Afternoon, everyone. Thanks for joining. I'm just gonna give a couple minutes for some stragglers, but phenomenal to see we've got 38 people here, 39 now on time, ready to go, 40. We'll just give it a couple minutes maybe, we'll start at 12:02, just to allow people some time to come in here. Okay, that's... We'll start, and people can certainly come in as we're presenting here. Again, thank you all for joining this afternoon. You know, we thought it was important to put a investor webinar and update together because there's been, you know, a lot of, you know, really important news that has come out over the past couple months, and we just wanna make sure we touch on it.
We'll be putting out the invite to our AGM shortly, but, you know, the AGM, like last year, is gonna be early May. And so we certainly wanted to take this opportunity to talk through the impact and the implication of all, all the really important catalysts and elements that have come together in a relatively short amount of time. Not to say we haven't been working on it for a little while, but it is all coming together now, so it's really exciting to see. So we'll just jump in. I think my presentation should only take, you know, 15, 20 minutes. I usually don't like presenting much longer than that, and then we'll open the room up for questions after the presentation.
So, you know, I think it's always good to have that sort of stage setting or, you know, summary here about what CHAR is doing at a really high level. You know, what are we really doing? What are we bringing to shareholders in order to create value for all of our fantastic shareholders? And, you know, so far we're at 61 who've joined the webinar so far. So, you know, again, I wanna say how much we appreciate the interest and the support of all our shareholders. But to really summarize, you know, as we announced earlier at the end of January, you know, our first facility has now entered commissioning, so Thorold is into commissioning.
So we're working towards that de-risking of that first facility, getting into operations, starting to drive revenue, and that's obviously a huge step forward for the company. Based on that first facility entering commissioning, we show a path with very near-term projects, and I'll touch on this more, but a path with very near-term projects that have CAD 130 million in project-level revenue and about CAD 42 million of free cash flow across those four facilities. That's at the project level, and it's always important to emphasize that, but that is a clear path that is developed from Thorold now moving into operations. We have world-class strategic partners providing validation, capital support, feedstock. It's really important for us to continue to be collaborative with, with phenomenal project partners.
Proven technology with long-term contracted revenue, so some of the renewable natural gas, as we've talked about, can have offtake terms for 20 years, which really underpins the financing of a project. Multiple growth vectors, and this is, again, something I really want to make sure is clear to investors, that we have these multiple growth vectors with our core facilities, with now licensing into the European Union and PFAS destruction. And ultimately, what that means is a strong margin profile with non-dilutive project financing. So I touched on world-class strategic partners. You know, most of you have seen this, but I want to again re-emphasize some key elements. So of the strategic partners, I think we cover the breadth of how do we get a project into a commercial operation.
Invested in CHAR Technologies Ltd. corporately, you know, after reviewing all of the landscape of steelmaking decarbonization. They invested in CHAR Technologies, and they provide, you know, global steel industry validation on our technology, and of course, they're a key offtaker for our biocarbon product. The BMI Group invested in CHAR Technologies corporately, you know, almost a year ago. I guess it was April, so we're getting to that one-year part. They have purchased a number of, you know, legacy pulp and paper mills, great ability to transform legacy infrastructure and industrial projects, and that is a great support for CHAR Technologies as we need to find homes for all of these projects.
And to date, they've provided about CAD 18 million in project level commitments, so CAD 8 million into Thorold, and then, 10 million earmarked for the Espanola project, which is awesome. And then, of course, feedstock. Biomass projects need feedstock, and through our First Nations partners at Lake Nipigon Forest Management, as an example, we've been able to secure substantial residuals from forestry operations. So LNFMI operates on about 1 million hectares of forest near Lake Nipigon. They have four key shareholders, which are the four First Nations that operate and live in that million hectare area. And so just looking at the wood wastes and wood residuals that LNFMI have access to, that's a CAD 80 million potential revenue through those partners.
So again, strategic partners is always gonna be important to us, and, and we've really been able to pull together some world-class partners. So I do wanna touch briefly on the financials. So, you know, we filed our financials at the end of January, and I wanna make sure that the changes here are well understood, and, and, that's why I wanna take a moment here to present them here. So the key change from fiscal 2024 to fiscal 2025 is executing on the model that we've been talking about, which is focusing at a project level. So, as we brought the Thorold project into a limited partnership with our partners at BMI, we moved the assets and the associated liabilities to the project entity.
So a lot of those liabilities, if you look in our fiscal 2024 numbers, were deferred grant revenue and the like. So it's not just, you know, things like debt, but we moved the assets and the liabilities into the project co. So that creates now this lean CHAR Technologies structure, where we're supporting project development, but we keep nice and lean. So, you know, what we saw, of course, was a significant reduction in those liabilities, a nice increase in our shareholders' equity. And I wanna also point out the one-time gain on contribution to joint venture. So that was for the Thorold project, but really what it is, is it's the realization of the value of sort of the upfront pre-developed project development work that we've been doing.
So will we see, you know, a CAD 4.1 million gain on contribution to joint venture for other projects? It won't be to that magnitude, but will we see a gain to realize the value of that upfront development work? Yes, that's now part of the model as we move things forward. The other thing I wanna highlight as well, as we've continued to focus, so again, at the beginning of our fiscal year, fiscal 2025, so in October, we exited the consulting business and continued to focus on our core project development and our core technology. What that saw was, while a decrease in revenue, we actually saw that gross profit number increase. That is, again, around the focus, around reducing costs, and around really how are we executing and delivering for our projects.
