2. Forward Looking Information
This Presentation discloses management policies, investment strategies and courses of conduct that may constitute “forward-looking
information” within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included
herein may be forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology
such as “plans”, “expects” or “does not expect”, “proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state
that certain actions, events or results may, could, would, or might occur or be achieved. This forward-looking information reflects the
Company’s current beliefs and is based on information currently available to the Company and on assumptions the Company believes are
reasonable at the time of preparation. These assumptions include, but are not limited to, the actual results of investee’s being equivalent to or
better than estimated results by the Company. Forward-looking information is subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those
expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business,
economic, competitive, political and social uncertainties; commodity prices; cyclical nature of the agricultural industry; weather; the early
stage development of the farming operations or dishonesty of the streaming partners; reliance on Messrs Emsley, Nystuen, Farquhar, and
Burgess, uncertainty in identifying and structuring streaming agreements, liquidity of investments, potential conflicts of interest, failure of the
Company to meet targeted returns, limited transferability of Shares, defaulting streaming partners, competition; changes in project parameters
as plans continue to be refined; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental
legislation affecting the Company and its streaming partners; timing and availability of external financing on acceptable terms; conclusions of
economic evaluations; and lack of qualified, skilled labour or loss of key individuals. Although the Company has attempted to identify
important factors that could cause actual results to differ materially from those contained in forward-looking information, there maybe other
factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forwardlooking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable
securities laws. As a result of these risks and uncertainties, actual events or results and the actual performance of the Company or its business
may be materially different from those reflected or contemplated in the forward looking statements or information. Likewise, in considering the
prior performance information contained herein, prospective investors should bear in mind that past performance and experience is not
necessarily indicative of future results, and there can be no assurance that the Company will achieve comparable results.
The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933
Act”), or any state securities laws. Accordingly, these securities may not be offered or sold within the United States of America or to a U.S.
Person (as such term is defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws
or an exemption from such registration is available.
2
4. WHO WE ARE
The world’s first agricultural commodity streaming company
Innovative source of long-term, non-constraining working capital
Aligned with producers to boost yields using industry-leading
precision agriculture practices
Input Capital provides a platform for significant value creation
4
5. THE WORLD’S PREMIER AG-STREAMING COMPANY
•
Input Capital Corporation (“Input Capital” or the “Company”) is the world’s first agricultural
commodity streaming company
•
Input Capital was created to bridge the gap in available funding sources for farm working capital
by providing non-constraining long-term working capital aimed at boosting production through
precision agronomics
•
Crop insurance mitigates downside crop yield risk while the negotiated interest in crop production
allows Input Capital to participate in any increased crop yield
•
Canola is the initial focus of Input Capital as it is the most profitable commodity for Canadian farmers
with an addressable target market of 50,000+ farmers in Western Canada alone
•
Management has developed a strong track record in the ag-sector, currently managing a portfolio of
$125+ million of farmland rented to 136 farmers, at least 75 of whom are canola producers
5
6. Management Track Record
100
NOW: Largest farmland investment
fund in Canada
Diversified $125+ million portfolio of
~117,000 acres of Saskatchewan
farmland
THEN: Launched first
farmland private equity
fund in Canada in 2005
$40 million farmland mortgage facility
through Farm Credit Canada
80
60
40
20
Thousands of Acres Owned
120
0
2005
2006
2007
2009
Raised $53 million in equity
through eight private & public
offerings since 2005
136 high quality farming tenants
across Saskatchewan
2010
2011
2012
2013
20.2% IRR (net of all fees) since inception
in 2005
Real Value
Creation
Units have appreciated from $18 in 2005 to
~$59 in 2013
Initial investors in Assiniboia have also
received $4.93 / unit in cash distributions
Management has Created a Leader in Canadian Agriculture Investing
Source: Assinoboia Farmland Limited Partnership MD&A
6
7. Board of Directors & Special Advisor
Name
Doug Emsley
Chairman
Highlights
•
•
•
•
Co-Founder and President of Assiniboia Capital and Palliser Farmland Management Corp.
