(TheNewswire)
April 25, 2024, TORONTO, ON – TheNewswire – Star Royalties Ltd. (“ Star Royalties ”, or the “ Company ”) (TSXV: STRR, OTCQX:STRFF), through its joint venture, Green Star Royalties Ltd. (“ Green Star ”), is pleased toannounce the execution of a definitive royalty agreement withNativState LLC (“ NativState ”) to acquire several gross revenue royalties(each a “ Royalty ”, andcollectively, the “ Royalties ”) on a carbon offset-issuing portfolio ofImproved Forest Management (“ IFM ”) projects in the southeastern United States.NativState is an Arkansas-based forest carbon project developerfocused on aggregating small-to-medium forest landowners into IFMprojects being developed under the American Carbon Registry (“ ACR ”). The Royalties are expectedto deliver to Green Star premium voluntary carbon offsets over a20-year period, with a total consideration for the Royalties of $5.6million to be paid over a series of tranches. All amounts are in U.S.dollars unless otherwise indicated.
Investment Highlights
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Expansion of Green Star’s NorthAmerican nature-based portfolio: The Royalties on NativState'sIFM projects complement and further diversify Green Star’s existingportfolio of North American nature-based carbon offset solutions.
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First carbon offset-issuing royaltyfor Green Star: Project ACR 783 in Arkansas becomes GreenStar’s first carbon offset-issuing investment with approximately180,000 carbon offsets expected to be delivered under the Royalty in2024, inclusive of 120,000 carbon offsets at closing. Approximately75% of Green Star’s attributable carbon offsets from the Royaltiesare expected to be delivered in the first five years.
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Aligned and defensive royaltystructure: Green Star and NativState have agreed to severaldefensive mechanisms, including minimum carbon offset volumes to bedelivered over the 20-year royalty term.
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Multiple Royalties with stronginvestment metrics: The Royalties consist of a 20% Royalty onProject ACR 783 and 10% Royalties on an additional 60,000 acres acrossArkansas, Louisiana, Mississippi, and Missouri, to be developed byNativState and registered as future ACR projects. At prevailing carbonoffset prices, the Royalties are expected to provide significant netpresent value accretion and allow for an attractive payback period.
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Demand and pricing trends for premiumNorth American carbon offsets are stable and rising: PremiumNorth American nature-based carbon offsets remain in limited supplyand in increasing demand. Current market pricing for these premiumavoidance and removal carbon offsets is approximately $13-15/t COe andover $20/t COe, respectively.
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Partnership with rapidly growingcarbon developer: NativState, with over 300,000 acres undermanagement, is striving to become the largest US aggregator ofsmall-to-medium forest landowners. Green Star is proud to be buildinga long-term partnership with NativState by funding American forestlandowners keen to participate in both IFM practices and voluntarycarbon markets.
Alex Pernin, Chief Executive Officer of Star Royalties, commented:“We are proud to announce this multi-royalty investment inNativState’s portfolio of high-integrity IFM projects in thesoutheastern United States. This thoughtful transaction transitionsGreen Star into free cash flow generation and provides desirableeconomic returns, while expanding and diversifying our existingpremium North American portfolio.”
“This investment will allow for the conservation of roughly 78,000acres of prime timberland and is a culmination of extensive duediligence by our team and multiple third-parties. We respectNativState’s team and their meticulous approach to building asustainable business model rooted in forestland conservation andstewardship. NativState’s attractive carbon offset issuance profileas well as their objective of enabling American forest landowners togenerate carbon revenue made this partnership a natural fit for GreenStar.”
Stuart Allen, Founder and Chief Executive Officer ofNativState, commented: “NativState was founded to give small andmedium forest landowners access to global carbon markets. Thisannouncement and our relationship with Green Star mark an importantstep in making the promise of voluntary carbon markets a reality forour landowner partners. We are thankful for Green Star’s trust inNativState, and we look forward to continuing to create value inforest conservation as a project proponent. Each new project broughtto market provides our landowners revenue to implement sustainableforest management practices and access to professional foresters.These practices then deliver high-quality carbon offsets to ourcorporate stakeholders.”