So happy to answer questions at the end about the fiscal 2025 financials, but, you know, ultimately, at the end of the day, it's year-over-year improvements to our operations and our balance sheet as we really execute on this project-focused model. So this is, you know, a slide I wanted. There's a few things going on, so I wanna speak to it here for a little bit. And sort of as we step back from the numbers on the previous slide, you know, I really wanna emphasize that, you know, the financial results are actually the least interesting thing that I wanna talk to everyone who's joined the webinar today, all 72 of you now. And so what the numbers that I just presented really represent is a foundation, right? So Thorold is in commissioning.
The balance sheet, as I just talked about, has been, you know, restructured and refocused on this project delivery model. We've basically cleared the runway here with our new focus, and what I want to spend the next few minutes on in talking to this slide is what we intend to do with that runway because we believe the next 18 months for CHAR Tech look very different from the past three years. You know, we're now entering a phase where three things are happening simultaneously, and when these three things converge like this, you know, we certainly believe it's gonna compress our timelines and bring accretive growth and benefit to shareholders. So, you know, the first one I wanna really talk about and emphasise is PFAS destruction.
And so I want to be clear and precise about what we've done here, 'cause I think it's really important that investors understand the significance. So we have completed the world's first deployment of high-temperature pyrolysis for permanent PFAS destruction in a commercial biosolids setting. So this was run 6 months in Baltimore with Synagro, processing real municipal biosolids from a real city. So this wasn't in a lab. This wasn't a pilot reactor in a controlled environment. This was a real commercial setting system operating continuously on some of the most contaminated waste streams and materials from the city of Baltimore. So this demo, this commercial demo, is complete. You know, the performance data has been collected and compiled. Third-party reviewers are now engaged, and their analysis is underway.
So I'm not gonna preempt that process, as much as I'd like to, but I will tell you this, that, you know, we are very confident in what our technology does. You know, I wouldn't be talking about PFAS today if we weren't, and I'm certainly very eager to be able to share the results once that report is completed. Now, why does this matter? Obviously, beyond, you know, CHAR Tech, we're talking about doing projects. Well, you know, the, the global PFAS waste management market is measured in the billions today and is projected to grow pretty significantly as regulations tighten. But the number I think that really keeps utilities up at night is the cost of biosolids management. So the biosolids are what comes out of the wastewater treatment plant. Where do they go?
You know, it's a solid material that needs to be handled, and it's a problem that is getting materially worse, not better, as land application restrictions expand. So historically, spread it on farmer fields to get the nutrients out of those biosolids, 'cause there are nutrients there. But with PFAS, obviously land application is a challenge, and those restrictions are certainly coming in. So our Baltimore project is really the proof point that changes how utilities will think about their options. They'll see this as a real option and a real opportunity. So we do expect that validation, once we're able to share that report, to be a significant catalyst, not just commercially, but in terms of how CHAR Tech is perceived globally as a technology licensor. Which brings me to something I do wanna reference briefly, which is GazoTech.
So that was another announcement that came out in February, and so kind of what are the implications? So, you know, in February, we executed a technology license with GazoTech in France. So it's important to mention, not because it's the biggest deal CHAR Tech's gonna do, but because of what it signals. So really what it's showing is something that we've been seeing internally, and now we're able to show to shareholders, which is the world is coming to us as experts in pyrolysis and in processing. So when a European operator licenses our technology, it validates not just the science, but also the commercial model. You know, the idea that CHAR Tech's platform is replicable, exportable, and valuable beyond our own backyard. And so that's why we're really excited about the ability to work with GazoTech to get these projects deployed in Europe.
Sort of coming back to PFAS, a validated PFAS destruction protocol opens the same doors globally. Utilities, regulators, you know, operators, whether it be Europe, Australia, across North America, are watching what we're doing in Baltimore. The nice thing about Baltimore is, is one of the premier North American biosolids conferences happened back in May, and we were running, you know, the plant in May. We were able to do a great tour and really hint at that time to these operators what we're capable of there. And so when the report lands, you know, we'll be ready, and we'll be in a position to have these conversations with these utilities, regulators, and operators around the world on how do we get this technology deployed and deployed quickly.
So the other thing I wanna address on this slide, and then, you know, walk through a few additional project updates, is how we think about growth capital. This is really philosophically important, I think, for how, again, CHAR is transitioning and focusing on what we want to do and how we're gonna deliver projects. You know, we're not a company that intends to grow only as fast as our organic cash flow allows. You know, we've talked about that, right? We're gonna finance projects at the project level, and that's really critical. So we believe that the credibility that we're building, you know, be it through Thorold, through Baltimore, through licensing with GazoTech, you know, in and of itself is kind of a form of capital.
It's, you know, a form of experience, and it's a form of track record. And it's really the kind of track record that project lenders, infrastructure banks, you know, strategic partners look to and look at when they're deciding whether to back an operator and a project. So, you know, with the walk back to the strategic partners, you know, we've been successful at demonstrating that track record and that technology, and now that just is able to accelerate with the work we've done and what we've deployed over the short amount of time here in our fiscal 2026. So, you know, for sure, our balance sheet today is not where it'll be at the end of 2026, which is exciting, and we know that.
But what we also know is that the deals worth doing in this sector, you know, don't require you to have capital necessarily on your balance sheet today. You know, again, we're not gonna go out and, and finance a CAD 50 million project purely with equity from the capital markets. But what is important and what is required is for us to have, you know, something that banks and lenders will finance. So that's things like contracted revenue, that's things like proven technology, you know, credible operator with functioning commercial platforms. So, you know, we are actively building all of these. And so basically what I wanna say and, and present from this slide in particular is that we're continuing to evaluate these opportunities, you know, in the category.
