Circa Group AS

OSE:CIRCA

Earnings Call Transcript 2023-Q2

[Unknown Executive]

Good morning, everyone, and thanks for tuning into the Circa Q2 and capital markets update. Initially, we will have the CFO, Tone Leivestad, present the Q2 figures. And thereafter, the wider Circa team will present the full update. Thank you.

[Tone Leivestad, executive]

Thank you, Patrick. So we will start with the Q2 financial figures. Normally, we would have more content in this part, but we believe that will mainly be covered by the capital market update following this first few slides.

We announced our Q2 results this morning. And here are some of the key figures, some of the headlines from that report. We have a spend, which is really in line with the expected run rate like we have had for a long time, the quarterly spending is actually a little bit lower than the fewer -- the previous quarters. And we have an operating revenue that is basically based on grant revenue for eligible expenses in the accounts. FC5 continues to provide a product for Cyrene. So we do have sale of trial products to customers on a continuous basis, and other expenses like employee expenses and operating expenses are in line with running the run rate.

So to move into the balance sheet. This quarter, we had a small jump in the fixed assets, which is according to plan, in line with the progress of the ReSolute project. So fixed assets is -- or accumulated ReSolute CapEx is almost EUR 18 million as per the second quarter and EUR 6.5 million was capitalized in the quarter. This is offset by grant contribution of EUR 3.3 million.

This grant amount includes accruals for both the Horizon 2020 grant and also the France Relance and Coal Fund grants.

Our cash balance as per end of second quarter is EUR 27.5 million, and the cash spend in the quarter was EUR 4.5 million. Cash does not reflect the announced grants that we have not yet received in accounts. We have announced grants of about EUR 20 million. Around EUR 8 million is recognized as received in the accounts. So the remaining will be received during the progress of the project.

We have an update when it comes to, the CapEx of the ReSolute plant. As we indicated the last quarter, we do have a new estimate or new -- yes, a new estimate based on quite extensive work with our engineers in [indiscernible] and the new updated CapEx estimate is now EUR 73 million in. The previous one, as announced back in 2021, EUR 50 million to EUR 55 million. We have worked quite hard to keep it down. We will continue to work to keep it down, but it is prudent to inform the market about this update.

This bridge is showing kind of the bricks in the cost increase. And there are several reasons behind this. It has been adjustments to the site based on the actual work that has been going on. We have had regulatory updates that has had an impact. And of course, we, like everyone else, has been hit by the inflation and the salary increases that we see all over the world that we did not know about in 2021.

In addition, we do have some changes here that are more about a switch between CapEx and OpEx. So it's a direct ownership to some of the equipment instead of leasing it. And as mentioned before, the engineering cost is also part of this.

So most of our -- well, all the CapEx, almost half of it is related to equipment, which is, to a large extent, committed, and then it's the second largest bulk is related to construction and erection, et cetera, that is ahead of us.

We will cover more around the progress of ReSolute in the following capital market update.

And then we have a small information here. It's -- we have had -- especially related to our Australian shareholders, they have been, many of them have had their shares in nominee accounts, not only the Australian but also other ones. And now there has been a change in the Norwegian legislation so that also nominee shareholders will be able to participate and vote in general meetings. So this is a change in the legislation, and we will inform you in due time regarding these deadlines, et cetera. But as long as they are followed, then also our shareholders in nominee accounts, we'll be able to participate in that. And this is, yes, for the sake of good order and in accordance with our Articles of Association. So no change to that.

So this is basically the update for Q2. As I mentioned before, we will now go into a quite extensive capital market update, covering all of Circa's activities. And we will also have a possibility to ask questions after that. But if it's anything specific now, we can...

[Unknown Analyst]

[indiscernible] the questions will be related to the Capital Markets Day, but you have provided an update on the CapEx it for the first plant ReSolute. Can you comment a bit more about updated estimates for further plants? And how you see that in the longer term?

[Tone Leivestad, executive]

Yes. We have updated estimates from further plans in the capital market update that will follow. The work with SCI has commenced already. So we do have a good basis for -- also for the future estimates, but we will come back to that, especially Philipp will go through that in his part in the capital market update.

[Unknown Executive]

There will be a 2-minute break, and then we will move on to the capital markets update, where the wider Circa team will present.

[Break]

[Unknown Executive]

Yes. All right. Thanks. Welcome, everyone, to the capital market update by Circa. This will first start with Tony Duncan, giving some introductory words before the wider Circa team will present the full capital market update. So the team that we'll be presenting today is Martin Laudenbach, the Chairperson. Tony Duncan will give some introductory remarks and the outro. And then we have Tone Leivestad, the CFO, presenting financials before Philipp Morgenthaler and Nick Smith will present around manufacturing and commercialization. So I'll leave the stage to you.

