then needed to find a way out, and we are glad that we did. In May, I was back to only running this company, and we announced our pivot to Transition.inc. By June, we had completed the pivot, had a new website, held an investor update call and announced 2 additional transactions. The first was that we sold the Bobcaygeon Quarry, which we hadn't restarted last spring last year. And that quarry went back to the original vendor from whom the asset was acquired back in 2019. Related to that disposition, the company -- our $700,000 vendor mortgage was discharged. That formally marked the end of the Roadstone business. The second transaction we announced was the acquisition of an Ontario mining lease for $150,000 in cash and 1 million shares if we complete a feasibility, plus a 1% NSR royalty. This was the birth of the company's Aurora Nickel project, which we are now very excited about. In the fall, we announced a new shareholder rights plan, which recently passed at our AGM, and that was to try and protect shareholders from groups swooping in with a stink bid on our assets. We also announced the happy and sad news that Paul Davis with whom I worked for many years, was retiring from Transition Inc. and shifting to an advisory role with us. Paul was a core member of senior management. He was an invaluable member of our team and his dedication, hard work and leadership, they left a significant mark on the company. He's going to be amiss, especially by me, but we are very grateful, me and the Board to keep access to his knowledge and experience as an adviser. In November of last year, we announced that we had produced from Snow White. This was after a summer of hard work. It was great to be able to tell the world what we actually were doing and that we are finally operating. We had upgraded the logging road for the haul trucks to truck the material out. That property is 10 claim units. And within 3 staked unpatented mining claims, there were approximately 160 hectares. So Snow White is permitted for unlimited annual quartz production. The company, we have drilled Snow White and M.Plan completed a resource with 486,000 of indicated tonnes and 271,000 inferred tonnes of quartz. Of course, that's just in the main zone. And then subsequent to the resource, and this is all in our disclosure, the company has identified continued quartz along a kilometer long trend and surface-sampled from the Mirror and the Pure White zones that we call. So last summer, before we made this announcement in November, I spent a lot of time up at the site, and I walked all through that bush. That was while the contractors were operating and while we were getting the quartz out. And I tell you, the quartz continues back into the woods. So when we talk about the main zone, that's really just us getting started. So the Snow White quartz has very low impurities. The company thinks it's an excellent feedstock for silicon metal smelters, specifically to create a product to be used for solar or as referred to photovoltaic modules. That's a growing business for the energy transition. The tonnes of the Snow White main zone alone could potentially produce more than 69 gigawatts of solar panels. That's just from the main zone resource. So that's 10x the current installed solar generation on Canada's power grids. And the way I get there is that each 1 megawatt of solar power requires almost 11 tonnes of low impurity quartz. And the way that works is from our quarry, we send about 2.5 tonnes of quartz to produce 1 tonne of silicon metal. And then 1 tonne of silicon metal produces about 0.8 tonnes of polysilicon. You need 3.5 grams of polysilicon for each watt or 3.5 tonnes per megawatt. So when you back that math out, it's basically 11 tonnes of our rock, our low impurity quartz in the ground to get 1 megawatt of solar power. And right now, there's about 6.5 gigs installed of solar in Canada. So what I'm getting at is even that main zone is very large for Snow White. So later in November, we told a bit more about our nickel acquisition, announcing that Micon was in process on updating the resource. And the 2015 resource, that had about 10 million tonnes at 0.42% nickel. So very good nickel grade, accessible from surface at about 10 million tonnes. So that, of course, is a historic resource. So we've got to emphasize that a qualified person had not done sufficient work to classify that as current, and we're not treating that as a historical resource. And actually, we were saying in November that we were starting to work on our current resource, and we're going to come out with that very soon. I'll get to that when we're talking about what we're working on this year. So the size of that resource, though, the 10 million tonnes at 0.42%, for context on that one, so the average electric vehicle battery requires about 145 pounds of nickel. That's the number we use, and it came from Bloomberg New Energy Finance. So that's a 100-kilowatt hour battery. Based on that, the contained nickel in that historical mineral resource estimate represents the equivalent nickel as in that resource would do about 642,000 electric vehicles. So in that