And I think the conversion of our technology validation timeline, our improving balance sheet trajectory, and the availability of accretive and shareholder value-creating situations is not a coincidence. It's all really coming together now, but that's based on years of work, and we're really working towards a position where we can act on these opportunities, and you know, we intend to be ready.... So to tie it all together, and then again, maybe go through some of the project updates that I'd like to talk about. You know, I think it's important to leave you with a clear picture of what we think the next 18 months is going to look like. So, you know, importantly, Thorold is generating revenue today. I'll touch on that. The PFAS validation is underway, and we're confident in what that data shows.
The licensing model's already operating, and GazoTech is evidence of that. So, you know, three years ago, when I did investor presentations and at our AGM, you know, we were asking you to believe in a technology. You know, we've now validated that technology. So today we're asking you to believe in a platform. So a platform that has been proven commercially, you know, validated independently, so be it with Synagro in Baltimore, you know, be it with GazoTech entering the license, be it with other project partners, and importantly, a platform that is beginning to be recognized globally. So I think our story has changed, and really, I think the market is about to catch up to that.
So we're really, you know, excited about the opportunities through this fiscal 2026 as we bring these projects online. So you can see at the bottom of the slide here, you know, we're also mentioning these four facility pipelines. So, you know, we'll also talk a bit more about that as well. So, you know, we addressed a little bit the PFAS opportunity, but then, you know, I just want to re-emphasize, you know, from a licensing perspective, you know, this is a significant market opportunity. As I said, you know, first commercial HTP, high temperature pyrolysis deployment for PFAS destruction. Our six-month demo in a commercial operation is completed, third-party validation is happening, and, you know, permanent PFAS destruction is confirmed. It's not filtering, it's destroying.
And so when you look at that from a licensing opportunity perspective, you know, there's almost 24,000 wastewater treatment plants in the United States. All of them will produce biosolids, whether, you know, they, they process the sludge, whether they dry it. What they do with it might be different, but it, it comes out of every wastewater treatment plant. Importantly, we've already shown the international licensing model with GazoTech, and that is something that we can continue to roll out with, with PFAS. So, you know, this validation report is obviously going to be critical, but it, it does de-risk the technology pretty significantly for global deployment. So that's on the PFAS. Kind of back to the projects, and again, a refresh for those who don't live and breathe CHAR Technologies the way I do and the way our team does.
So, wood waste through high-temperature pyrolysis into two marketable projects: renewable natural gas, with 20-year off-take agreements at premium pricing, and biocarbon, which is a drop-in replacement for metallurgical coal. And so this picture of wood waste, that is wood waste at our Nipigon project that's being collected for the project, which, you know, is great as will be feedstock ready for that site. But one other thing to touch on, because we've been talking about this market for a few years now, is really how that opportunity to generate revenue and, you know, profitability and good returns from these projects has grown. So, you know, in 2022, we saw pricing in biocarbon of, you know, $450-$500 per ton, and, you know, RNG was in the $20 per gigajoule range.
We're now seeing those numbers into $1,000-$1,500, and in some cases, even higher for the biocarbon because of the market pressures on, you know, the, the carbon intensity of steel products. So this is either, you know, direct use in steel making or other metallurgical applications where it reduces the CO2 emissions, or, you know, it, it could be used in facilities where, the carbon intensity of that product is important because it's, you know, going to a market like Europe, where there's, there's basically carbon border adjustments. So, you know, the dynamics behind just the biocarbon market have increased substantively, as has for renewable natural gas. Because renewable natural gas is still being mandated.
It might not be talked about as much, but it's still being mandated to meet minimum renewable gas requirements within certain gas grids in places like British Columbia and Quebec, and that mandate is not being fulfilled. So that's really helping drive the price up of renewable natural gas as well. And being as we produce both, it's really shifting the economics. You know, in 2022, we presented projects that made financial sense. You know, those projects make exceptional financial sense as we look at the 2025 market opportunities. So I mentioned earlier, sort of CAD 130 million in project revenue potential, and I do want to emphasize project. You know, this is...
These are projects where we're, you know, either part owners or full owners, and so we would, we would get, obviously, the, the, to realize the revenue and the, the free cash flow based on our equity. So for Thorold, for example, you know, we're a 50% owner of that project. But what we're showing here is only four projects. You know, we have a much bigger pipeline behind these four projects, but these are the four near-term projects. So, you know, Thorold into commissioning phase one. Like Nipigon, I'll talk a little bit more about, but there's some construction going on at that site. You know, and then Espanola, with our, our partners at BMI Group, and then Saint-Félicien. So those are all ones that can come together quickly, and can get us to pretty significant revenue numbers fairly quickly as well.
So this is what the roadmap looks like for the very short term. Like I said, there's a number of projects in behind that are earlier stage, that are, you know, in feasibility or pre-feasibility levels that will come online after these. But this is a fantastic start for really the short term project deployment for our projects. So Thorold, I wanted to pause here. We included this picture in our MD&A, but for those who didn't see it, you know, we are producing biocarbon. So this is a truckload of biocarbon that's being shipped out to... This load was going to Dofasco for their use. But we are making that product today. And so what does the total Thorold project look like?
It's about 10,000 tons a year of biocarbon and 475,000 gigajoules per year of renewable natural gas. So where does that all sit? So BMI invested CAD 8 million into the project. They're 50% so we're partners in the project, and we've been able to bring in CAD 12 million in non-dilutive funding from government. Phase one, which is biocarbon production, is into commissioning now. So like I said, we are making some amounts of biocarbon. As phase one gets through commissioning into operations, the volume of biocarbon that we're selling to the market increases, and then once phase one is fully commissioned and into operations, we're seeing a, you know, a revenue rate of about CAD 9 million per year, with CAD 3 million a year of EBITDA.