Transaction Terms
Green Star has agreed to acquire the Royalties for $5.6 million,payable over a series of tranches linked to ACR registrationmilestones. In consideration of its investment, Green Star willreceive a 20% Royalty on Project ACR 783 as well as 10% Royalties onan additional 60,000 acres to be enrolled by NativState and registeredas ACR projects. Each Royalty will have a 20-year term commencing atthe underlying ACR project’s first carbon offset issuance date. TheRoyalties will be paid directly in carbon offsets. As part of thistransaction, Green Star and NativState have agreed to severaldefensive mechanisms, including minimum carbon offset volumes to bedelivered over the 20-year royalty term.
Transaction Impact on Green Star’s Carbon Offset andRevenue Profiles
The transaction provides Green Star with immediately monetizableavoidance and removal carbon offsets. The Royalties are expected todeliver carbon offsets to Green Star over the 20-year royalty term,with an estimated 75% of these attributable carbon offsets expected inthe first five years. Green Star’s estimated annual carbon offsetsand revenues are highlighted below in Figure 1.
Figure 1: Green Star’s estimated annual carbonoffsets and royalty revenues by investment
Improved Forest Management
IFM is a type of conservationproject where the undertaken IFM practices increase carbon storageover a baseline, or a business-as-usual level. IFM projects can bothincrease net carbon stocks by sequestering carbon from the atmosphere(removal) through photosynthesis due to increased forest cover ormaintained existing forest cover relative to the baseline and canreduce greenhouse gas emissions (avoidance) from reduced timberharvesting relative to the baseline. Acceptable IFM practices,including rotation extension, thinning, fire prevention practices, andchanges in harvesting techniques, must be deemed allowable practicesas per the projects’ selected carbon registry methodology.
IFM projects form an importantsubset of nature-based solutions, a set of land management,conservation and restoration practices aimed at mitigating climatechange, while also sustaining biodiversity and other ecosystemservices. In the United States, timber harvesting is the mostextensive disturbance across forestlands, with the vast majority oftimber harvested annually coming from private lands. Consequently,improved forest and land management decisions can have a significantimpact on the role of forests as a carbon sink. The removed andavoided carbon emissions as a result of IFM projects, when overseen bya carbon project developer and properly validated and verified throughan existing carbon registry methodology, can result in the generation of carbon offsets, taggedas removal and avoidance offsets, respectively. The current marketpricing for U.S. premium avoidance and removal carbon offsets isapproximately $13-$15/t CO 2 e and over $20/tCO 2 e, respectively.
Royalty Projects
Project ACR 783 – The S&JTaylor Forest Carbon Project, Arkansas
Project ACR 783 is a registered and already-issuing project andrepresents approximately 18,000 acres of sustainably managedforestland across Southcentral Arkansas. This project is expected togenerate approximately 1.5 million carbon offsets over the next twentyyears. Green Star now owns a 20% Royalty on this project, which issuedand sold its first carbon offsets in March 2024 with a second carbonoffset issuance expected later in 2024.
As project proponents alongside NativState, the S&J Taylor familyis committed to conserving working hardwoods and pine forests thathave lucrative timber value by foregoing a widespread aggressiveharvest that is typical to this part of the United States. The diverseoak, gum, cypress, hickory, and pine forests within the Gulf CoastalPlain eco-region represent an important habitat and provide essentialbuffers that prevent sedimentation and nutrient runoff betweendevelopment and waterways. Project ACR 783 aims to maintain forestCO 2 e stocks by certified and sustainablemanagement, while accomplishing significant carbon sequestration andproviding important co-benefits to the Ouachita watershed, localcommunities, and improved water resources to downstream communitiesthroughout the Gulf Coastal Plain Region.
The project is located in the counties of Cleveland, Grant, Jefferson,and Saline, where this type of land is typically aggressively cut andmanaged to maximize forestland investment by cutting trees as soon asthey have grown to commercial maturity. By enrolling with NativStateinto Project ACR 783, S&J Taylor looks to generate long-termrevenues through sustainable forest management and the voluntarycarbon markets. In addition to generating carbon revenues, the projectis expected to lead to fewer disturbances on the landscape, increasedbiodiversity, and improved habitat protection for species of concern.Additional information about Project ACR 783 can be found at ACR 783 | S & J Taylor Forest Project -NativState , https://vimeo.com/922734059 , and https://acr2.apx.com/mymodule/reg/prjView.asp?id1=783 .
