Published for StockFam Investor Education Group
Highlights:
- Climate focused startups raised over $20B USD, an increase of 11% over 2021. During that same period, NASDAQ IPOs declined a staggering 93%. While all other sectors faltered in raising capital, climate focused capital increased.
- Laurence Fink, CEO of Blackrock, stated that 1000 companies in the climate space will soon join the 83 existing billion-dollar valued firms already there.
- Aduro works with Shell, Brightlands (Netherlands), and has had its technology validated by third parties
- The company sits at a $59M CDN valuation while comparable firms are in the billions
- Aduro remains in a pre-revenue stage, presenting both risk and opportunity
- The company’s stock (ACT: CN) has a float of 30m with 46% held by management. Warrant exercising has been a weight on the share price, yet the stock has risen 30% in the last calendar year, while the overall Canadian Securities Exchange has fallen 58% over the same period
- The company may be making inroads into one of the fastest growing plastic polluting markets: India.
Preamble: A Quick Look at the Global State of Affairs
Most of us know the harsh facts about plastic’s impact on the environment. Its creation from planet-warming fuels like oil, gas and coal goes directly against our planet-saving goals, and the fact that it simply doesn’t decompose ensures that carbon remains in the environment and all the toxins that accompany it. The WWF and other organizations have postulated a 2050 future where we have more plastic than fish in the oceans (by weight), while research suggests there could be 1.6 billion tonnes of plastics being produced by 2050, producing 6.5 billion tonnes of CO2e (carbon dioxide equivalent), up nearly 300% from 20154.
Yet plastics are used everywhere and for nearly everything. Aerospace, technology, construction, automotive, packaging, healthcare, military and even clean energy applications incorporate plastics (think wind turbine material and cables connecting them to the grid). Some reports believe that plastics will account for more than half of all petrochemical demand long before 2050. Our decades-long dependence on plastics has led to the tongue-in-cheek naming of this period as The Plasticene Era.
Rubbish at Rampura Lake, Karnataka, in what used to be a popular birding site (Mike Prince at https://flickr.com/photos/70804987@N00/30668110355)
So, having established that plastics are, for better or worse, a part of our future, the discussion must turn to establishing a circular economy for them.
Plastics recycling has really become the key, both for reducing our unsustainable amount of plastic waste, and for petrochemical firms looking to remain relevant, profitable, and on the right side of change. For their part, most of these firms are saying the right things:
“We are scaling up our advanced recycling capabilities around the world to manufacture more circular products for our customers,” said Karen McKee, president of ExxonMobil Chemical Company. Chevron’s President of New Energies, Jeff Gustavson, had this to say: “At Chevron New Energies, we’re well positioned to reduce emissions of the essential industries that enable modern society. Customers can be confident in our ability to move quickly with an entrepreneurial mindset to serve their needs, as we help build the lower carbon energy system of tomorrow.” Shell has recently made their own promises, announcing “By 2030, we will increase the amount of recycled plastic in our packaging to 30% and ensure that the packaging we use for our products is reusable or recyclable. We will increase the amount of recycled materials used to make our products, starting with plastics. Our ambition is to use one million tonnes of plastic waste a year in our global chemicals plants by 2025.”
With the influx of informative documentaries coming from streaming services and more open discussions both in the social realm and at government levels, we are all more aware of what these global firms certainly know: while consumers must do their part with recycling practices and smarter lifestyle and purchasing choices, the bigger change needs to come from corporate entities like the petroleum giants.
With the writing clearly on the wall, global firms have no choice but to act. And so do countries. Let’s look at India in particular.
Aduro Goes to India: Here’s Why it Matters
Most agree that the fastest growing nation in the world, from population to GDP, is India. With another 7% in expected GDP growth this year, India will likely retain its title for another year. With progress inevitably comes growing pains, and in India’s case, the environment may be the biggest of them. The country produces roughly 40M tonnes of plastic each year, 3.47M tonnes of plastic waste. These numbers are expected to quadruple over the next couple of decades, eventually surpassing the United States. Moreover, only 60% of plastic waste is currently treatable in India, with the remaining 40% left to pollute landfills and waterways. India has recently taken steps to address this troubling trend, with a full ban on most single-use plastic items such as plates, straws, cutlery and even plastic bags of a certain thickness. While these measures are a step in the right direction, they will hardly make the difference necessary to turn the pollution tide in the country.
India’s hopeful transformation and progression to net zero under Prime Minister Narendra Modi has been multi-pronged. According to the PM, India has achieved its goal of having 40% of its installed power generation from non-fossil fuel-based sources nine years before the deadline, forest cover has grown by over 20,000 sq km in the last eight years, with wildlife numbers also seeing a record growth. Solar energy capacity has increased by 18 times and initiatives like Hydrogen Mission and a circular economy have also progressed.
