Spotlight 🔍 Northstar

Northstar’s shingle-minded pursuit is turning waste into wealth

“The sheer volume of asphalt shingle waste going into landfills is massive…Apart from us, nobody has a commercially ready solution to split the asphalt shingle into its individual component parts to become usable end products.”
- Aidan Mills, President & CEO and Director of Northstar

In the world of construction, asphalt shingles have long been the go-to roofing material for homeowners due to their affordability, durability, and ease of installation.

Today, close to 85% of single-family detached homes across the United States are covered with asphalt shingles, a reflection of their widespread popularity.

According to market projections, the global asphalt shingle market is set to reach US$9.2 billion in 2024 and could grow to US$13.1 billion by 2034, underscoring its dominance in the roofing industry​

In Canada alone, this market is expected to grow from US$1.23 billion in 2023 to US$1.45 billion by 2030, driven by a combination of residential construction and renovations​.

However, the ubiquitous use of asphalt shingles has led to a significant environmental challenge.

With an average lifespan of just 15-20 years, asphalt shingles contribute to an enormous amount of waste each year. Landfills in Canada and the United States receive a staggering 16.5 million tonnes of used shingles annually, which equates to over 20 million barrels of oil, states the Asphalt Roofing Manufacturer's Association.

This is where the shingle-minded pursuit by Northstar Clean Technologies Inc (TSXV: ROOF) (OTCQB: ROOOF) is making a transformative impact.

The Canadian clean technology company has developed a proprietary design process that takes discarded asphalt shingles, which would otherwise end up in overcrowded landfills, and extracts its 3 valuable components for reuse.

This groundbreaking technology not only addresses the growing waste problem but also contributes to the circular economy by recovering nearly 100% of the constituent components of asphalt shingles.

“The sheer volume of asphalt shingle waste going into landfills is massive…Apart from us, nobody appears to have a commercially ready solution to break down the asphalt shingle into its individual component parts to become reuseable end products,” said Aidan Mills, President & CEO and Director of Northstar.

This past July, Northstar was issued a patent for its front-end technology for reprocessing asphalt shingles from the Canadian Intellectual Property Office.  This follows two patents issued by the United States Patent and Trademark Office for both the front-end technology for reprocessing asphalt shingles and the follow-on patent for the second stage of Northstar’s four-stage proprietary technology for reprocessing asphalt roofing shingles.

According to Mills, Northstar’s approach is distinctive because it allows for the complete separation and recovery of asphalt shingles' three main components—liquid asphalt, fibre, and aggregate—back into their original forms.

“With each tonne of shingles we collect from waste haulers, we believe we can generate revenue of over CAD$200 per tonne from input and outputs, so when you start thinking about the financial opportunity, it’s absolutely staggering,” said Mills.

Latest estimates show, the Canadian and US markets for asphalt shingle recovery and repurposing are valued at US$1.35bn and US$7bn respectively. 

Northstar moves beyond promises and plans

Unlike other companies whose initiatives are in the early of stages of development or validation, Northstar is actively implementing its sustainability solutions, moving beyond mere promises or plans.

Northstar completed the successful de-risking of its Empower Pilot Facility in Delta, British Columbia, Canada. A 20,000 sqft pilot plant just outside of Vancouver located about 10km from the Metro Vancouver landfill, the Empower Pilot Facility was primarily set up to provide real-world validation for Northstar’s proprietary Bitumen Extraction and Separation Technology (BEST).

After completing successful de-risking of its Empower Pilot Facility, Northstar moved forward with the construction of its first commercial scale facility in Calgary, Alberta (the “Empower Calgary Facility”).

The Empower Calgary Facility’s modular design allows it to be replicated in other municipalities, making it adaptable for wider deployment​.

“The lessons learned at our pilot facility have been incorporated into the engineering design for our Empower Calgary Facility, significantly de-risking the process,” said Mills.

The Empower Calgary Facility is currently under construction and is expected to start production next year on a 175,000-square-foot industrial property that is about 4km from the City of Calgary’s SE Landfill. 

Once operational, Northstar’s Empower Calgary Facility will be able to process 150 to 200 tonnes per day of material in its base case operation thereby allowing Calgary landfills to divert approximately 40,000 tonnes of asphalt shingle deposits per year. The facility has the potential to increase operating hours and divert approximately 80,000 tonnes per annum.

