On March 2, 2021, Earthrenew (ERTH.C) announced that it has signed a non-binding letter of intent (L.O.I) with Diamond Feeders to develop of Earthrenew’s first facility in the United States.
ERTH transforms livestock waste into a high-performance organic fertilizer. That generates revenues from multiple streams.
Earthrenew takes a biologically compromised product that is trapped in local markets, and frees it into a pure organic product that can be transported across provincial and state lines.
The value proposition for the owner of the cows?
- Annual lease payments for ERTH’s processing plant
- Disposal of manure.
- Electricity generation.
Electricity produced by the gas turbine is sold to offset the majority of fuel costs, creating an economically sustainable and environmentally friendly method of organic fertilizer production.
Located on a 25,000 head cattle feedlot, ERTH’s flagship Strathmore plant in Alberta is capable of producing up to four megawatts (MW) per hour.
In 2020, Earthrenew generated 1,500 MWh of electricity which it sold to the municipal grid for an estimated $377,667 in electricity sales revenue. The direct costs to run the turbine throughout 2020 were $99,400.
In December 2020, Earthrenew completed a feasibility study on the Colorado Site.
If constructed, the new facility will be located on Diamond Feeders’ large feedlot in the western United States, which finishes over 50,000 head of cattle per year and could provide ample feedstock.
“We anticipate that the Colorado Site could be a strategic operational location, as it is in close proximity to the southwestern United States, one of the world’s largest organic farming markets,” states Earthrenew.
The demand-drivers for ERTH’s products have a macro tail-wind (the stock is up 75% year-to-date). Due to the encroachment of suburbs, arable land is being lost at the rate of over 38,000 square miles per year.
Land devoted to organic farming however is increasing.
“The U.S. organic sector posted a banner year in 2019, with organic sales in the food and non-food markets totalling a record $55.1 billion, up 5% from the previous year”.
“Organic fruits & vegetables market is expected to grow at a rate of 8.75% from 2020 to 2027,” states Data Bridge, citing “the increasing awareness amongst consumers regarding health benefits along with food safety.”
Once constructed, ERTH estimates that the facility at the Colorado Site could produce 40,000 tonnes per year of our organic fertilizer pellets for distribution to markets in the southwestern United States.
This is twice the capacity of the existing Strathmore, Alberta facility.
The Colorado Site would function as a strategic United States hub for the blending and granulation of the Replenish’s product line.
On February 18, 2021 ERTH announced that it has negotiated an increase to its proposed equity ownership stake of Replenish nutrients from 38% to approximately 100%.
“The Replenish Nutrients team will support all aspects of the marketing, distribution and sales of the Earthrenew products into the regenerative agriculture space,” stated ERTH, “Replenish Nutrients currently has an established product line that it sells across Western Canada and the United States (North Dakota and Montana), generating strong revenues”.
The combined EarthRenew/Replenish entity expects to generate significant revenue growth within the expanding regenerative and organic fertilizer markets.
Financial Highlights and Projections:
- Replenish Nutrients booked revenue of $5.1 million for the last six months of 2020 and through the end of January 2021.
- ERTH is forecasting $4.8 million in revenue for the balance of the first half of 2021.
- New Entity projections are for a total $9.9 million for the period of July 2020 through June 2021, up from $3.6 million for the same period in 2019/2020.
Following completion of the Proposed Acquisition, ERTH anticipates that Replenish Nutrients will continue to operate as a marketing and distribution company as a wholly owned subsidiary of EarthRenew.
In this December 3, 2020 video, Jody Vance talks to EarthRenew CEO and Director, Keith Driver about the business objectives of the company.
“It’s a super simple business model,” Driver told Vance, “We take manure directly from the feedlot, because we’re located on the feedlot, we run it through our thermal treatment system, a dryer, and we then blend it with other fertilizers to make really high value product.”
Pursuant to the terms of the LOI announced on March 2, 2021, Earthrenew anticipates signing a binding long-term lease with Diamond Feeders for the Colorado Site so that it can proceed to complete permitting and engineering activities.
Key terms of the LOI include:
- terms of the lease and shared services for the Colorado Facility
- parameters for feedstock fees
- structure for delivery and co-marketing of end-products
- electricity sales to Diamond Feeders
“Diamond Feeders is aligned with our sustainability goals and looks forward to us providing them a solution to their manure disposal concerns,” stated Earthrenew’s CEO, Keith Driver.
“This new facility could potentially produce over 40,000 tonnes of our organic fertilizer pellets per year,” added Driver, “providing us with a tremendous opportunity to serve the vast United States market.”
“If we are successful at the Colorado Site, there is potential for future expansion to other United States locations owned by Diamond Feeders.”
Diamond Feeders is an arm’s length party to Earthrenew. Construction of a new facility at the Colorado Site is subject to multiple conditions.
ERTH stresses that “there are no guarantees that the necessary permits will be obtained, that the Definitive Agreements and construction contracts will be entered into or that the new facility will be constructed”.
- Lukas Kane
Full Disclosure: Earthrenew is an Equity Guru marketing client