VANCOUVER, BC, July 20,
2023 /CNW/ - Earthworks Industries Inc. (the
"Company"), wishes to report that it has done a calculation of the
net present value of the development of its integrated waste
handling project at the Cortina Rancheria in Colusa County, California. The project is
being developed by the Company's wholly owned U.S. subsidiary,
Cortina Integrated Waste Management Inc. (CIWM). The
calculation is based on a cash flow forecast comprised of all known
variables that influence revenue expectations, operating and
capital costs, regulatory and construction costs, and the time
frames associated with them. These calculations, which cover
a period of 25 years show the value of the project – using 7% and
5% discount rates, to be between $U.S. 158 million and $U.S. 202
million.
Over the past several months the Company has had Mr.
Robert Gardner of SCS Engineers
(SCS) a Civil Engineer licensed in the U.S., and an expert in this
field, with many years of experience, review the financial models
for Cortina. Landfill operations are unique, and we were extremely
fortunate to have Mr. Gardner's expertise in that area available to
us. Mr. Wayne Pearce of SCS, a
registered Professional Geologist in the U.S., also assisted in the
review. After reviewing the model and an earlier Basis of
Design of the Project, dated July
2022, SCS provided their opinion in a letter date
June 21, 2023, stating that "the
proforma model developed for the proposed landfill construction and
operation appears to be well structured and considers the major
fixed and variable operational costs, projected revenues, and
capital costs associated with developing, closing, and maintaining
the site during the post closure care period."
The calculations, which cover a period of 25 years, have
resulted in a projected revenue stream that steadily builds over
time until the capacity of the project is exhausted. The Company
has used the net present value of this cash flow stream to
determine the current value of the asset. The key assumptions in
making the calculation are as follows (USD). Average tipping fee of
$98 per ton (adjusting for
inflation), daily tonnage of 920 and 1,500 per day, 70% of total
cost financed with debt, 10% equity and 20% via sinking fund
financed through operation. Variable operating costs have been
deducted from anticipated revenue to arrive at projected net
revenue. Estimated peak outstanding debt required for construction
$23 million, the amount of new equity
required will be $10 million, and
inflation is assumed to average 2% over the forecast period.
The after-tax annual cash flow rises steadily from $U.S.13.5
million in the first full year to over $U.S.30 million in 25
years.
Detailed fact-based assumptions covering capacity and source
types have been applied to the calculation schedules along with
taxes and interest estimates. Anticipated timing of construction
and corresponding revenue generation and expansion have also been
calculated in detail. The assumptions at this time are based
primarily on landfill tipping fees and therefore represent the
minimum revenue that could be earned. Additional revenue from
recycling, power generation, contaminated soil, and compost sales,
which are permitted, will come on-line as operations proceed. The
revenues in this cash flow model do not include anticipated
capacity increases.
The Company's management accepted the NPV figures and
calculations effective June 30,
2023.
The Lease at Cortina currently runs until January 25, 2032, with a 25-year extension at the
Company's option.
Over the past several months the United States Environmental
Protection Agency (EPA), Region 9, has been completing its review
for tentative approval of the remaining Site-Specific Flexibility
Requests (SSFRs) pursuant to the EPA's draft guidance for municipal
waste landfills in Indian Country.
Based on the pending tentative project approval by U.S. EPA, and
the updated Basis of Design, the Company is planning to begin
construction in spring of 2024. Initial operation of the facility
is targeted for 2026. The Company had previously moved forward as
far as possible with other permit applications related to air and
water, and in light of this progress, those applications will now
be updated as well. Because of this progress towards final
permitting, an aggressive marketing campaign for the facility will
be initiated over the next few months to attract interest in
disposal at Cortina. Management fully expects that disposal
contracts related to the Project will empower the Company's
financing of the development. The Company continues to be
successful in raising the necessary working capital to move the
Project forward.
The Company earlier announced an agreement dated March 13, 2023 (the "North Bay Agreement") with
North Bay Corporation ("North Bay") – to which the Company owed in
excess of $U.S. 5.9 million – to settle the indebtedness for $U.S.
2,675,000. A payment of $U.S. 265,000 has been paid with the
balance to be paid by September 30,
2023.
Risks and Uncertainties
The Company and CIWM face a number of risk factors and
uncertainties due to the nature of the Project, the limited extent
of the Company's assets and the present stage of development of the
Project. The factors given below, among others, should be
considered.
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(a)
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Key Employees - The
Company's growth and its ability to develop the Project will depend
on its ability to attract and retain highly qualified personnel.
The company is currently highly dependent on its President and
Chief Executive Officer and the loss of his services might impede
the Company's ability to proceed with the Project
growth.
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(b)
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Market Conditions -
Part of the Project's worth – and success – could be negatively
impacted if another waste management project is proposed or
developed in the area. The economic viability of the Project could
be adversely affected if there is a reduction of demand for waste
management facilities in Northern California or if there is a
decline in tipping fees that can be charged by the
Project.
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(c)
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The project's
completion will require further approvals from regulatory
authorities having jurisdiction. The Project would be delayed or
not be able to proceed or operate if the regulatory authorities
delay or refuse the further approvals that will be
required.
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(d)
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The Company may not be
able to raise the $U.S. 2,500,000 payable pursuant to the North Bay
Agreement. If the September 30, 2023 payment is not made, North Bay
would take control of CIWM.
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(e)
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The Company has no
history of building or operation of waste management facilities.
Therefore, the Company is subject to many risks common to
comparable companies, including under-capitalization, cash
shortages and limitation with respect to personnel, financial and
other resources, as well as lack of revenues.
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(f)
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The Company's ability
to continue as a going concern in the short term is dependent upon
its ability to obtain financing. The Company obtains financing by
the issuance of share capital. Although the Company has been
successful in the past in obtaining financing, there can be no
assurance that it will be able to obtain adequate financing in the
future or that terms of such financing will be favorable. Failure
to obtain additional financing in the near future will result in
the delay or the indefinite postponement of further development and
marketing initiatives.
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For further information, contact:
Earthworks
Industries Inc.
David
Atkinson
President/CEO
604-669-3143
Forward Looking Statements
The news release contains
"forward-looking information" and "forward-looking statements"
(collectively 'forward-looking statements") within the meaning of
the applicable Canadian securities regulations. All statements,
other than statements of historical fact, are forward-looking
statements and are based on expectations, estimates and projections
as at the date of this news release. Any statements that involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objective assumptions, future events or
performance (often but not always using phrases such as
"expects", or "does not expect", "is expected", "anticipates" or
"does not anticipate", "plans", "budget", "scheduled", "forecasts",
"estimates", "believes" or "intends" or "may" or "could", "would",
"might" or "will" be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, or achievements of the Company or CIWM to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Factors that could cause actual results to differ
materially from those anticipated in these forward-looking
statements are described under the "Risks and Uncertainties
Statement" in this news release. The risks, uncertainties and
assumptions are difficult to predict and may affect operations, and
may include, without limitation: equipment and labor shortages and
inflationary costs; general economic conditions; changes in
applicable environmental taxation and other laws and regulations as
well as how such laws and regulations are interpreted and enforced.
Forward- looking statements contained herein are made as of the
date of this news release. The Company will update these
forward-looking statement and Risks and Uncertainties as a result
of new information, results, future events, circumstances, or if
management's estimates or opinions should change, or otherwise.
There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, the reader is cautioned not to place undue reliance on
the forward-looking statements.
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this News Release.
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SOURCE Earthworks Industries Inc.