President of Emsley & Associates (2002) Inc., Chairman of Security Resource Group Inc. and Sabre West Oil & Gas
Ltd.
Board member – Bank of Canada, Public Policy Forum, Saskatchewan Roughriders Football Club, Information
Services Corporation (TSX: ISV)
Director
•
•
Co-Founder, Vice-President & CFO of Assiniboia Capital and Palliser Farmland Management and President of Nomad
Capital Corp.
Director of Greenfield Carbon Offsetters Inc., Frontier Centre for Public Policy, and SIM Canada
Member of the Regina & District Chamber of Commerce Policy Committee
David Laidley
•
•
•
Chairman Emeritus, Deloitte Touche LLP (Canada)
Director, Aimia Inc., EMCOR Group Inc., ProSep Inc., Bank of Canada, Nautilus Indemnity Holdings Ltd.
CPA (Quebec)
•
•
•
•
President of CropLife Canada and Chairman of Genome Canada, Director of CARE Canada
Independent Review Committee – Assiniboia Farmland Limited Partnership
Member, Canadian International Food Security Research Fund Scientific Advisory Committee
Former Saskatchewan Minister of Agriculture, Finance, Education, and Energy & Mines
•
•
•
•
•
Counsel, Davies Ward Phillips & Vineberg LLP
Former Chairman & CEO – Ontario Securities Commission (OSC)
Former Chair, Board of Directors, Canadian Employment Insurance Financing Board
Member, Investment Advisory Board, Westerkirk Capital Inc.
Director & Member, Funds Advisory Board, Invesco Trimark Group of mutual funds
•
•
•
•
CEO, Morien Resources and Chairman, Delta Gold
Director, Sandstorm Gold Ltd., Sandstorm Metals & Energy Ltd. and Delta Gold Ltd.
Director, Alaris Royalty Corp.
Formerly Vice-Chairman, Cormark Securities, President & CEO of Orion Securities Inc., and Head of Investment
Banking, Scotia Capital Inc.
Brad Farquhar
Independent Director
Dr. Lorne Hepworth
Independent Director
David A. Brown, QC
Independent Director
Special Advisor:
John Budreski
Special Advisor
7
8. Management
Name
Doug Emsley
President, CEO &
Chairman of the Board
Highlights
•
•
•
•
Brad Farquhar
Executive VP, CFO &
Director
•
•
•
•
•
Co-Founder and President of Assiniboia Capital and Palliser Farmland Management Corp.
President of Emsley & Associates (2002) Inc., Chairman of Security Resource Group Inc. and Sabre West Oil & Gas
Ltd.
Board Member – Bank of Canada, Public Policy Forum, Saskatchewan Roughriders Football Club, Greenfield Carbon
Offsetters Inc., Information Services Corporation (TSX: ISV)
Former Board Member – Royal Utilities Income Fund (TSX)
Co-Founder, Vice-President & CFO of Assiniboia Capital and Palliser Farmland Management and President of Nomad
Capital Corp.
Director of Greenfield Carbon Offsetters Inc., Frontier Centre for Public Policy, and SIM Canada
Member of the Regina & District Chamber of Commerce Policy Committee
•
Gord Nystuen
Previously served as VP of Corporate Affairs at SaskPower
Former Deputy Minister of Agriculture, Chief of Staff to the Premier of Saskatchewan and Chairman of Saskatchewan
Crop Insurance Corporation
Partner, Golden Acres Seed Farm & Director of Avena Foods Ltd.
•
•
•
Director of Finance & Administration for Assiniboia Capital Corp. and Palliser Farmland Management Corp.