Aurora Nickel project, with the historic resource, and again, we're updating that. If you do the math on that size of resource, 642,000 electric vehicle batteries. So for context, that's 3.5x the number of EVs on the road in Canada right now. So both of those, the quartz and the nickel in terms of the volume we have and we know of, they're very large. So the Aurora also has a permitted mill less than 15 kilometers away. So just before the end of the calendar year, we completed a non-brokered private placement of flow-through units where we raised $425,000. We sold shares at $0.08, so a healthy premium to the market with a warrant. This offering had a 15-month hold period from the date of issuance. We didn't pay any finders' fees. It went primarily to 3 groups: one, a new high net worth investor, and then the rest went to me personally and my family more broadly. So the great news about bringing in $425,000 of flow-through is that we are set up for a technical work through 2025. So 2024 was a bit of a whirlwind, but I'm very confident in saying that the company was in much better shape now 2025, January 2025 than we were 1 year ago at the beginning of last year. From my perspective, we currently have very good physical assets. The silica quartz business is the same projects. So we have the Snow White in Ontario and the permitting challenge Silicon Ridge in Quebec. But now Snow White is much more real as we made the road upgrades, being in there and operated, worked the kinks out of the supply chain, and now we're waiting on the furnace tests. Producing some quartz was a goal for 2024, and we met that. We had also been searching for potential low carbon intensity critical minerals production, and we absolutely found that with our new Aurora Nickel project. That is a near surface mineralization close to our permitted mill, just outside of a major mining town and serviced by a year-round road and very close to line power. There's a lot of positives about the Aurora Nickel project. Moving away from the physical assets, we continue to have a very strong team. Travis, our CFO, and I have been through a lot with our Board. The team remains engaged, and we're constantly working through ideas and opportunities. If you're following closely, you'll know that we pulled off -- what we pulled off last year, some of which I was conflicted on and not directly involved in. As a group, it is as though we pulled off the triple back flip and managed to stick the landing. I lost Paul to the ski hill and the golf course, but he remains just at the end of the phone any time we need him. And we strengthened our group of advisers. So Paul joined that. We also have the retired COO of Royal Gold and one of Lundin Mining's most successful project managers. These are guys that have all worked together for many years and knows me and my Board well. We'll add to that group as the Aurora Nickel project moves along. But the key thing is that we have access to people who are usually not focused on $2 million equity value companies. So we have the physical and the people assets. We also have a good cash runway with this year's technical budget covered through the flow-through, as I mentioned, and more on that in a bit. And we should have more than 2 years of G&A in cash and cash equivalents. Plus we have a tight share structure with a little under 42 million shares and tax losses that we can apply to future profits. We have more than $30 million of noncapital losses and unclaimed resource deductions. This all combines to give me a very strong outlook for this year. But a couple of obvious observations, and this comes direct from questions that I've received through [email protected]. First, all this work is fine, but what about the share price? And two, who knows what will happen with an unpredictable White House and a Canadian election on the horizon? Let me start with the share price issue, which I feel every day. It's like a constant job review staring back at me from the screen. One of our mantras is this idea that nobody cares just about news. We need true results. So we're not scrambling for news and then talking about the news because we think that the funding model itself is broken. And I'd roll into that idea of the brokered funding model that spending expensive money on promotion, paid promotion and travel, especially to go out and tell a story that nobody seems to be listening to, is not the way to go. We run as cheap as we can. We're very selective as to where we go to tell the story. I need to combine this with marketing our product, for example. Our real focus is trying to pull together a story that's able to lead to value and then draw people into that value. Sadly, I don't control the share price, but I do control the steps we take to try and add as much value to the company with the resources and the funding we have available. That's where I'm focused with my time. If our equation becomes this tight structure, tight share structure, and we're able to move various streams of business along, I think that people will be drawn to that. So our focus is in the business and trying to generate as much value