Okay. Next up, we're pleased to have Mr. Ofer Vicus with us from Aduro Clean Technologies. Aduro is based in London, Ontario. It's a Canadian developer of proprietary water-based Hydrochemolytic-
Hydrochemolytic technology, HCT, that chemically breaks down and transforms plastic waste, heavy bitumen, and renewable oils into higher value feedstocks, as well as sustainable fuels and renewable chemicals. Ofer founded the company in 2011. The company has 31 million shares outstanding, trades around $10.30 million for about a $340 million market cap and about $10 million of net cash. Ofer will come up with a short presentation and then we'll do some Q&A.
Thank you very much.
Yeah. You want to go from there?
From there? From here?
Wherever you want to do it.
We'll start here. Thank you very much for the audience and to you, Tony. It's great to be here. Quite exciting. I wanted to spend most of our time in discussion, so I prepared, since we've been here once or twice before, we'd be just a short presentation just to tell you where we are. The numbers that you mentioned. We've gone through. Right now, we're about a $350 million company. Right now, quite stable. We call ourselves a platform chemical technology. Everything is based on the small innovation that we detect several years ago, as early as 2011. It is actually quite rare to find such phenomenon. I can explain about the phenomenon, but that allow us to progress and develop this technology into segments that each one of them is a company making.
We have applications right now in transforming heavy oil into lighter oil. Of course, we are in the chemical recycling business, and we are considering ourself as being the, what we call the next generation. We think we have a good chance to be the next generation to whatever is going on today in the chemical recycling space. We have applications in renewable oil to renewable fuel, and we have even more applications in areas that we don't even disclose. The company has addressable market of more than $200 billion today. Quite aggressive, quite eager company. I'll say a little bit, one word about where the legacy is and where we are in terms of chemical recycling. It is Hydrochemolytic. This is what happen when you give technical people the line to give you marketing comments.
Basically, our peers in the legacy technology called pyrolysis or thermolysis. This is a situation basically based where you put a lot of waste plastic from different types into one pot. One way or the other, you heat it, and it comes with a little bit of challenges, so they suffer a lot of that. The chemolysis on that end is actually superior in many ways. We are operating in a lower energy mode. We have high tolerance to contamination. We have been having a better yield, and yield definition is quite important. Whatever the quality of the material that we produce, a lot of it could go back, much more of it can go back to the building blocks of plastic. Circular naphtha is the product that we are producing from waste plastic. It's basically an oil.
We are just in the stage where we commissioned our pilot, and we're moving on our first-of-a-kind machine or unit. Just to give you a bit of information about the size and the addressable market that we are looking at in the chemical recycling space. Society is producing about 400 million tons, and the numbers vary, and we can update them, but that is as close as we can get. Most of the organization that I showed you here, there in the chemical recycling space, a quite large organization, they only produce close to 1% today. There is a reason, because they are challenged by many chemical challenges that we see a way to solve. Because of that, by economic challenges, and we can discuss that.
The first go to market is normally mechanical recycling is the cheapest way to deal with waste plastic. Plastic is very cheap, and it has to be collected, it has to be cleaned, it has to be sorted. Society is no longer willing to accept the fact that we just live with that here when we're looking for solutions. Whatever is rejected from mechanical recycling is moved to chemical recycling. This is where we have this ability to, rather than compete with those guys, to take from material that otherwise would go to the landfill or destined to the landfill. Quite a lot of addressable market for us just in the chemical recycling space. This is some of our customers that we're working with, potential customers.
All of them, one way or the other, are engaged in some kind of a form of business deals, a collaboration or maybe early testing. Several Fortune 500 are involved, but we cannot disclose the name of them. Just to tell you that we came from no one, nowhere in May, April 2021, where we can become public. Before that, there was no name for Aduro. You would not even know that we exist. We've been moving ahead quite rapidly since April 2021 when we become public, and until now, and on the way, of course, we've been introducing ourselves to several customers. One thing I want to say to investors, or potential investors, who are looking at this, we started this journey from a lab, very basic thesis. Then we put some kind of a theory behind it. We support it later with what we call technology demonstration.
Today, in 2026, we have an up and running pilot. We call it the next generation pilot. It's actually commissioned. We're troubleshooting, doing a lot of learning out of it. We are not stopping there. We now are focusing on our, what we call first of a kind machine or unit, and it is dedicated to be in the Netherlands for obvious reasons of regulations, and I can explain a little bit later through our discussion. We are heading towards building our first of a kind unit there. With that, this is just a picture of the Netherlands and the area that we're going to be there. I'd like to maybe go to the questions so we would save as much time.