Previously served as a senior manager at Deloitte & Touche LLP
Director of Saskatchewan Science Centre
VP, Market Development
Jamie Burgess
Director of Finance & Administration
8
9. Agriculture Industry Fundamentals
•
Long-term food production must increase to keep pace with needs of a rising
population with the U.N. forecasting the global population will grow to 8+ billion
within the next decade
Long-Term Rising
Global Incomes
•
Economic growth in developing nations (i.e. China, India) fueling demand for
more and better food, driving demand for meats and better quality grains
Decreasing Arable
Land
•
Decreasing amount of arable farm acreage per capita is increasing pressure on
farmers to produce more food from less land by increasing crop yields
Recent Interest in
Biofuels
•
Rising interest and production in biofuels increasing demand for all grain
products and feedstock commodities
Increased
Population
9
10. Canola is a $19.3 Billion Industry in Canada
•
Canola is a crop that produces pods from which seeds are harvested and crushed to create
canola oil and meal
•
Canola demand is growing for many reasons:
The healthy oil
•
FDA has tentatively ruled to effectively ban the use of trans fats in foods
•
Canola oil is high in good fats, is trans fat free, contains no cholesterol and is a good source
of vitamin E
Biofuel feedstock and high quality animal feed
•
Canola is used as a source of feedstock for biofuel
•
Canola meal in animal feed is known to increase milk production by one litre, per cow, per day
Emerging industrial uses
•
Including plastics, protein isolates, adhesives and sealants
10
11. The Opportunity
Western Canada’s agriculture sector is significantly undercapitalized
and offers excellent, overlooked investment opportunities
•
Canadian farm assets = $330+ billion with Western Canada accounting for 52%
•
50,000+ canola farmers in Canada
•
Big Market
Massive intergenerational transfer of farm assets over the next 10-15 years:
Demographically
Driven
Sector
Consolidation
•
•
•
Aging Western Canadian farmers – more than 35% over age of 55 (vs. Canada @
30%)
Ongoing consolidation of farming sector
•
•
Underserved
Market
Expected to be over $30 billion in Saskatchewan alone
Many farmers are faced with once-in-a-lifetime expansion opportunities they cannot
afford on their own
Significant shortage of financing available for working capital in the farming sector
that matches the needs and requirements of farmers
•
Unlimited supply of farmland mortgage capital (FCC - $23 billion book) and leasing
capital (i.e. John Deere)
•
Precision farming is more capital intensive than older, less productive farming methods
Source: Statistics Canada
11
12. INPUT CAPITAL HIGHLIGHTS
“Game Changer” for Farmers
• Accelerates farm growth and productivity and improves bargaining power with grain handlers and input
providers
100% of Current Streams Will Generate Revenue in 2013
•
No production delays or capex overruns and close to immediate revenue (unlike many mining streams)
Scalable, Diversifiable Model where Key Relationships Create Barriers to Entry
•
Best in class farming relationships with the largest investor-to-farmer footprint in all of Saskatchewan
Strong Risk / Return Profile with Meaningful Future Growth Potential
•
Excellent return metrics and robust, unlevered operating cash flow generation
Strong Board and Management Team with Demonstrated Track Record in Ag-Space
•
High profile experienced management team
12
13. Business Process
1. Up Front Payment
Up front payments to farmer
for a Crop Production Interest
6. New Streaming Contracts
Free cash flow reinvested in
new streaming contracts for
compounding returns
2. Consulting Agrologist
Assigned
Retain services of a sciencebased agrologist
5. Upside Potential
Input Capital receives a share
of measured yield
improvement on farm resulting
from improved agronomy
3. Farmer Grows the Crop
The farmer and the agrologist
work to grow the best possible
crop
4. Crop Payment
The farmer delivers Input
Capital’s share of crop to
established elevators and is
paid a fixed price/tonne
13
14. Risk Management
Potential Concerns
Mitigating Factors
• Geographic diversification
• Streaming contracts call for fixed tonnage and are not yield dependent
Crop Shortfall
(i.e. weather, bad crop, etc.)