Indian PM Narendra Modi chairing a meeting on the “Namaami Gange” project to curb pollution on the River Ganga. Prime Minister’s Office, Government of India
It is the circular economy initiative that should interest Aduro investors the most, as Mr. Modi is intent on curbing projections that indicate India may become the US’ equal in just a few decades when it comes to plastic waste.
The pinnacle event on Modi’s netzero calendar is the Uttar Pradesh Global Investors Summit, a gathering of policy makers, corporate leaders, business delegations, academia, think-tanks, and political and government leadership from across the globe to explore business opportunities and forge partnerships. Aduro will be showcasing its Hydrochemolytic technology, and the company will also be conducting one-on-one meetings with government agencies, business representatives, strategic partners, and interested investors.
For the average small cap investor, news of attendance at a conference causes barely a ripple of interest. Afterall, every day in Toronto, Montreal or Vancouver, there is a trade show or conference of some kind, so we can be forgiven for initial skepticism. Yet in this case, Aduro is participating in a global summit, and they are doing so as an invitee. Moreover, they are the only company of their kind presenting at the summit. While there are no guarantees of ultimate success, this type of validation only adds to the growing argument that Aduro is not just a different way to recycle plastics, but the best way to recycle plastics.
The Case for Aduro as The Best Long Term Investment in the Sector
Aduro’s patented HCT technology
Market Appetite:
Brookfield Asset Management, one of Canada’s largest and most renowned international firms, has recently committed $700 million to to bring together five US-based recycling companies. Brookfield has over US$725 billion of assets under management, and they are squarely focused on a net-zero emissions economy. Once consolidated, the new company, called Circular Services, will be the largest recycling operation in the United States. And this is just the first domino to fall.
Patented Technology to Recycle ALL Plastics
Aduro Clean Technologies has been working away on its patented technology for over a decade; updating and expanding it along the way. Its chemistry has not been duplicated anywhere, and it allows the company to process plastics more safely, efficiently, economically, and thoroughly than any other technology. Competitors with far higher valuations will, at best, recycle one type of plastic at higher costs to the pocketbook and the environment.
Inflection Point
In the previous quarter, Aduro put out a news release confirming the imminent completion of its Continuous Flow Plastics Reactor, which we can now assume has been fully completed. According to the company: “The R2 Plastic unit is the Company’s customer engagement unit and is designed to handle various plastic feedstocks such as polyethylene, polypropylene, and polystyrene as single stream materials, followed by a mixture of these feedstock streams.”
It remains to be seen how quickly Aduro will bring potential clients to the table for these trials, but after painstakingly developing their business to this point, it would follow that CEO Ofer Vicus and his team have been informing interested parties of their progress along the way. Government support has been flowing in as well, with the recently announced $1.15M non-repayable grant to the company and its partnership with Western University from The National Sciences and Engineering Research Council (“NSERC”) Alliance and Mitacs Accelerate Grants Program. The grant represents a 3-to-1 ratio (Aduro will contribute $382,500) of funding to support and accelerate the company’s path to commercialization.
Validation Pretty Much Everywhere
Aduro’s HPU (Hydrochemolytic Plastics Upcycling) technology has already attracted industry giant Shell, who selected them as the only recent entrant into Shell’s Game Changer Program. Aduro is working in the Netherlands with Brightlands, Europe’s largest innovation community. It has taken over a decade of painstaking development, but Aduro is now at the point where validation has spread internationally, and not only that the technology works, but that it is easily scalable. And that really is what has held back the company to this point. Can it scale? The technology can indeed scale and it appears that soon we will see further evidence of it.
Investing in Aduro
The choice to invest in a company, or even just remain patient with your investment in it, is obviously dependent on a host of variables. Your own personal investment strategies and capabilities are first and foremost, but factors such as overall market health, long-term industry trends, and individual company’s management decisions need to be considered as well.
At this point in Aduro’s corporate development, the positives appear to outweigh the risks, and that has played out in the past calendar year. As nearly every public company across most sectors endured a miserable 2022, Aduro continued to rise. The stock price currently sits at $1.05 CDN (ACT: CN) compared to $0.73 a year ago. One could argue that the stock could be higher if not for a large group of warrant holders exercising their options recently, and yet the share price continues to slowly rise. Even with the slow and steady rise, Aduro’s market cap sits below $60M CDN, a far cry from peers with less efficient technology and market caps in the billions. The blue sky potential is clearly there, especially with the new economy squarely focused on investments that actually do some good in the world.
Citations
1-https://cleantechnica.com/2022/10/24/china-electric-car-sales-35-share-of-auto-sales-in-september/
2-https://www.caranddriver.com/news/a39998609/electric-car-sales-usa/
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