Here are some of the key financial highlights and agreements relating to Northstar's Empower Calgary Facility:

• Asphalt Off-take - Long-term 5+ year 100% offtake for liquid asphalt with McAsphalt Industries, a wholly owned subsidiary of Colas Canada (subsidiary of Colas SA). For over 50 years, McAsphalt has been the industry’s top asphalt expert, offering asphalt products and services from over 27 strategically located terminals across Canada. This offtake is at a market-based price with a price floor above the Company’s estimated project-level cash flow breakeven.
• Government Grants - from Emissions Reduction Alberta (ERA) for $7.088M in project-level government grants. The government grant will be paid out based on milestones of detailed design, construction, commissioning and operation of the Empower Calgary Facility.
• Project Debt - $8.75M in senior secured project debt from Business Development Bank of Canada (BDC)
• Strategic Investments and Supply Agreements - US$10 million strategic investment from TAMKO Building Products, a major U.S. shingle manufacturer. Five-year asphalt shingle supply agreement with IKO Industries Ltd. (IKO), a leading Canadian shingle manufacturer. IKO is currently delivering shingles to the Empower Calgary Facility. Three-year asphalt shingle supply agreement with Ecco Recycling & Energy Corporation. It received the first delivery of waste shingles from Ecco in April.
• Started generating revenue through tipping fees from IKO Industries Ltd. and Ecco Recycling.

In total, Northstar has secured over CAD$67 million in current and future funding through debt, equity, royalties and government grants, the company said. 

“Our significant progress in funding, partnerships, and development of the Empower Calgary Facility positions Northstar for full commercial operations in the near future,” said Mills, who has over 30-years’ experience in the global oil and gas industry.

Northstar: a Top Pick for Investors

Northstar Clean Technologies was a Top Pick at the recent 12th annual Muskoka Capital Event hosted by CEM, which attracted over 50 companies from various sectors who engaged with a cadre of innovative entrepreneurs. The Investor Breakout Exchange, which is the signature culmination at CEM events, selected Northstar as a Top Pick for its proven technology, scalable model and its ability to generate revenue from both input and output streams​.

Stock Information TSXV:ROOF.V

1. As of market open on October 24, 2024
2. As of market close on Monday September 30, 2024 after being selected as a Top Pick at the CEM Muskoka Capital Event*

Following the company’s distinction as a Top Pick at the Muskoka CEM Summit Top Pick, I caught up with Aidan Mills, President & CEO and Director of Northstar for this Spotlight Feature.

What is attracting investors to Northstar?

“Our technology is not just a concept, but a proven solution that will be implemented at a commercial scale at our Calgary Facility. We're not just solving a waste problem; we're creating value from what was once considered unusable material.

I believe that companies like ours, with a focus on sustainability, must first prove that their technology is effective. Next, they need to scale it up to meet larger demands. Finally, they must quickly deploy their solutions across key markets to maximize their impact. 

We have proven the technology works at our pilot plant in Delta, and we are now constructing our first commercial plant in Calgary. We are a company with a market cap of around $30 million, but our R&D capabilities rival billion-dollar enterprises. Our technology has been validated by major players in road paving, shingle manufacturing, and flat roofing sectors. These industry leaders have carried out significant R&D on our products, which is critical to the technical due diligence of our manufacturing process. This external validation is a testament to the potential of our technology, which supports multiple applications across key construction sectors, positioning us for significant growth and broader market adoption.

We also have a unique revenue model that includes receiving tipping fees from the collection of asphalt shingles as feedstock supply and the sales of liquid asphalt, aggregate, and fibre recovered from the waste shingles.

Our model is to get paid on inputs and get paid on outputs. There aren’t many businesses that I know where you get paid for taking the feedstock. 

From a carbon-credit perspective, we are taking a very conservative approach and have not factored it yet into the company's revenue model. Independent studies show strong potential CO₂e emission savings of 60% for our Calgary Empower Facility over virgin production and landfill disposal carbon dioxide equivalent emissions. Any potential carbon credit revenue will be additional upside not currently accounted for in our financial projections.

So, to summarize we are on the cusp of commercialization with a proven technology and are well funded to move forward.”

