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Arrowhead published an Equity Research Report on Aduro Clean Technologies Inc.
September 14, 2023

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Aduro Clean Technologies Inc. (CNSX: ACT) Research Initiation

Highlights:

  • Arrowhead is initiating its coverage on Aduro Clean Technologies Inc. (Aduro) with a fair value bracket of CAD 3.6 to CAD 5.0 per share (share price on September 14, 2023: CAD 1.05) based on the Blended Valuation (Relative Valuation and Discounted Cash Flow) method.
  • Aduro Clean Technologies is an Ontario-based early-stage platform technology company that pioneered the development of a flexible, disruptive technology platform called Hydrochemolytic™ Technology (HCT).
  • Aduro Clean Technologies Inc., which was formerly named Dimension Five Technologies Inc. (D5), was incorporated under the Business Corporations Act (British Columbia) (BCBCA) on January 10, 2018. After successfully completing a reverse merger on April 23, 2021, the company changed its name from Dimension Five Technologies Inc. to Aduro Clean Technologies Inc.
  • The company’s objective is to provide solutions to address global environmental issues from petroleum production and processing, landfilling, waste incineration, and unscrupulous dumping of waste plastics in the oceans.
  • The technology is aimed at addressing the shortcomings of the prevailing traditional methods of recycling plastic waste and other applications, such as partial upgrading of Bitumen and turning renewable oils into renewable fuels.
  • HCT offers economic and operational flexibility, minimizing implementation risks and costs while maximizing yield. It activates the unique properties of water in a chemistry platform that operates at relatively low temperatures.
  • The company’s technology is protected by eight patents (seven granted and one pending), a by-product of the company’s creative, skilled team comprising research and development (R&D) chemists. The company has its dedicated R&D laboratory and research collaboration with Western University. It is developing several new patents, potentially unlocking valuable innovations that could lead to additional patents and intellectual property.
  • The technology has three applications: Hydrochemolytic™ Bitumen Upgrading (HBU) for upgrading heavy crude/Bitumen to lighter crude; Hydrochemolytic™ Plastics Upcycling (HPU) for converting waste plastics, foam and waste rubber to chemicals and fuels and Hydrochemolytic™ Renewables Upgrading (HRU) to transform renewable oils from crushed oil seed operations, poultry processing plants and biodiesel plants into renewable motor fuels, bio-jet fuel and specialty chemicals.
  • The key customers for these applications are:
    • HPU – Refineries, polymer producers, energy companies (both global and local), remote communities, waste collection companies (both national and international), municipalities and governments
    • HBU – Heavy oil producers (both Canadian and international) and refineries
    • HRU – Ethanol producers, seed-crushing plants that produce renewable oils, biodiesel plants, farmers and poultry producers.
  • The company targets small and medium businesses and customers, including Fortune 500 companies in seven countries.
  • Aduro has had several highly respected partners in the last three years, which should help it develop technical know-how and secure its financial position. In September 2022, the company partnered with Prospera – a Canadian heavy oil operator, to develop, build, and supply a pre-commercial pilot plant to convert low-API bitumen into higher-value products, which is expected to generate a monthly fee of CAD 25,000, with total fees capped at CAD 125,000. On March 02, 2023, Aduro partnered with Chemelot Innovation and Learning Labs (CHILL) to carry out an experimentation program at the Brightlands Chemelot Campus in Geleen, the Netherlands. The objective is to optimize its next-generation chemical recycling platform and accelerate the company’s path to commercialization. Previously, on February 02, 2021, Aduro partnered with Brightlands Chemelot Campus, an international shared innovation community, to develop HCT and complete an installation that applies HCT to demonstrate, on a tons per day scale, the conversion of waste plastics to useful feedstock for chemical processes. On March 29, 2022, Aduro partnered with Switch Energy Corp., a recycler and operator, to build a pre-commercial pilot plant for converting waste agricultural polyethylene into high-value products and supplying waste plastic feedstock.
  • On November 3, 2022, the company was selected for the Shell GameChanger Program, which was created to collaborate with companies to provide cutting-edge technologies that might significantly influence the future of energy and the transition towards net-zero emissions. Shell GameChanger will contribute to non-dilutive funding while mentoring Aduro in developing its commercial strategy and market position.
  • Aduro’s future business model is based on licensing, royalties, and R&D, where the company monetizes its technology, enabling it to work with industry partners and expand significantly without the need for major capital. In the long term, the company might expand its business model through its ‘own & operate’ model.
  • Aduro’s strategy will aim at commercializing HCT from lab-scale batch reactors into bench-scale, small-scale continuous-flow processing units. Aduro is also devising a strategy for developing commercial partnerships through demonstration projects, as the strategy has been proved to be potent on a small scale by securing customer feedstock and funding commitments. The company has a strong economic outlook, with recurring revenue forecasted at CAD 95.0 mn in 2027. The adjusted EBITDA is expected to increase at a CAGR of 460.7% to CAD 78.1 mn in FY 2027.
  • Aduro Clean Technologies Inc. is publicly listed on the Canadian Securities Exchange (CSE) under the ticker “ACT,” on the OTCQB under the ticker “ACTHF” and on the Frankfurt Stock Exchange under the ticker “9D50”.