[Anthony Duncan, executive]

Good morning. Good morning, everyone, and welcome to this presentation of Circa Group's capital market update. I appreciate my audio is inaudible. It's easy to understand [indiscernible]. So I'm going to hand over to the Circa team in a just a moment to give you the presentation, but I'd like initially to just to add comments. And I don't want to [indiscernible] sound [indiscernible] where there is transition going on with the business. I think and [indiscernible] around 2 [indiscernible]. For the past 2 to 3 years, particularly, it's been a privilege. And I would like to thank you, our investors for your support, particularly, [indiscernible] thanks to most of our large long-term Australian investors who stayed loyal to the business through [indiscernible] lead times. And to every shareholders, you've got our back and we thank you, and we will reward you.

[indiscernible] people in this Circa teams and

FC5 in Tasmania, in Melbourne, in the U.K. and the site in France, in Switzerland. And of course, the corporate team in Norway. It's been fairly intense couple of years one way or another.

Today, we're going to [indiscernible]. Firstly, progress in the business. And secondly, to [indiscernible] your investment and [indiscernible]technology, large [indiscernible].

So there's been significant progress since the [indiscernible] moved into the Circa. In the last 22 years, we've optimized and [indiscernible]. We've started joint engineering development with the world leaders Valmet and [indiscernible] for [indiscernible] not only to [indiscernible] world but also to [indiscernible]. We can [indiscernible] with FC5 in increasing more than one of these. We've strengthen our team in [indiscernible] industry leaders as we transition knowledge from the original Australian team to Europe.

We've received over EUR 20 million in our [indiscernible] funding from [indiscernible] and France.

We expect to transition ReSolute in July 2024 and production will fully went up to 2025 and sort of elaborate on this later in the presentation. [indiscernible] plant and 12,000 tonnes, [indiscernible] to become online by around 2026 and currently, we [indiscernible] site selection and early stages engineering. And we have a network of [indiscernible] brand distributors as well as [indiscernible] at firm orders, and Nick will discuss this again later in the presentation. So that's my introductory comments.

And now I'd like to pass it over to our chair Martin Laudenbach to give you commentary about [indiscernible] and the way we're moving forward. Thanks, Martin.

[Martin Laudenbach, executive]

Good morning, good evening, and thank you, Tony. It's a pleasure to be with you this morning and being part of this capital market update.

Looking at the strength -- or assessing the strength of Circa, the first look should go to the decisive factor behind the development of the company, the management team.

Shifting Circa's focus to Europe back in 2021, building a strong management team based here in the region became an imperative and a priority. Over the last 2 years, we have successfully hired experienced industry leaders into the key roles. And as you already know, you will hear from some of them this morning.

Together, they add a rich and diverse set of critical capabilities to the company. And as many of them acquired their skill sets in large, well-known and global professional organizations, circa is already today equipped and disposal of the experience and best practices to run a much larger and much more global business.

The transfer, as Tony already alluded to -- the transfer of the leadership functions to Europe will complete in Q4 of this year with the handoff of the leadership role from Tony, the Founder and CEO of the company, to Steve Döring, who will then take the company into and through the next phase of growth.

Steve Döring is a chemical industry professional and experienced CEO based in Germany. He started his career in diverse roles with larger, well-known global companies before leading to smaller companies through transformation, growth and exit. Tony and Steve will work closely together to ensure a smooth and seamless transition.

Supporting management, there's also been an expansion of the capabilities of the Board, adding to independent directors, Elise Fahlen and I back in 2022. Elise is an experienced investor and is currently the investment manager of the Venture Capital branch of the well-known Swedish H&M group.

I spent my entire career leading businesses in the chemical industry, including senior positions with BASF and Solvay.

The other Board members including the co-founder and representatives from our partner and major investors in [indiscernible], they have been on the board longer, and many of them have been contributing to the journey of Circa well before the IPO.

So what is Circa about, especially for those of you that don't know us yet that well? Our mission is to change chemistry for good, offering products that allow companies, our customers to reduce their carbon footprint and to move away from fossil-based chemicals. At the core, and here marked in orange on the slide, at the core Circa is a patent-protected proprietary technology called Furacell. Furacell converts the most and abundant -- or not abandoned, but abundant renewable material in the world, biomass, for instance, sawdust from the forestry industry into a molecule called levoglucosenone or simply LGO.

LGO is a very versatile platform bio molecule which can be converted in a wide range of useful and valuable chemicals.

The green solvent Cyrene is just our lead product. It is a safer and lower carbon solvent with users across multiple applications, and you will hear more on that later from Nick Smith.