• Crop Insurance, paid for by the farmer, guarantees 70% of the farmer’s long-term average
yield
• Science-based agrologist on every farm helps ensure optimum crop yields
• Ability to accept other commodities of equal value in lieu of canola
• Strong track record with ~$20 million deployed within the first 6 months of operations
Capital Deployment
• Relationships with farm advisory firms provide thousands of potential clients
• Assiniboia Farmland provides a pipeline of 75 canola farmer tenants
• Typically-sized deal with each tenant would require over $130 million in capital
• Contractual protection on the “use of proceeds”
• Strong security covenants embedded into every contract
• General Security Agreement on the entire farm
Counterparty Risk
• Purchase Money Security Interest on inputs used and crops being grown (like a
Crop Lien)
• Second Mortgage against farmland in many cases
• Term life insurance provides an “easy exit” in the event of death of the farm operator
14
15. Growth Opportunities
Other Crops Grown Existing
Farm Partners
Farms produce other crops that
provide ancillary streaming
opportunities:
• Grains (wheat, barley, oats, durum)
• Pulses (lentils, peas, beans)
• Oilseeds (mustard, flax)
Top-Tier Business
Development Team
Three well-known and top quality
farmers greatly enhance deal
generation and processing
capabilities:
• Previous Saskatchewan Young
Farmer of the Year award winners
• Strong ambassadors for Input
Geographic Expansion
Expansion to Northern U.S. states that
grow similar crops to Western
Canadian farms i.e. ND, SD, MT
Expansion to global food companies
and overseas farmers that deal in a
variety of agricultural commodities
3 million acres
Growing
marketing
channels lead to
large deal-flow
6+ million acres
75+ canola farmers
Pending strategic
relationship
3,000+ farm clients
Additional capital
to be raised to
satisfy farmer
demand
15
16. High Quality Canola Streaming Portfolio
•
High quality asset base, well-diversified by
geography
•
10 producing farms in 2013
•
Farm range in size from 1,700 – 40,000
acres farmed
•
Source: Saskatchewan Ministry of Agriculture, Input Capital
Most recent contract represents first
expansion of Input into Alberta
•
Operating in a well-established industry in an
area of negligible political risk
•
Existing portfolio provides strong earnings
visibility
Contract Summary
2014B
2015F
2016F
2017F
2018F
2019F
Contract Base Tonnes
13,502
13,377
13,377
13,502
13,527
13,577
In-Year Additions to Base Tonnes
3,650
-
-
-
-
-
Total Base Tonnes
17,152
13,377
13,377
13,502
13,527
13,577
15%
15%
15%
15%
15%
15%
$79.05
$73.13
$73.13
$72.46
$72.32
$72.06
Claim to Bonus Tonnes
Average Cash Cost / MT
16
17. Exposure to Western Canadian Ag Space
•
Investors are increasingly looking for exposure to the secular tailwinds benefiting the
agriculture industry
•
Opportunities for direct exposure to farming and ownership of physical commodity are
restricted or difficult for most investors
•
International grain trading companies provide limited exposure to the Western Canadian
geography and are no longer purely focused on agriculture
Accessible to
Investors
No Debt
Farming
Canola Futures
Grain Trading
Companies
Input Capital
Commodity
Price Exposure
Yield Upside
Multiple
Expansion
No Operating
Cost Exposure
17
18. Benefits to Farmers
It is expensive to be poor … we help farmers drive down their cost of capital
Buying inputs off peak-season
•
•
20% - 40%
$25 - $30 per acre savings on fertilizer alone, reducing fertilizer costs by 20% to 25%
By buying and applying fertilizer in the fall, spring seeding logistics are improved and de-risked
Discounts for cash purchases
3%
Interest Costs
10%
Flexible Crop Marketing Program
6% - 12%
Total Savings (Inherent Cost of Capital)
39 - 65%
Inputs
Crop Revenue
Farmer
Input
Traditional Farming
$200/acre
$150-$250/acre
Leverage to canola price
Input Capital