That's a great segue.
Okay.
A great overview. Maybe we can jump right into, you talked about the phenomenon earlier. You identified this specific chemical in 2011. Maybe you could sort of talk how it does work. How does the HCT process cut molecules-
Okay.
With more finesse? I think people would love to hear more about that.
Okay. The technology is based on phenomena. The phenomena suggests that we're using, at the time, with heavy oil, an in situ catalyst, that is basically the metals that are very much built up in heavy oil, a little bit in our conditions that we identified, under pressure, under temperature, with some water around it, to do very selective break of carbon-carbon bonds. That is actually when pyrolysis basically breaks everything around it's actually shredding everything. That's how we call it. This is a very selective chemistry that just breaks certain things. On top of that, normally, very important, all of our peers would need hydrogen to deal with the output of the pyrolysis, some of the species that comes from pyrolysis.
We found out that if we mix in the process materials such as glycerol, ethanol, methanol, things of such, we are actually creating in situ hydrogenation. In effect, the secret is in the chemistry, and it's been hiding in plain sight for the last ever. I can answer, always we ask how we discover it and where we would go, and I can explain a little bit around that, but we are after 10 patents around it. If you know nothing about what we've been doing, you can look at our journey. The first patent that we found in our space is as early as 1930, yet it's a very saturated market. We came in 2011, and we almost every year build a new patent and a new approach.
We develop it to different company sectors, heavy oil, renewable oil, chemical recycling, and we have more in the back burner.
You talk about refinery-like precision.
Yes.
You mentioned breaking down refinery scale operations to smaller modular units. How do your operating conditions, I know you talked a little bit about it, but how do they differ from the legacy, and maybe how that actually works, your process is different with that?
The fact that the process has, let's say, very low value catalyst, almost in situ. The fact that the process does not need at all any management of hydrogen. That actually reduced the process and dumb it down to much smaller. Most of the organization in our time needs to be somewhat associated with a hydrogen plant. One way or the other, it's actually quite expensive. It's a big no no to the environment, production of hydrogen. As society, we are a bit of a junkie of hydrogen. You heard, I guess, the terms of Blue hydrogen, Brown hydrogen. How about no hydrogen? That allow us to actually think different business models because it becomes more smaller. When you think of waste plastic as opposed to, let's say, oil.
When you punch a hole in the ground and you get some oil, you can build capital cost around it for the next 50 years, and it's changing. Having a small unit that could be directed towards some solution brings the company a lot of elasticity, ability to move around.
Yeah. You just mentioned it also, but modularity versus scale, I know that's a big issue with being able to scale the business up. Most industrial chemical processes require that.
Yes.
Why do you argue that your technology just allows for scaling out, adding units rather than scaling up?
Right. Building on my previous answer, we feel that plastic is diverse. It's everywhere and anywhere. The waste that we will have today will be different in 10 years. If you are taking precautions to build small-scale units and you adjust them based on where you are, in other words, let's say a reasonable process of our peers would need about a commercial, I would estimate around 100,000 tons a year of processing capacity. But what if you have only 75? You will need to bring on from somewhere else, and you add costs and all those things. This ability to scale up is super important, and it is all benefit and embedded in that phenomenon. The fact that we do not need to access capital management of CapEx, it's big.
Yeah. It's very beneficial to a starting company. For the chemical recycling yield, you've talked about a 75%-80% yield compared to-
Yes.
40%-50%. What specifically about your process prevents half that material turning into low-value liquid fuels?
Right. When we talk about yield, we have to first define what is the yield that we see. Because yield is running around in numbers, 95%, 80%. What is the yield that we're talking? Normally we talk about 95% of what we call fungible material. If you take a kilo of material, let's say pure material, probably 95% will be some liquid or gas form that we could use. That's in general. If I'll take, let's say, our peers, any one of our peers, standard, and let's say I'll compare them to us on 100%. Both of them are doing 100% yield. Because of the mass balance regulation, half of what our peers will do is likely to move into petroleum product, and only half of that final product will move into circular naphtha. On that level, we are almost double.
We're producing much more material that actually could go to circular naphtha than anyone else. I haven't seen any company right now competing on our level at this point of time. That actually in return, goes back to the environmental benefit because you can make more material just the order of magnitude.
Yeah. Interesting. You talked about the addressable market, the sort of $200 billion opportunity. What are the three of the main pillars, plastic recycling, the bitumen upgrading, and renewable fuels, do you expect to be the primary driver into 2030?
