ANNUAL GENERAL MEETING May 28 th , 2019 1000 - 925 West Georgia - - PowerPoint PPT Presentation

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ANNUAL GENERAL MEETING May 28 th , 2019 1000 - 925 West Georgia - - PowerPoint PPT Presentation

ANNUAL GENERAL MEETING May 28 th , 2019 1000 - 925 West Georgia Street Vancouver BC. Canada Forward Looking Information - Disclaimer This presentation contains certain forward-looking information that reflects the Companys current views and/or


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ANNUAL GENERAL MEETING

May 28th, 2019

1000 - 925 West Georgia Street Vancouver BC. Canada

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Forward Looking Information - Disclaimer

This presentation contains certain forward-looking information that reflects the Company’s current views and/or expectations with respect to, among other things, the markets the Company operates in; the impact of currency exchange rates and other market factors on the results of the Company’s mills; expectations relating to capital expenditure spending; and the Company’s production, biorefinery, and balance sheet initiatives. Persons reading this presentation are cautioned that statements comprising forward- looking information are only predictions, and that the Company's actual future results or performance are subject to certain risks and uncertainties including, without limitation: those relating to potential disruptions to production and delivery, including as a result

  • f equipment failures, labour issues, extreme weather, the complex integration of processes and equipment and other factors;

fluctuations in the market price for products sold; trade restrictions or import duties imposed by foreign governments; labour relations; failure to meet regulatory requirements; changes in the market; potential downturns in economic conditions; fluctuations in the price and supply of required materials; foreign exchange fluctuations; availability of financing (as necessary); ability to restructure the Company’s existing debt on satisfactory terms; and other risk factors detailed in our Annual Information Form dated March 29, 2019 available on SEDAR at www.sedar.com and other filings with the Canadian securities regulatory authorities. In particular, financial forecasts and expectations are not indicators of future financial performance and there is no assurance that the Company’s assumptions in support of such forecasts or expectations are correct, accurate, or complete. These risks, as well as

  • thers, could cause actual results and events to vary significantly. The Company does not undertake any obligation to update any

forward-looking information, except as required by applicable securities law. Unless otherwise noted, all references in this presentation to “$” are to Canadian dollars. The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, the Company’s unaudited condensed consolidated financial statements for the quarter ended March 31, 2019 and the related notes thereto and Management’s Discussion & Analysis, which are available on SEDAR. This presentation contains reference to “Operating EBITDA”, which is a non-GAAP financial measure. For disclosure of the manner in which these measures are calculated and a reconciliation to net loss, please refer to the MD&A for the quarter ended March 31, 2019, available on SEDAR.

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Year 2018 Recap

  • The Company created a new reporting segment, the Bioproducts Segment, as a result of

the acquisition of S2G Biochemicals Inc. (“S2G”)

  • Integrated S2G team and started front end engineering design for planned

demonstration plant

  • Secured Federal and Quebec Government commitments for up to $17.4 million and

initiated negotiations for an additional $12.5 million

  • Entered into a technology license and collaboration agreement with Mondelēz, one of

the world’s largest snacking companies, including commitments in principle relating to the purchase of xylitol from the demonstration plant and a future commercial plant

  • Completed convertible debenture refinancing announced on Aug 28th 2018 by amending

and extending maturity to December 31, 2022 from December 31, 2019

  • Giovanni Iadeluca promoted to CEO of Fortress Global Enterprises
  • Progress was made in productivity, reliability and quality all while managing a baseline

capital expenditure program

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Improved Production Stability

200 600 Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18

Liquor Cycle Volume (ADMT/day)

ADMT

Launched leadership Phase 1 - KBI/KPI Increase

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Production Volume Improvements

0.0 600.0 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

ADMT

Production ADMT/day

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15 25 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

Megawatts

MW

Improved Monthly Average MW Production

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2019 Q1 Recap

  • Mill stability continued to improve, however, due to

a combination of factors the positive momentum from the prior three quarters was temporarily interrupted

  • Extreme weather conditions and unusual region-

wide electrical outages impacted operating results in the first quarter and April of 2019*

  • Important cooking process knowledge was gained

which will ensure the winter issues are mitigated and throughput increased under diverse conditions

  • Entering seasonably more productive months

*Operating EBITDA loss of $9.7 million, DP operating EBITDA loss of $8.8 million. The Company invested $0.8 million in the Bioproducts Segment which was

  • ffset by grants and funding and corporate costs were $0.9 million in the first quarter of 2019.
  • Achieved important milestones in the

first quarter of 2019 by advancing engineering for

  • ur

bioproducts demonstration plant, and

  • rdering

equipment required for tie-in to the FSC mill’s fifth digester

  • Signed

definitive contribution agreement with NRC for up to $10 million nonrefundable grant. This funding from NRC is in addition to previously announced Governments of Canada and Quebec commitments for up to $17.4 million

Milestones

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Strategy 2019

Production Improvements Biorefinery Balance Sheet Improvements

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  • Annual planned shutdown in Q2 has been reduced by a

day as we were able to perform some maintenance during the power outages in the first quarter