as possible. And for Investor Relations, having as clear and as simple an avenue open to investors to be able to direct questions to us. That's how we're doing it, and that's how I'd like to stay doing it. So the political uncertainty question, that's a real thing, especially because of the government involvement across North America and the industries we're trying to serve, which are continued expansion of solar power generation with the silica courts, continued growth in electric vehicle adoption with the low carbon intensity nickel. These markets will organically develop, but the government support either from market policy or direct economic benefit, and that could be grants, subsidies or tax policies or a combination of all of that. Government is very much involved. So it's very frustrating, especially with what we hear. I'm trying to distinguish though between the words and the threats we all hear and the actual steps that are taken. For the U.S., I take comfort that the states receiving the most foreign investment for EV manufacturing were all red states. These investments, they represented jobs in states that elected the President. So that must be worth something. Similarly, in Canada, all that I've heard from the conservatives who seem to be the government in waiting are pro- critical minerals, plus permitting reforms seem to be a big part of their platform because they have a resource-intensive part of their party foundation. Now that's oil and gas, but we can definitely ride along as hard rock miners. So it's tough to predict which is the most difficult thing to manage, and that's the uncertainty. That is not being able to predict is the hardest thing. Uncertainty is so inefficient for commerce. And I wish if I could run things for a day that we'd have very strict and hard guardrails. That may seem very strange for someone in, for example, the resource business to say they want strict guardrails. But what I want is for them to be crystal clear. And then within those, we could try to develop our businesses. It might be naive for me to say, but I believe that a made in "North America transition" could be very good for us, plus clearer permitting guardrails, if that comes with the new Canadian government later this year, could combine to help our industry deliver on its biggest challenge ever, sourcing the materials to drive the transition. So we'll see. Okay. Now looking ahead, here's what we have coming up this year. For the silica quartz business, we're waiting for the results from the furnace testing. That's for the quartz we sent off last year to potential customers to try and test. They need to run our material, see if it works for their purposes. And then I hope follow that up with us for a contract next summer. Where Snow White is based, that's west of Sudbury, Ontario, what's called the spring breakup starts late and the half load limits, that's when the trucks can only run with 1/2 of their capacity. The half loads don't come off until mid-June. That's much different than where, for example, our old stone quarries are located in the southern part of the province, where we would have full load starting in April. So mid-June is really when things open up there. So our objective would be to secure contracts to let us produce from July through December. That's the objective. On the Aurora Nickel project, we should be announcing our updated resource this calendar quarter, hopefully before PDAC in early March. We're working through that now. The next step on that will be to advance to a preliminary economic appraisal or PEA. Depending on the updated resource results, we would likely move into PEA soon after that. In addition, we're pulling together the former work done, including on the metallurgy of the asset. We're also doing some of that on our own. We're testing the bio-leaching. Aurora has very interesting mineralogy, and we look forward to talking about that more. But I'm comfortable in saying that we should have an updated resource and a PEA on that asset this year. In addition to work we'll be doing around the low carbon intensity that I keep referring to. Finally, on the third part of our business, the additional opportunities across the energy transition. It's really tough to predict. We're in multiple parallel discussions right now and even at least one negotiation for us to enter into various related businesses. With this sort of thing, though, you never know until it happens, like estimating how long a ball of Twine is. You won't know until you get to the end. So I know that's frustrating for investors and stakeholders to hear. But in that third area where we're looking at additional opportunities, it's tough to predict. We're going hard at it. There are a huge number of opportunities ranging across electricity, software, water. There is just so much happening right now, and there's a lot of opportunities for us to dip a toe in. So thanks, everyone, for listening to this run through. Again, direct your questions through the website or direct them in to me on [email protected]. I'll be back on here in a week, and we'll give you our answers. Thanks very much.