Once we layer on phase two, that's where the kind of big revenue jump comes from. And you can see that in the graph as well. I just want to point out on the years, this is our fiscal year, so 2026 for us starts in October. So just keep that in mind when we're looking at the numbers. You know, we're always talking our fiscal year, not calendar year. So here's a picture of Thorold facility, and I have two pictures of Thorold. Both of the pictures I'm sharing are from kind of deliberate angles. You know, we're always open to give tours and show people around, but there's certain elements now that we want to not necessarily share in kind of a public forum like this.
But what we're seeing, and just for those who are interested in how the technology works, I'll take sort of 30 seconds. You know, we have a receiving bin, so biomass gets dropped in here, goes through a conveyor into storage. So this is... These are four containers, but it's got a walking floor, so it can move material out at the bottom. That goes through a conveyor over here, and then it goes through some pre-processing. So in behind our storage bins, we've got a magnet separator. We've got what's called a chip cleaner, so that removes dust and stones and grit and that type of thing. And then we have a hammer mill here that goes through, basically a special screw conveyor through an airlock, and the hammer mill and the chip cleaner get tied into this big dust collector.
This picture was from, you know, a few weeks ago now, so even more has happened on site. This is the picture that I wanna, wanna share, you know, just to show what that feedstock handling looks like. Now, similarly, this is one that, you know, we, we... I tried to crop pretty tightly, so, you know, some things might not be obvious. The reason it's tightly cropped is this is inside of Thorold. I also wanted to show a picture of the kiln as it's being assembled, so there's some parts missing here, and they're parts that I don't necessarily want to share, again, in pictures. What I do want to share is just to give an emphasis on the size. This is what our high-temperature pyrolysis kiln in Thorold looks like.
You can see, two workers here putting the plant together. So this diameter here is about seven feet. So, you know, you can certainly walk through that hole. And it's good to have, you know, the perspective of the folks there. So that's, you know, a glimpse of what's going on inside. But again, you know, we're keen to host tours and, you know, show a more zoomed out picture, but this was cropped for the purposes of being able to share it in this venue. So then I want to chat Lake Nipigon. So this is, again, a look at Lake Nipigon. Like all of our projects, we're phasing it in. So what we're showing here is basically three phases. So in 2027, production of biocarbon at the full revenue run rate.
2028, full revenue from RNG, and then 2029, doubling, you know, that capacity again. The reason we're able to do that is because these plants are modular in nature. So, you know, to start with, you know, Lake Nipigon is 4 process lines, and so we can add another 4 as we get through 2029, and there's absolutely the biomass available to support that expansion in the Lake Nipigon forest area, which is very, very exciting for us and keen to keep working with our partners at Lake Nipigon Forest Management to source and secure as much biomass as we can to grow these projects as best we can.
But it keeps sort of the CapEx bite-size reasonable, gets us into good revenue production, and then allows us to, to do that expansion, either through additional project financing or through revenue and cash flow from the project itself. So this is now a rendering, and, and similar to the, the Thorold picture, this is the only rendering I can share, 'cause I don't want to show certain elements. But just to give you a sense of scale, this is half of the Lake Nipigon project, so this building is cut in half. So double the building, put another feedstock storage bunker, and what we're seeing here is just storage bunker for feedstock and conveyance into the building where, you know, all the high-temperature pyrolysis and all the other kind of magic happens.
But what I do want to show on this slide is that, you know, it's a reasonably big project, but it's not sort of ludicrously big in terms of footprint. Like, you can see some wheel loaders here to get a sense of scale. You can see kind of a car in the rendering over here, again, to get a sense of scale. So it's a large project, but it's not, you know, so big that it's not, you know, reasonable to, to be able to build, and importantly, it's not. It's very reasonable to be able to expand and, and add additional processing lines as the availability of biomass increases. And there is construction going on there, so this is a picture from a couple of weeks ago of some foundations being dug and poured.
You know, I think the day they were doing this was something like - 20 or colder. So it is winter mixed concrete, but this is how keen this project is to move forward; they're continuing to do work through the winter here so that we're ready to build out the rest of the project. So what's coming together here with this crane and with the foundation are feedstock storage tents. In this particular site, the woody biomass will be ground into microchips, then they'll be stored to dry in these drying tents. You can see one in place at the back, the second one coming together here, and the foundations being poured for the third one here.
So it's, you know, Magneforce have been great project partners, and they're really pushing this project forward, which is phenomenal to see. So finally, on the last slide, you know, again, this may not be surprising to most investors, but I did want to share, again, kind of the corporate profile to remind where we are from a public markets perspective, sort of what shares outstanding and kind of where the ownership structure is. So, you know, insiders are sort of, BMI Group, you know, retail, and then institutions. So with that, I wanted to make sure we leave lots of time for questions. So I will switch over here to the meeting, and please post your questions in the Q&A.
I see there's a couple in here already, so I will start answering them, but please add your questions to the Q&A here, and you know, happy to have the discussion and answer them. So you know, the first question is, "Has the Baltimore Back River demonstration facility been demobilized?" And the answer is no. It's still operating, still generating data. There is an intention to demobilize it at some point and move it to another site for testing with Synagro, but it is currently operating today. And then the next question: "How does the facility's CO2 emission change from phase one to phase one and phase two operations?" So great question. In phase one, it's...