Upcoming ACR Projects
As part of the royalty agreement,NativState will continue to enroll forest landowners across thesouthern United States into future ACR projects that will be subjectto 10% Royalties, until total acreage under the Royalties reaches60,000 acres, excluding Project ACR 783. These future IFM projects areexpected to be located in Arkansas, Louisiana, Mississippi, andMissouri.
CONTACT INFORMATION
For more information, please visit our website at starroyalties.com orcontact:
Alex Pernin, P.Geo. DmitryKushnir, CFA
Chief Executive Officer and Director Vice President, InvestorRelations
apernin@starroyalties.com dkushnir@starroyalties.com
+1 647 494 5001 +1 647 494 5088
About NativState LLC
NativState LLC ( www.nativstate.com ) is aforest carbon project development company partnering withsmall-to-medium sized landowners across the southern United States todeliver access to global carbon markets. It works with landowners toimprove and conserve their forests while realizing a financial returnbased on the creation of high-quality carbon credits sold to companiesseeking to meet and exceed their carbon emission reduction goals.NativState empowers forest owners with the ability to manage theirproperties sustainably and provide the co-benefits of improved waterquality, improved wildlife habitation, and improved overall health ofthe forest itself.
About Star Royalties Ltd.
Star Royalties Ltd. is a carbon credit and precious metals royalty andstreaming company. The Company innovated the world’s first carboncredit royalties in forestry and regenerative agriculture through itspure-green joint venture, Green Star Royalties Ltd., and offersinvestors exposure to carbon credit and precious metals prices. TheCompany’s objective is to provide wealth creation by originatingaccretive transactions with superior alignment to both counterpartiesand shareholders.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this news release may constitute“forward-looking statements”, including those regarding theRoyalties transaction, future market conditions for metals, mineralsand carbon offset credits, future capital raising opportunities, andthe future business growth of the Company and Green Star.Forward-looking statements are statements that address or discussactivities, events or developments that the Company or Green Starexpects or anticipates may occur in the future. When used in this newsrelease, words such as “estimates”, “expects”, “plans”,“anticipates”, “will”, “believes”, “intends”“should”, “could”, “may” and other similar terminology areintended to identify such forward-looking statements. Forward-lookingstatements are made based upon certain assumptions and other importantfactors that, if untrue, could cause the actual results, performancesor achievements of Star Royalties and Green Star to be materiallydifferent from future results, performances or achievements expressedor implied by such statements. Forward-looking statements should notbe read as a guarantee of future performance or results and will notnecessarily be an accurate indication of whether or not such resultswill be achieved.
A number of factors could cause actual results,performances or achievements to differ materially from suchforward-looking statements, including, without limitation, changes inbusiness plans and strategies, market and capital finance conditions,ongoing market disruptions caused by the Ukraineand Russian conflict, metal and mineral commodity price volatility,discrepancies between actual and estimated production and testresults, mineral reserves and resources and metallurgical recoveries,mining operation and development risks relating to the parties whichproduce the metals and minerals Star Royalties will purchase or fromwhich it will receive royalty payments, carbon pricing and carbon taxlegislation and regulations, risks inherent to the development of theESG-related investments and the creation, marketability and sale ofcarbon offset credits by the parties, the potential value of mandatoryand voluntary carbon markets and carbon offset credits, includingcarbon offsets, the carbon credits to be provided by NativState, risksrelated to the IFM projects, changes in legislation and policiesincluding affecting the ACR, risks inherent to royalty companies,title and permitting matters, operation and development risks relatingto the parties which develop, market and sell the carbon offsetcredits from which Green Star will receive royalty payments, changesin crop yields and resulting financial margins regulatoryrestrictions, activities by governmental authorities (includingchanges in taxation), currency fluctuations, the global, federal andprovincial social and economic climate in particular with respect toaddressing and reducing global warming, natural disasters and globalpandemics, dilution, risk inherent to anycapital financing transactions, risks inherent to a possible GreenStar go-public transaction, the nature of the governance rightsbetween Star Royalties, Cenovus Energy Inc. and Agnico Eagle MinesLtd. in the operation and management of Green Star and competition,the ability to raise any additional funds into Green Star. Theserisks, as well as others, could cause actual results and events tovary significantly. Accordingly, readers should exercise caution inrelying upon forward-looking statements and the Company undertakes noobligation to publicly revise them to reflect subsequent events orcircumstances, except as required by law.
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