Ticker: CMC.V / CWSFF
Listings: TSX Venture Exchange / US OTC / Frankfurt
Market Cap: 690,34 MCAD at time of publication
Share price: 1.07 CAD at time of publication
Industry: Converting waste to renewable fuel

Letter of Intent with Kodiak Chemical Solutions

Cielo Waste Solitions today announced that they have signed a non-binding Letter of Intent (“LOI”) with Kodiak Chemical Solutions (“Kodiak”). Kodiak is a Western Canadian based company interested in the purchase of Waste Derived Naphtha (“WDN”) for uses including but not limited to paraffin solvents, diluents, cleaning fluids, paint and ashphalt diluents and any other uses in their discretion. Kodiak wishes to purchase, from Cielo, WDN from all of Cielo’s Alberta production facilities. The material terms of the LOI are to be mutually agreed upon and set out in a definitive agreement, anticipated to occur prior to the end of 2021. This LOI does not conflict with a previously announced and existing memorandum of understanding with Elbow River Marketing, which is an offtake agreement for diesel fuels.

Lionel Robins, SVP Global Development & Indigenous Relations for Cielo, stated: “We believe the demand for naphtha in the current market is growing and seeing this demand further increases Cielo’s growth opportunity, as we can profitably produce more types of fuel. We now see the opportunity to have a WDN fuel that could demand a premium over its fossil-based counterparts. The price discussed with Kodiak will move with the weekly market price, and we expect that to generate a profitable revenue stream with good margins.”

Brian Venance, President of Kodiak Chemical Solutions, stated: “As the demand for energy continues to ramp up, Kodiak continues to look for and source sustainable alternatives where possible. Cielo’s WDN fuel is an alternative many of our customers are wanting and willing to pay for in the growing demand for sustainability and climate change.”

Operational Update

As to its operational update, and as previously announced, Cielo has hired 3 engineering companies to look for any improvements that can be made to the Aldersyde facility. Cielo has these engineers focused on the main pieces of the process, which include the reactor design and waste recovery to obtain optimized and enhanced performance.

Reactor Enhancements – Optimization of distillate production and achieving a steady-state production profile are priorities. Reactor modifications are anticipated to result in improved distillate production and carrier fluid efficiencies.

Waste Recovery – Cielo is working on modifications, including the implementation of a centrifuge system to the waste recovery process.

Desulfurization – The catalyst, intended for use in Cielo’s desulphurization process, designed by the University of Calgary, and produced in China, was not complete when it arrived to the Aldersyde, Alberta facility. The catalyst required further work and was sent to Texas, USA for catalyst activation and stabalization. Commisioning of the desulphurization process equipment is expected to be completed by the end of September, 2021.

New Corporate Office

Cielo is in the process of executing a commercial lease for corporate office space in downtown Calgary, Alberta. The lease is expected to be finalized in September 2021.

Don Allan, President and CEO of Cielo, stated: “We are delighted to have signed this LOI with Kodiak and look forward to working with them to build out our WDN business. I would also like to thank Kodiak Chemical Solutions and Brian Venance for their commitment and interest in our Waste Derived Naphtha.” Mr. Allan continued: “The process improvements our engineers are working on are creating better optimization of
our process facility which is beneficial prior to building multi million dollar facilities. We believe this is the right thing to do for our shareholders, investors, and financial lenders.” Additionally, Mr. Allan stated: “ The move to downtown Calgary from Red Deer will allow Cielo to expand and attract additional talent required for the anticipated growth of the Company. The inducements offered were quite competitive and Cielo is delighted to have the opportunity to support the recovery and transformation of downtown Calgary.”

ESG Comments & Calculations: We are happy to see that the timeline for finalizing the desulfurization stage is set for the end of September, the technology is not new in itself so we are not worried that it wouldn’t work.

In terms of production capacity, each modular of Cielo’s technology is on pace to produce 4000 litres per hour. Of those 4000 litres, 10% is Naphtha, so we end up with 400 litres per hour, per plant. Which is equal to 9600 litres per day. If we estimate 341 production days (24 days maintenance), each modular will generate 3.3M Liters of Naptha. If we make a conservative of the litre price tag Cielo’s naphtha will be, we land on $0,78 CAD. $0,78 multiplied by 3,3M litres give us over 2,5m CAD in revenue per year for the cheapest and lowest quantity of fuel. In a plant like Dunmore, that number is much higher and lands on $7.5M per year in revenue for just 10 % of the fuel produced. This is an “additional income” for the company for fuels that are worthless compared to the other fuels the company plans to sell! 

If we multiple the “additional income” on all future hundreds of plants in North America, the sales number for the Naphta alone becomes huge!

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