It depends a little bit on the project, and what we're doing and how we're managing the pyrolysis gas and the syngas. It does improve because we are, through phase one, basically wasting some of that pyrolysis gas and syngas, because we don't need all of it to run the kilns, but we're not yet injecting it into the pipeline. There's a couple of reasons that we phase it out. One is it's about half the CapEx to do phase one versus the full project. We need to do all the feedstock handling, the kilns, all of that stuff has to come together, whether it's just phase one or the entire project. We can get that deployed quickly, we can get revenue running out of the plant while we get phase two operational.
The other thing about phase two is it requires more, you know, we'll say more planning with the gas utilities, because we have to interconnect with the gas pipeline, build injection stations, and sometimes that can take longer or shorter, depending on the project site. But if we can get phase one operational, you know, we can get those projects into revenue and cash flow quickly as well. The next question is: "Regarding the Baltimore PFAS project, can you confirm whether the preliminary results meet the expected destruction and operational stability targets? And..." Oh, there's more. "And what, the next concrete milestones towards commercialization will be?" Great question as well.
So again, I don't want to kind of preempt the completion and distribution of the report, but what I will say is, you know, we did a lot of testing, scale up, of the PFAS destruction project. We, you know, worked with Synagro almost as long as we worked with our core. So from sort of 2017, 2018, to scale up the testing to show PFAS destruction. And you know, we're all very happy with the results, so I'm very keen to be able to share that report. Then sort of the next steps, the next concrete milestones is really what does the deployment arrangements look like with our deployment partners? So, you know, we are not going to be in the market where we're building a merchant biosolids plant.
That's not in our plan. You know, our plan is we're going to build, be part owners and operators of the woody biomass high-temperature pyrolysis plants, and we're going to work with partners to deploy PFAS destruction projects. It's a much more saturated market. There's some great mature players that have projects that are already operational that could really use HTP quickly. And I think that's maybe an important point to emphasize as well, is we're not starting high-temperature pyrolysis projects for biosolids through you know, a municipal procurement process that can take years. This will be, the early stages of deployments anyway, will be through existing biosolids processors that are contracted, and so private entities so we can move you know, a lot quicker with those.
You know, we did dabble in municipal bidding kind of 2017, 2018 when looking at PFAS destruction. You know, it's just a lot of work and takes a lot of time, and you know, we have partners that we can leverage there. So the next question is: "Can you walk us through phase two of the Thorold site? And if you can share what's already confirmed versus what the main hurdles are." So yeah, so phase two of Thorold is we're gonna double the throughput capacity of the biomass, so we add a second kiln. So that takes us on the biocarbon size from 5,000 to 10,000, rough numbers, 5,000-10,000 tons per year.
And then we add a gas scrubber, so that cleans the pyrolysis gas from, you know, kind of dirty pyrolysis gas into clean syngas. We are doing that in Baltimore as well. So the Baltimore project, while it's running on biosolids, the pyrolysis gas that's generated is going through a scrubber, and then the clean syngas is being burned in burners to run the plant. So we do have experience with the scrubbing, and then from there, it goes through methanation. So methanation is a catalytic process. So basically, you have some vessels or beds that are filled with catalyst. The gas passes through it, and it converts things like hydrogen, carbon monoxide, and carbon dioxide, which is in our syngas, into renewable natural gas.
And so, you know, the kind of final hurdle to move that forward is to close out the project debt financing. So we are pursuing, you know, non-recourse project debt, as we've talked about, for that piece. You know, in the interim, we've been working, well with Enbridge to line up the injection station and the pipeline interconnects, and all of that is moving forward as well. So in this project, that is not gonna hold us up, which is great, because we've been working with Enbridge for quite some time on ensuring that that piece is in place, in time. So next question: "Who would be the RNG off-takers for Lake Nipigon and Espanola projects?" So, Lake Nipigon, we're still working on who the off-takers are going to be.
There's a couple of interesting options that we're exploring. Basically, do we inject the gas into the pipeline that runs through the property and do long-term off-take, or do we do what's called virtual pipeline, where you put it in a truck, and you can sell that gas molecule to local users, including the mining site that or the mining sites that don't have pipeline access? So we're still evaluating what to do there and how best to approach it, and do we split off, you know, the environmental attributes, which is sort of the premium on the gas, versus the sort of methane or the natural gas molecules.
So, that one, we have some really cool opportunities, but the Thorold project will be injecting gas, directly and selling that under 20-year off-take, for sure. For Espanola, what we're exploring is using the syngas, we'll call it behind the meter, so using syngas behind, the natural gas infrastructure. And part of that will be, you know, are we able to demonstrate a pathway with the Canadian, Clean Fuels Regulations to monetize environmental attribute credits? So that's still a work in progress as well, but, you know, Espanola hasn't- has not yet broken ground, so, you know, we have, we have obviously different stages of, development for our projects here.
Next question is: "When considering phase projects, biochar in phase one, biochar RNG in phase two, will the syngas to RNG conversion addition require design changes from the pyrolyzer to optimize production versus biochar production?" Okay. Yeah, so another great question. So operability versus CapEx. So the pyrolysis kiln, you know, all of the physical infrastructure doesn't change. What can change to optimize gas versus biochar is basically the operating conditions. So think of the kiln like a big oven. If we just wanna make biochar, we'll run a specific time temperature regime to optimize that biochar into biocarbon production. If we want to make RNG, we change those operating conditions to optimize highest quality syngas that can be converted into RNG and that can go into market. And that's within sort of a band.