What is the scalability of Northstar’s technology

"Our technology has the potential to scale globally, addressing the massive problem of shingle waste that impacts landfills and the environment worldwide. What we’ve achieved at our pilot plant in Delta, BC, and are now building in Calgary proves that this can be implemented on a commercial scale. 

As we think about the economics for one of our facilities, we are looking at about $20 million with approximately $15 million worth of capital and $5 million of associated costs. If we run one facility on a day shift only, not 24/7, it should generate $10 million of revenue and about $5 million of EBITDA at the project-level per year. And if we run a 24/7 operation, we should be able to double that. 

We plan to replicate the Calgary facility model in other key regions into various municipalities. With the asphalt shingle manufacturing industry (through ARMA) having a goal to divert up to 100% of landfill disposal by 2050, which based on our production estimates, would require over 400 Northstar facilities across North America.

Regarding our business strategy, we plan to roll out a modular approach at ~150 tpd / 40,000 tpa to scaling (like McDonald’s), rather than increasing the size of individual facilities. Our long-term business strategy is not actually focused on scaling up each individual facility to match the size of the municipality’s demand. For example, if Los Angeles has 5x the demand of Vancouver, we would build 5 facilities in LA rather than 1 large facility 5x the size, but it is rather focused on developing a modular design of the same size (i.e. 150-200 tpd) that is fully optimized and can be deployed in any municipality in North America. So if a municipality or city has more demand, we will just build more facilities rather than building one larger facility.

We see a clear path for growth. By further refining and optimizing our process, we will be able to replicate it with new facilities across key markets. Our technology can be rolled out repeatedly with consistency to meet the existing demand in regions across North America and beyond."

What’s next for Northstar in the coming 12 to 24 months?

"It’s shaping up to be a busy year or two for us at Northstar. Our immediate focus is to complete construction and commence commissioning of the Empower Calgary Facility by early 2025. We will then ramp up to commercial production levels.

The next key catalyst will be to move swiftly on our next facilities by retrofitting the pilot plant (from pilot scale to commercial scale) in Vancouver and building new commercial facilities in both the Toronto area and in the northeast United States. I believe that we'll be able to announce the Greater Toronto Area facility in Q4 2024 and the US location in Q1 2025. In Toronto, the off-take supply and location agreements are under negotiation. In the US, we are working towards development of a facility in the Mid-Atlantic Area in partnership with TAMKO Building Products, marking Northstar's entry into the U.S. market. We have an MOU with TAMKO to build four Northstar facilities.

 In the coming 12 to 24 months, Northstar’s experienced leadership team will be focusing on further commercializing our technology, expanding our operational footprint, and establishing a strong foundation for growth in both Canada and the United States.” 

Our View

Northstar’s proven technology, large market opportunity and a clear expansion strategy, led to the Investor Breakout Exchange in Muskoka selecting it as a Top Pick. Attendees referred to Northstar as a compelling investment opportunity for those interested in the circular economy.

• Near-term commercialization at the Empower Calgary Facility and the Company is fully funded to deliver this commercial facility.
• With Canada and the US producing 16.5 million tonnes of waste shingles annually, there is a significant market opportunity for Northstar. Northstar has a modular expansion strategy focused on developing facilities of the same size that can be deployed in multiple municipalities across North America. This approach allows for flexible and potentially rapid expansion.
• Northstar has a two-tiered revenue model that generates income from both inputs and outputs. This dual revenue stream is unique in the industry. The company’s green technology also opens doors for potential revenue through carbon credits and other government incentives aimed at reducing waste and promoting sustainability.

The Investor Breakout advantage

As you already know, our Investor Breakout newsletter is based on the top picks and performers at CEM conferences, which are held seven times a year. These invite-only summits serve as the meeting ground for North America’s most influential investors and industry leading issuers that attend a day-long series of 1-1 meetings.

At the end of each event, after over 1,000 meetings have taken place, investors gather for the Breakout Exchange forum to identify their top picks.

Next Stop: Florida 

Mark your calendars! 

CEM is proud to announce the 8th annual Florida Capital Event, scheduled for November 22 to November 24, 2024, at the JW Marriott Miami Turnberry Resort & Spa in Aventura, Florida. This elite conference, marking one of the first major investor gatherings post-U.S. elections, is designed to foster strategic connections between companies and top capital finance leaders through carefully arranged one-on-one meetings and dynamic networking activities.

Warm Regards and Happy Investing,
Fabian Dawson