We're, I mentioned before, quite aggressive and ambitious company. It's a huge addressable market for us, and there are many opportunities for us. In the last three or four years, we focused ourselves on waste plastic and chemical recycling. The minute we went out to the market and showed ourselves, we were overwhelmed by organizations that came back and wanted to know and investigate what it is we're doing. We are working on the back burner on the heavy oil. This is actually a legacy that we have. Our genesis is from heavy oil. I expect that in 2026 there'll be some news around that as well. I don't want to stop with one application. We are focusing very much on revenue generating, and our closest path to revenue is actually the chemical recycling.
Although, I would say we are working very hard on other application at this point of time.
Very good. You talked about the five-year processing goal. You'd be looking to be at full processing capacity. I know that there's some step-ups here. But what does it look like in terms of total annual tonnage across the facilities when you get to those rates?
Yeah. Before I'll answer that, I just want to say, when you're talking about centralized location, you're talking about many years of development and build-up and capital investment before you even go into the market. This could take time, and there is examples everywhere. If our commercial unit is about 25,000 tons, let's say, over 100 tons, one of those unit can be built in less than one year. If we are connected to EPCs, one or two or three, and I need five unit or 10 units or 20 units, it will take another the same year. Our processing capacity is not dependent on that level of, I'll say, constraints. It's actually very much dictated by the market, basically. If you take that, I think in the Netherlands, we can go as high as 100,000 tons.
I don't want to give numbers yet of the economic model because we will produce those quite soon. You can do a very basic math, and this is just a single operation. If you've seen in our press release, we are working very hard on North America, we're working very hard on Mexico. Each one of them could be that level very, very easy. There's 100 million people in Mexico. For us, it's actually to build very quickly small units dedicated to a solution and just move forward.
Yeah. Maybe I'll open the floor up to the audience.
For sure.
For any questions. If not, I've got a lot more. Okay. We talked about bitumen being a company maker. Maybe what is the status of that application relative to the plastic recycling focus?
Yeah. Our genesis was bitumen. We started with bitumen. We worked very hard on it. The plastic application somewhat became aggressive, and kind of, we decided to move forward with the plastic application very soon. We've been working on the bitumen on the back burner. It will undergo the same journey as a plastic application. In other words, at some point in time, we will announce what we're planning to do with it. Then when we will announce those things, it will undergo a pilot and a first-of-a-kind unit. Normally we try to do that with partners. We are very much interested to work with partners. We don't want to spend our resources just without knowing that we have somewhere a potential partner that can support us. We're still a small company, and I expect that to happen. Some of it will happen this year.
Some decisions about it will happen this year.
What about synthetic turf and ag waste? You mentioned those are niche markets.
Yeah.
How do these smaller unified feedstocks help de-risk the initial commercial rollout? Can you talk about the simple-to-complex model?
This is a message that I actually want to bring back to the investors. Ever since when, a year ago and two years ago, we mentioned what we're going to achieve, we mentioned how we're going to achieve it, and then we went on and achieved that. We mentioned that synthetic turf and agricultural waste is something that we really like because it's a clean, small application that we can make actually quite rapid money out of it. We mentioned the need to do simple to complex. In other words, we want to see industrial units that are successful first before we troubleshoot and conquer the world with the rest of the garbage that everyone is producing. In fact, our plan is to use agricultural waste, for example, in our first-of-a-kind, which is due in, I think it's H2 2027.
Two things happen. First, it's the simple one that we can run very straightforward into revenue. Two, it's something we already told investors ever since. Now we are meeting that promise. We're actually confirming that we can do it. Later, how many applications will be, we'll have the market to dictate, but this is how we're starting.
Pretty interesting stuff. Maybe talking about intellectual property and the competitive moat, given that the major competitors like Shell and Total have been in this space since you discussed the 1930s, it's nothing new. How has Aduro managed to secure 10 patents in this landscape?
Yeah. Today we're hoping to see companies such as Shell and Total as customers, not as competitors. I think we have enough intellectual property out there for them to be encouraged to work with us rather than copy us. It all comes down to the basic fact of that phenomenon that was discovered. Organizations for many, many years, if you've been in the heavy oil side, you would normally do development on the heavy oil side. You would not cross link to renewable oil. You would need to be very, very brave to go back to your boss and tell him, "I want to do something in a completely different space" without knowing how you'll get the return back.