So, you know, we can't double the gas production or bring the gas production in half, but we can optimize a few, you know, percentage points of yield between the two and between the quality of them. So next question is: "Given the current balance sheet and the LP and licensing structures you're developing, do you anticipate the need for additional equity finances in 2026 to fund existing operations, or do you expect to advance primarily through project finance and partner-funded structures?" You know, great question. Certainly, at the project level, we continue to be focused on how do we ensure that we're getting sort of maximum leverage, maximum grants into those projects, and that reduces, you know, the need to do equity financing.
You know, I would say, you know, there's certain projects or, or opportunities where, you know, either we want more or, or something may present itself, that we want to be able to act on. But for the specific projects, you know, the focus continues to be on how do we get financing directly at the project level? Next question: How sensitive was PFAS destruction and removal efficiency performance based on the biocarbon matrix? What regulatory milestones are left before any commercial deployment in municipal PFAS removal? So great question. So on the PFAS removal, you know, it's again something that works well with our high-temperature pyrolysis. 'Cause basically, what high-temperature pyrolysis is doing is volatilizing everything that can be volatilized out of the salt. So volatilize means turns into the gas.
So how can we drive everything out of the solid phase except for the carbon, and in the case of biosolids ash, how can we drive everything into the gas phase? And then within the pyrolysis condition, there's no oxygen in the reactor, so that's creating a cracking environment, so we're breaking the PFAS molecule apart. And that you need the higher temperatures that high-temperature pyrolysis operates under. So from a regulatory milestone perspective, that's one of the key elements of the Baltimore Synagro project, is pulling together sort of a third-party data collection and analysis process that can be shown to, in this case, the U.S. EPA, to say, "You know, here's the data collected. The PFAS is clearly destroyed.
You know, we're measuring it in the stack and in the biochar." So that's the two key spots for the EPA. But for us internally, it's also important, you know, how much is in the pyrolysis gas? How much is in the syngas before it's used in the burners? If any, how much is in any condensate through the gas scrubbing system? So we're measuring all the places where it could present itself, and then that gets presented to the EPA. And that's really the key piece: is there PFAS destruction? And then they can also opine on the other important element from the U.S. EPA, which is it's Non-Sewage Sludge Incineration, so non-SSI. And that's a really important designation as well because we don't want to be in that market incinerating biosolids.
Like, that just doesn't have social acceptance, and it has totally different permitting requirements. We did go down that path with the U.S. EPA. They came when our facility was still located in London, Ontario, when our pilot demonstration unit was there. They looked at it, you know, they opined quite favorably on it, but the U.S. EPA can't give non-SSI designation to non-US-based projects. So they can look at the technology and say, "Yeah, it meets the description, but we can't give you anything that confirms non-SSI because that's a project-by-project specific to the project." So having that cleared in the United States is a big win absolutely for us.
And the next question: "Considering Espanola has existing infrastructure, how much of the existing infrastructure can you leverage to shorten your construction timelines? Understood that there's a study being done, but anything you can share would be helpful. There's also recent news about Espanola site having five times capacity of Thorold. Will that be done through five kilns like the Thorold one has?" So great question. So, yeah, Espanola does have existing infrastructure, which is great. So, from a timeline perspective and from a CapEx perspective, it's helpful because those elements don't have to be, designed. So, you know, there's, there's truck scales, there's receiving. A really cool aspect about Espanola itself is that as a mill, it was able to switch between softwood pulp production and hardwood pulp production.
And why that's important for us is it means they had to have multiple wood handling systems. So they have a stacker reclaimer, basically, where the wood chips are stored and then pulled into the plant. That can have multiple piles, so it can pull from different piles. So we can have, you know, a wood chip pile for the Char Tech process and a wood chip pile for any Espanola operation. So, that's very cool, and that's all in place.
So really, that front-end handling system, a lot of that gets dropped off, and we basically tie into the conveyor and say, "Okay, when you know the feed bin needs more chips, it feeds into the char system, and when not, it can go to other uses." So that's a great ability to share that infrastructure and, of course, the use of the syngas behind the meter. Espanola will be four kilns, so there are some tweaks to kiln sizing and throughput for future projects that get a little bit more production out of a single kiln. And so, yeah, for Espanola, you know, throughput will be 5x, kiln number will be 4x. So thanks for that question.
So the next question: "Considering the impediments in dealing with utilities, are you considering RNG utilization for municipal vehicle fleets?" So to answer the question, absolutely. But I think one of the key things that will really drive the economics here is the ability to have that long-term offtake agreements with, you know, very creditworthy counterparties being the utilities. So yes, you know, for Thorold, for example, you know, we have to work with Enbridge, of course, for the injection station and some of the gas contracting to move that gas from Thorold to the Dawn Hub, which is kind of the natural gas trading hub, and then sell to a utility from the Dawn Hub. But being able to get a nice-...
Price that supports the project economics, that allows it to be built, that's secure for 20 years, creates a lot of value. You know, I know anaerobic digesters also doing RNG, there's some that are kind of fueling municipal fleets directly, but even there, I believe, and I actually haven't been to this site, so I might be wrong, but I believe that gas is going into the pipe, and then it's being delivered to the vehicle. So it's more of like a contractual arrangement versus completely separate from the pipeline. Being connected to the pipeline just gives a lot of flexibility, even if you're not locking in for 20 years. Once you're connected to the pipeline, you know, you could sell to municipal fleet, you could sell to California.
So there's a robust gas trading network. So we would wanna generally be connected some way, shape, or form. What other use cases have you identified for the biocarbon? I know the current focus on metallurgical coal replacement, wondering if high-value uses might be possible in the near future: battery materials, construction materials such as concrete, et cetera. So great question, and the short answer is yes to both. Certainly, battery materials require carbon. And again, for both the battery materials and construction materials, such as concrete, high-temperature pyrolysis creates, you know, basically a better quality biochar for those applications. So we have actually done trials in the construction side, specifically for concrete addition and how our biochar performs versus others.