  • We intend to complete modifications to the fifth digester for

the extraction of prehydrolysis liquor, an important step for the bioproducts demonstration plant project

  • Annual planned shutdown has been moved to Q2 to take

advantage of historically stronger seasonal pricing in the second half of the year

  • Continued integration of the 5th digester through 2019 will

result in increased run rate throughput and reduced costs

  • Other Production initiatives such as online real-time

equipment monitoring system

Production Improvements

Strategy 2019 - Production Improvements

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Cellulose 43-45% Inorganics/Organics Waste water treatments Lignin 20-28% Water 100 t of Green Wood

17t of specialty cellulose grade 20t of rayon cellulose grade 25t of fluff pulp 27t of paper pulp grade

Black Liquor Organics - Energy Inorganics - Recovery Hemicelluloses (PHK) 12-15%

INPUT COOKING PROCESS BLEACHING PROCESS OUTPUT

Bio-products Opportunity Burned in recovery boiler for energy

Biorefinery - Pulp Processes and Yields

Source: Hawkins Wright

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Strategy 2019 – Biorefinery

Immediate Opportunities

  • Existing waste

streams

  • Low-capital, quick

wins

PHL Opportunities

  • Animal feed
  • Non-sulfonated lignin
  • Furfural
  • Organic acids
  • Sugars for high-value

bioproducts

Other Opportunities

  • Sulfonated lignin
  • Biofuels
  • Bio-oil
  • Hydrogen
  • Power
  • Biochemicals
  • CO2-based products

High Value Bioproducts Products

  • Xylitol
  • Xylose
  • Xylo-oligomers
  • Other sugar alcohols

Strategic plan to become one of the world leaders in demonstrating and commercializing leading technologies for conversion of hemicellulose to advanced bioproducts

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Biorefinery - Xylitol Market

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 50 100 150 200 250 300 350 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Tonnes USD Millions 000s Tonnes US$M

  • Average selling price (2018): ~US$4,900/tonne
  • Volumes expected to grow at CAGR of 6.5% (2017 – 2024)
  • Market expected to exceed US$1B by 2022

Volume & Revenue Forecast to 2024

Source: Global Market Insights -Xylitol Market Report 2024, ICTS, EPA, FDA, EFSA, ADA, CCM

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Biorefinery – Value Added Products

  • Identify complimentary innovative value – added

processes/bioproduct opportunities

  • Assess business cases & required technology, priortize

and select

  • Identify additional strategic alliances
  • Finalize demonstration plant funding and commence

construction of demonstration plant in second half of 2019

Biorefinery

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Strategy 2019 - Balance Sheet Improvements

  • Agreement in principle with Investissement Québec for a

multi year interest and principal payment deferrals and an extended term on the $105.2 million indebtedness, subject to definitive documentation

  • Restricted cash: CHF 3.2 million (CDN $4.3) expected

to become available June 2019

  • Working capital should improve with operations in

second half of the year

Balance Sheet Improvements

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Dissolving Pulp - Market Outlook

  • Substantial recent increases in Viscose (VSF)

capacity has contributed to inventory build up and softening of VSF pricing. Near term dissolving pulp pricing will most likely continue to be impacted by VSF market pricing and paper pulp markets

  • Dissolving pulp (DP) and VSF markets remain

structurally sound – VSF demand should eventually catch up to rapid increase in supply

  • Growing VSF market will increase pressure on

DP supply over the next few years

  • DP demand is projected to grow at ~ 6% per

annum for the foreseeable future

Source: RISI, CCF, Hawkins Wright

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Textile Market

  • World textile market is growing as a result of

favorable macro trends, expanding middle classes and consumer spending in emerging markets

  • VSF is gaining market share due to technical

advantages over competing products thus dragging along dissolving pulp demand

  • Per capita fibre consumption has risen from ~

5kg in 1960 to almost 14kg in 2016

  • Textile fibre demand growth expected to

increase by over 60% through 2030

  • VSF growth has historically outpaced textile

fibre demand growth

Source: RISI, CCF, Hawkins Wright

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Global Fibre Markets - VSF Demand Growing

Faster Than Other Fibres

Natural Fibers, 31.6mt , 30.6% Cellulosic, 6.6mt, 6.4% Synthetics, 64.9mt, 62.9%

  • 4.5%
  • 4.2%

85.7% 68.8% 37.5%

  • 10.%

10.% 30.% 50.% 70.% 90.% 110.% Cotton Natural Fibers Cellulosic Synthetics Total Fiber Production

2006-2016 % Growth in Volume

Natural Fibers 32.9 mt 44.1% Cellulosic 3.6 mt 4.8% Synthetic 38.3 mt 51.1%

Source: “The Fiber Year 2017 ” and “Hawkins Wright, 2010 World Survey on Textiles & Nonwovens”

2017

World Fiber Production 103.1 Million tonnes (mt)

2006

World Fiber Production 74.8 mt

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THANK YOU

www.fortressge.com @fortressge t:888-820-3888

Quote from Canada’s Bioeconomy Strategy "Canada has a window now to become one of the world’s most successful modern bioeconomies. It is important that governments, financial institutions and large corporations hasten the pace of policies”