That kind of a corridor is what allows us to be successful because we actually cross-linked from heavy oil to renewable oil, lessons learned, move to chemical recycling. At this point of time, it feels. By the way, by this, I just want to say kudos to our team. We basically built a chemical powerhouse, which understood different sector, had to learn different sectors. We've been the first, I've been the first to bring the technology in front of potential customers when I had small vials, 5 mL of vials, because I wanted the potential customer to shoot holes in it. Ever since that actually in return brought a lot of know-how to the company, and we feel quite safe today where we are and actually moving on and working very aggressively on new patents.
Everything that we see, imagine if we say we're right, somehow we're right, and the technology is so rare, we get to see ahead of the curve for many other organizations that are doing more or less all the same. If you know nothing about what we've been doing, look at the partners that are testing what we're doing.
[audio distortion]. You talked about the two-path model. You're pursuing both a build and operate and licensing. Those two models are obviously quite different. Why is it important for Aduro to own and operate its first facilities rather than being a pure play?
Actually maybe more than the first facility, to be honest, because we know and recognize that organization at that size could be very, very slow. While we want 90% of our operation to be on the licensing model, we didn't want to put all our faith in the god of licensing. We made a very clear decision. We told the investors that we will own our own units first. We'll take responsibility. It is good for the company to kind of work around and deal with, be in the trenches and deal with the issues, and there are issues. This is again, a promise we told investors. While we initially, several months ago, already maybe announced that we are moving into Chemelot, and Chemelot will be basically 100% build-own-operate.
Recently, we press release that we are starting to work with an EPC, and that work is actually dedicated to building a licensing machine. A machine that you can license later to different organization and such EPCs bring huge marketing power to the table as well. It's not just about the process, but then it's again, it's a promise we made to investors and now we're moving on it.
In the 2027 revenue milestone, you anticipate commissioning your first client machine in 2027. Are there key mechanical hurdles between today's pilot and the operational date?
There's a lot of hurdles. The one that we see that would be the most maybe serious on that is the regulation, the permits. I think we'll be ready with the process before the permits will let us. The permits is a little bit out of our hands. Chemelot is a huge industrial hub. It has plenty of chemical plants. It's a slow process to do it. It could take some time. This is why we are dedicating. We said H2 of 2024- 2027, but we're working against that deadline to do whatever we can to move the permit. That will be our major hurdle towards commissioning that unit on time.
Like you said, if a customer needs 100,000 tons of capacity, you suggest providing for 25,000 units. How does this copy-paste model improve the speed of deployment compared to building one large unit?
Let's move on beyond 2030 and think maybe two or three EPCs, great global marketing power. Each one of them needs 10 units. They can build it in less than a year.
Yeah.
That's how fast we can grow. This is what we're looking at. This is how aggressive we intend to do or intend to be.
Any other questions from the audience? You talked about sort of the Chemelot facility. Maybe you could just talk through, is it a regulation issue? Why Netherlands versus anywhere else in Europe, and is there any opportunity for places in Canada or U.S. locations going forward?
Our main streams are Europe, North America, Mexico at this point of time. Each one of them has that type of opportunity. Europe being quite advanced in terms of regulation, it's quite important for us. Brightlands Chemelot is a hub we engaged several years ago. We learn how the hub is operating and working, so it was quite good. Prior to that, we actually investigate and we publish that we investigate different site across Canada, across Mexico, across North America. We landed on Chemelot for the obvious reason that this hub is the most advanced in the regulation. It's chemical hub. We're a pipeline away from our first potential customer and 50 km away from our next. We can grow as much as we want, should we want to. It was ideal decision. On top of that, they knew us.
Maybe I'll give you the last closing minutes to sort of getting your pulpit and I guess in this environment and obviously rising costs potentially of energy here, what are your thoughts going forward for Aduro maybe in this environment?
Yeah. You can't hide the current environment. We're hoping for peace everywhere. For us, nothing is changing our business. We're cashed up. We have CAD 40 million in the bank. Our plans for this year are moving forward, whether it will happen, we're just kind of working to execute that regardless what's going on outside. If there is and when there are issues concerning pricing, raising price of heavy oil in particular, that's actually a good thing for us. But that's not where we are motivated. We're just focusing on execution moving forward. This is something that I want to share with investors, is just that go and search what we've been doing so far. We are telling investors where we're heading, and we're focusing on executing on that level. This is what will happen in 2026, and that's what investors should kind of look and expect from.
Well, looks like you got a great future and great technology.
Thank you.
Looking forward to following you guys and all your successes and hopefully get you back here next year. Thank you.
Oh, looking forward. Thank you very much.
Yeah. Appreciate it.
It was a pleasure. Thank you.