You know, the benefit of doing biochar into concrete is you don't need to go through the agglomeration, so you don't need to make pellets. You can just use straight biochar. So to put that in context, biochar is what comes out of the pyrolysis kiln. It's kind of like a lighter material, and then for steelmaking or other metallurgical applications, you know, we need to make that into a dense pellet. For concrete applications, you don't need that dense pellet. There's different ways to get it into the concrete matrix, so it has the highest use case, and we have, you know, collaborated with others who are working in that space, so it is very interesting. I won't say much about the battery side, but, I will say we are looking at some other applications.
Absolutely, that could be higher value and could work well with our existing infrastructure. So are there applications where, you know, the existing model of turning residuals into biocarbon for steelmaking and renewable natural gas, where other parts of a tree that is, you know, currently not being able to be harvested because the market isn't there, could those be converted into higher-value applications? So, you know, it's really pretty interesting opportunities for sure to support higher-value biocarbon, biochar, but also support our ongoing operations. So thanks for that question. So the next question, you know: Did you have any challenges to control variability in biocarbon properties or quality, given the heterogeneous wood waste feedstock? Have you observed any operational penalties during large-scale trials?
So it's another good question because, absolutely, you know, wood residuals are not, like a really super homogeneous structure. You know, we are focused specifically on wood, so what you'll never hear me say is, "Hey, we're going into black bag," you know, "garbage, municipal solid waste processing," because that's a very broad, range, of material. What we wanna do is focus on woody biomass, and then, you know, the heterogeneity of it is, you know, at least a little bit more narrow. But the nice thing, again, going back to high-temperature pyrolysis and maybe to compare and contrast versus typical pyrolysis. A usual pyrolysis process runs at a lower temperature, creates a pyrolysis gas, that gas gets burned, all of it gets burned in an oxidizer, and then the heat from that oxidizer runs the pyrolysis reactor.
And that has applications where it's useful. Like, I'm not, you know, saying that's good, bad, or otherwise, but in that application, you don't get extra syngas, and you run at lower temperatures. When you run at higher temperatures, like our system, we actually have burners directly into the kiln box, and so what that does is now we run those burners off the syngas. So instead of burning the gas in an oxidizer to create heat, we're creating the heat directly in the kiln. That lets us run higher temperatures, and that also lets us vary the temperature. So if, you know, the feedstock changes, let's say there's a little bit more moisture, the temperature of the tube, the heat tube, would drop, the system would notice that, and the burner would kick up a little bit and create additional energy.
So the downside is, you know, if we're using more gas in the kiln, we're not able to sell it, so we want to avoid that, but it doesn't shut the plant down. It doesn't create major challenges. It just means there's a bit more gas being self-consumed to run the reactor, as opposed to being sold to market. The other piece is other contaminants, so things like, you know, sand and rocks and stones and, you know, things that can get on your biomass as it's being handled from the bush all the way to our facility, and that's where, in the Thorold project, we have, you know, magnets and chip cleaners. In other projects, like Nipigon, we don't have to have quite such a robust feedstock because of all the pre-process handling that, like Nipigon Forest is doing.
So it is a little bit project-dependent, but we do wanna be mindful of cleaning out contaminants, like the solid contaminants, trying to control and get it as homogeneous as possible. But with all the different biomasses that we have run in our demo plant and in our lab, we've got a pretty robust analytical model. We call it our mass and energy balance, or our MEB model, that we can plug in different feedstocks, different moisture contents, and find the right balance. So that can be tuned during commercial operations, which again lends itself well to our type of pyrolysis. So the next question, and it looks like maybe the last question, which is well-timed. Oh, there was one more question. You know, I'm good to stay here right to the end.
Can we expect to have more frequent investor calls like this one, quarterly or semi-annual basis? I believe more frequent communication from management definitely helps with investor sentiment. The frequent news updates on timelines, et cetera, are also very helpful." So absolutely. You know, it's great. I think we capped out at over 80, 84 people, I think, when I looked up, was the largest audience. We're now at 73. So thanks, everyone, for sticking around for the full hour. I really appreciate the attention and the ability to address questions and really talk about CHAR, which I could talk all day about, if you have the time.
So absolutely, if this is well-received, if this is something investors like, I'm more than happy to do it, you know, certainly on a quarterly basis, if that makes sense. You know, again, happy to do a walk-through progress updates and, of course, continue to communicate to the market through press releases as well. But if this is well-received, and again, the numbers show it is, absolutely, we will do this with a more frequent basis. Question. Oh, Galen brought in a question with the chat. Thanks, Galen. "I see spot prices for metallurgical bio-coal capping out at $400 per ton generally.
How is your pricing so much of a premium of that?" So I would, I would argue that there's not really spot pricing for metallurgical bio-coal because there's not really a lot of it out there. There is spot pricing for metallurgical coal, absolutely. And that can, you know, be CAD 400 per ton, maybe even a little bit lower. So what's the difference between, you know, metallurgical coal spot pricing and the pricing, the value that we see? And part of this, you can, you can kind of do on the back of the envelope as well to validate. But there's a couple of things that are happening here.