$300/acre
$300-$450/acre
No crop input overruns
No ongoing capex
Fixed cash costs for life of contract
18
19. Profile of Target Farmers
•
Ideal farm has 3,000 – 12,000 acres of land located in dark brown & black soil zones of
Manitoba, Saskatchewan, and Alberta
•
Young farmers who possess the agronomic skills to grow great crops but require capital
partners to finance the intergenerational transfer of the farm
•
Established farmers with large expansion opportunities
•
Pre-qualified farmers without sufficient working capital to achieve their production goals or
potential
•
Farmers looking to expand significantly without degrading their balance sheets
Size of Farm: 4,000 acres
Per Acre
Capital Required
Farmland
$1,000+
$4,000,000+
Equipment
~$350
~$1,400,000
Annual Inputs
$200+
$800,000+
Totals
$1,550+/acre
$6,200,000+
Source Assiniboia Farmland, Iron Search, Input Capital
19
20. Public Market Summary
Capitalization Summary (December 2, 2013)
Trading Symbol
Recent Public Market Events
TSX-V: INP
Shares Outstanding
61.20M
Fully Diluted Shares
67.16M
Price
$1.73
Market Capitalization
$106M
52 Week Range
$1.58 - $2.12
Average Daily Volume
~81,000
Debt
$0
Cash Position
$41M
October 15, 2013
Input took delivery of canola from its first streaming contract,
selling 712 tonnes of canola for proceeds of $359,862, or an
average net price of $505 per tonne.
October 4, 2013
Input announced the closing of a previously announced bought
deal public offering and private placement for gross proceeds of
$37.5 million.
Analyst Coverage
Ownership
Directors & Management
December 1, 2013
In its monthly update for November 2013, Input announced that
it has surpassed the $1 million in revenue with recent deliveries.
18.4% Basic, 25.4% FD
Catlin Group
19.99%
Other Institutional
Siddharth Rajeev
12.66%
Private Investor
Widely Held
4.45%
43.80%
Michael Mills
Anoop Prihar
Spencer Churchill
Source: Company Filings & Records, TSX.com.
20
21. INPUT CAPITAL
The world’s first agricultural commodity streaming company
Innovative source of long-term, non-constraining working capital
Aligned with producers to boost yields using industry-leading
agronomic practices
Input Capital provides a platform for significant value creation
21
24. Global Canola Production
•
Canada is one of the largest producing countries of canola and the largest exporter,
exporting more than two thirds of global canola
•
Exports from Canada are driven primarily by demand in China, Japan, Mexico, the U.S., and other
parts of Asia
•
Canola produced in Canada is used for food (oil, animal feed) and industrial products (bio-fuels,
lubricants, etc)
Global Canola Producers
Canada,
24%
(14.7mT)
Global Canola Exports
China,
19%
(12mT)
Canada,
72%
India,
11%
(6.9mT)
EU-27,
32%
(19.9mT)
Source: USDA (2012/13)
Other,
13%
(8mT)
Other,
3%
Ukraine,
8%
Australia,
17%
Source: International Grains (2011/12)
24
25. Canola is Bigger than the Potash Industry
•
•
•
•
•
•
•
•
•
•
•
•
Canola is a bigger global market than potash
Canola is a bigger export business for Canada than potash
Canadian canola exports have been growing at a CAGR of 18.3% over the last 10 years (compared to
13.6% for potash)
Canola is Canada’s #7 export to the world (potash is #10)
Canadian canola exports have double the market share in global export markets than potash
Canadian canola exports to China are 8.5x the value of Canadian potash exports to China
Canadian canola exports to China have been growing at a CAGR of 36.4% over the last 10 years
(compared to 4.1% for potash)
Canola represents 16.0% of all Canadian exports to China (compared to 1.9% for potash)
Canola is Canada’s #1 export to China (potash is #12)
Canola employs 249,000 Canadians; Potash employs 5,041 Canadians
There are three companies providing investment exposure to Canadian potash production: POT, AGU,
MOS. They have a combined market cap of $60 billion.
In canola, there are 50,000 canola producers, but only one public company – Input Capital Corp
Sources: Statistics Canada, Industry Canada Trade Data Online, Potash Corporation of Saskatchewan, Sask Mining Association, Canola Council of Canada
25
26. Canadian Canola Exports
•
Canadian exports of canola continue to be driven by demand from Asia and emerging
markets with China accounting for the largest share of Canadian exports at 36.3%
Volume Growth Rate
(Last 5 Years)
Canola Rank Among
Imports from Canada –
Ranked by $ Value
(2012)
Canola Value as %
of Total Value of
Goods Imported
from Canada
(2012)
36.3%
333.0%
1
15.6%
Japan
28.2%
21.1%
2
14.4%
Mexico
18.1%
35.1%
1
17.8%
United Arab
Emirates
6.9%
216.6%
1
22.7%
USA
5.0%
75.5%
25
0.4%
Pakistan
2.7%
48.1%
1
44.5%
Bangladesh
1.2%
130.2%
2
15.8%
Others
1.5%
129.5%
% of Canadian
Export Market for
Canola (2012)
China
Country
Source: Statistics Canada, as published in the Western Producer, March 21, 2013; CanolaCouncil.org; Industry Canada Trade Data Online
26
27. North American Canola Production
•
Canada is the largest single producer of canola
with production concentrated in Western
Canada (specifically, Saskatchewan),
consisting of 20+ million acres seeded to
canola
•
There are also approximately 1.7 million
seeded acres of canola grown in the north
central and south eastern U.S. with North
Dakota as the dominant producing region
Input Capital Target
area
Source: Canola Council of Canada, U.S. Canola Association
27
28. Western Canadian Expansion
•
The ideal combination of soil organic matter and climate for canola production is found in the
Black, Dark Brown, and Dark Gray soils of Western Canada
Major Soil Zones of the Prairie Region
Source: http://www.fao.org/ag/AGP/AGPC/doc/Counprof/Canada/Canada.html
28
29. Canadian Canola Industry
•
Canada is the dominant exporter of
canola to the world with domestic
production having increased by ~300%
over the last decade
Western Canadian Canola Production in Tonnes
16,000
•
Canola is one of the world’s most
important oilseed crops, and the most
profitable commodity for Canadian
farmers, representing 25% of all farm
cash receipts in the country
Saskatchewan
Manitoba
14,000
• Canola is grown by 52,000 Canadian
farmers with 52% of Canadian canola
originating from Saskatchewan
Alberta
8,000
12,000
10,000
6,000
4,000
•
Canada’s dominant export position of
canola creates a natural hedge for
pricing
• When production falls due to poor crop
results, prices tend to rise to
compensate for lost tonnage
2,000
0
Source: Canola Council of Canada
• For example, when 8 mm acres went
unseeded in W. Canada in 2010,
canola prices rose from $373/tonne to
over $600/tonne
29
30. Canola Volatility and Prices
Canola prices have risen significantly over the last two years driven by increased demand from Asia, the
emerging biofuels industry, and the war on trans fats in western economies
Historical Canola Prices – 10 Year
$700
Canola Monthly Price
$600
$500
CAD per Tonne
•
$400
$300
$200
$100
$2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Canola Council of Canada
30
31. Value Creation of Agronomics
•
The average canola in Saskatchewan is typically 25-30 bushels / acre while the yield potential
of modern canola varieties, using modern farm practices with optimal weather, is between 6070 bushels/acre
•
With the right agronomic program, farmers can focus on optimizing the yield potential of their
crops through;
•
Soil & tissue testing
•
Seed & seed treatments
•
Seeding precision
•
Weed control
•
In-crop operations – perfect timing & application
•
Crop residue management
•
Yield goals
Source: Canola Council of Canada
31