So, you know, our base case is for the physical carbon that we're producing, you know, the important thing is that the steel or the metallurgical application doesn't see a difference, right? So for steelmakers or other metallurgical users to use the product, they don't wanna change their infrastructure. They wanna use exactly what they've been using. So the carbon of our biocarbon needs to match the carbon of the metallurgical coal, needs to react similarly, basically needs to be a drop-in replacement, which means that spot price is our, is our starting point. So sort of doing a margin stack, that's where we start. It then depends on what the final application is and, and what sort of jurisdiction we're talking about.
So the very base case is 1 ton of bio-coal offsetting 1 ton of metallurgical coal offsets about 2.5 tons of CO2 emissions, so that's on a life cycle basis. You know, on a just swapping basis, it offsets more like 3 tons, based on the stoichiometric ratio of carbon and CO2 in metallurgical coal. But on a life cycle basis, you know, it's about 2.5 times. So that means, you know, if that facility is paying a carbon price, we reduce the dollars that have to be spent on that, on that carbon price, be it, you know, carbon tax, or be it cap and trade, or, or, or credits, or, you know, whatever the, the trading regime is.
So that's method one of how you get the pricing from CAD 400 up, is while we're actually offsetting, CO2 emissions by 2.5 times, what the pricing is in that jurisdiction. The other is, and in particular for North American applications, is if the finished product from steelmaking or metallurgical processing is being sold into a market that has a carbon intensity limit. So a carbon intensity limit on how much CO2 can be embedded in that physical product, and that is sort of a Carbon Border Adjustment. So again, it's a pricing mechanism that accounts for the CO2 offset, and that can be built into the biocarbon pricing as well.
So there's a couple of ways that, again, depending on the jurisdiction and the use case, but there's a couple of different ways that the CO2 emission reduction that you see from biocarbon versus metallurgical coal gets priced into the model here. So there's—I'll just go through these last questions, and then, since we're over 1:00, but I see a lot of people are still staying around, so I'm happy to stick around for a couple extra minutes here. "Thanks for the update. Please talk about how you and the CHAR team are adapting to the ideological barriers that are emerging from the current U.S. administration. Very anti-climate, pro-coal. What's CHAR's coal product, and have any potential in this Trump era?" So, great question, because obviously, lots of change going on in the United States.
But we don't see, you know, a strong and key impact on our business, and there's a couple reasons why.... So one, on the PFAS side, because that's also, you know, in the United States, and we're talking about, you know, a federal government that is looking at, you know, deregulation and changing kind of the paradigm on a number of things. But a lot of PFAS regulations are at the state level. So when we look at the Northeast or we look at California, you know, we look at Oregon, other, you know, states are still pressing ahead with those PFAS regulations. So kinda, you know, ultimately matters much more who's in, you know, the governor's mansion than in the White House, from a PFAS perspective.
And we don't see any indication that that is, you know, reducing. Couple that with the results from Baltimore, you know, we do believe will allow for opportunities in places like, you know, the United Kingdom and Europe and Australia and other places that have emerging PFAS regulations as well. So it's certainly not just sort of a U.S. exposure. Our production plants are all Canadian-based. You'll notice, and maybe I'll go back a couple slides here really quickly. Most of them are adjacent to the waterways. So you know, right now, most of our market is in Canada. We do have some U.S. clients. But again, those U.S. clients are exposed to non-U.S. market drivers, like carbon border price adjustments.
You know, and we are working directly with European offtakers for the biocarbon, for their applications, where I don't believe we're gonna see a reduction in CO2 pricing, as it, as it relates to, to operations in Europe. So, you know, we're, we're certainly not, you know, massively exposed to the U.S., market, but within the, the, the areas that we operate in, you know, there is still, some really good opportunity for us because of what's going on at the state level. So thanks very much, for that question. And the last question here, from, Bob Seymour: "Your estimates of CAD 42 million in free cash flow and CAD 131 million of total sales across 4 facilities gives a 32% FCF margin on sales.
This is 4.5 times the FCF margin on sales of typical S&P/ TSX company. In light of this big advantage, can you give insight on typical project IRR? So, so great question, and, you know, it's, it's interesting because of the market that we operate in, you know, and that being, you know, selling renewable natural gas into the, the utilities, which are, you know, monopolistically regulated utilities. So there has to be sort of a balance in, in what we're doing. And so we have the equity IRR, and then we also have to balance our, our ability to service debt. So, you know, we think for, at least earlier-stage projects, you know, we need a debt service coverage ratio of 2 at least. And so that impacts what our, our equity IRRs are.
And basically targeting the DSCR of 2, you know, we're seeing IRRs in the, you know, mid- to high-30% ranges on the equity component. So we think it's, it's strong, it's really important, and I think it will continue to grow as we see some of the market dynamics come into place and come into play for some of our output products. So, you know, thanks for the question, but, you know, working through that service coverage ratio and the project IRR, to kinda get right to the question, typical project IRR on the equity is in that mid-30% range, mid- to high-30% range.
So with that last question, appreciate all the questions coming in through the Q&A and through the chat, and everyone sorta sticking around here for the full hour and then a couple minutes of overtime. Appreciate the question on frequency of these investor updates. Certainly, the fact that so many of you tuned in and so many of you stuck around for the full hour plus now, you know, that's a really strong indicator that we should be doing this regularly. So, you know, I will certainly commit to that. As always, you know, Galen and I are available for additional questions. Now that the weather is...
Well, I'm looking out the window, maybe not nice today in Toronto, but now that the weather is getting closer to being nice, you know, certainly if you, if you're planning a wine tour in Niagara, you know, build in some time before you go and enjoy that Niagara wine, and come to Thorold, and you know, we'd happily schedule a tour there as well. So thank you all for your time, and I look forward to doing this more regularly. Appreciate it, everybody. Thank you.