Closing the loop, most of the energy for the process will come from biochar, which is a by-product of the Furacell process.

We've been developing this patented process since 2006, creating a solid first-mover advantage and a substantial barrier to entry to LGO.

And where do we stand in our journey? Well, it's been a long and careful runway since the start in 2006. And getting us where we are today, our mission is to supply what we expect to be a rapidly growing demand for LGO-based high-value derivatives.

To serve this demand, our plan is to rapidly scale up our capacity in modules of around 12,000 tonnes at each or multiples thereof, establishing a total capacity of over 80,000 tonnes beyond 2030. We have the only fully scalable technology for LGO today.

Right now, we're in the box in the middle, which is the link between the pilot plants we've run so far and commercial scale capacity and the first plant of that will be FC6.

So the project right now under realization, ReSolute will produce 1,200 tonnes. The follow-up FC6 will produce 10x that volume, 12,000 tonnes. We are already looking at the site selection and working with our partners, Valmet and EKATO on the engineering.

FC6 will, and all the following plans will be full commercial scale. And Philipp Morgenthaler, our VP of Manufacturing, will provide with more detail around the projects. And he will also explain to you why Furacell is so easily scalable.

But before we get deeper into the production and manufacturing technology, it is worth taking a look at the attractive market that we're targeting, the customers we're working with and the applications that our products are going in. And the best person to explain this is Nick Smith, our VP of Development and Commercialization to which I have the pleasure to hand over to

[Nick Smith, executive]

Thank you, thank you, Martin, and good morning and good evening. I'd like to start with a little bit of an introduction to the markets that we operate in and where the demand for our products is coming from.

So we're operating in the chemicals market. And the chemicals market is one of the largest of all global industries. In Europe alone, EUR 500 billion. The reason it's so large is because the chemicals industry is embedded in the value chains of so many other industries, think about the automotive industry, construction or electronics. So basically, wherever there's a manufacturing industry, it's fed by the chemicals industry.

And there are two things remarkable about the chemical industry. Firstly is the massive transition and transformation that it has to undergo over the next years. So the chemical industry has a very high energy intensity, and this means it's also a large emitter of CO2. And that makes it at the center of the focus for government strategies, for example, the EU Green deal or the U.S. Inflation Reduction Act. And that -- and both of those are mandating decarbonization. And this is exactly where Circa comes in with our products based on sustainable biomass.

The second thing to note about the chemical industry. In this example, the European chemical industry is how robust it is. Over recent years, following pandemic, the war in Ukraine, recession and then spiraling costs for gas and other commodities. The amazing thing is that the chemical industry has continued to grow.

Our first product, Cyrene as mentioned, is a green solvent. And Cyrene plays in the market of dipolar aprotic, a market that is 1 million tonnes.

These solvents are used in essential and growing applications, for example, the manufacturer of pharmaceuticals of electronics or even oil and gas processing. However, the majority of the solvents that are used in these markets are toxic. And Cyrene is universally recognized as one of the very few viable low toxicity and sustainable alternatives.

But it's not only that. It's been found that Cyrene can actually outperform these incumbent products in certain applications across almost all of these markets. And this means that we, at Circa can market on performance as well as sustainability, which is a very powerful combination.

With this kind of performance and characteristics of Cyrene plus the size of the market opportunity, it's not surprising that the interest from the market is very high. We've been talking to our customers for several years now who have been following our progress from start-up to scale-up, we've also developed a network of high-quality leading chemical distributors. And these companies are stepping up with strong support for us and especially for Cyrene. To this point where today, we are sitting on more than 5,000 tonnes of capacity reservations and letters of intent, comparing to just a little bit more than 1,500 tonnes a couple of years ago at the IPO stage.

Now comparing this number of capacity reservation to the 1,200 tonnes of capacity that we're building at the ReSolute, it's clear that the ReSolute plant is already well oversubscribed and this is why we're beginning to plan our next plant at the same time.

Alongside this interest from the industry, there's also a massive scale of IP work. And I'd like to show you here just around the IP work that's happening in the industry. We've seen a big spike in patent work. [indiscernible] Thank you. We've seen big spike in IP activity over the last couple of years. More than 30 patents filed on Cyrene just over the last 2 years. And we're at the stage now where there's pretty much a new patent coming out every single month. And they're coming out from big companies. From big companies in the chemical industry and blue-chip companies in the industry downstream, for example, the pharmaceutical industry. Look at the logos here on the right of the slide. And 77% of these patents are also coming out from high-value industries like pharma and specialty chemicals.

With the next slide, I'd just like to give you a little overview and dive into a couple of more details. Just to point out, let those companies really say how they are finding Cyrene and let those companies speak for us.

So the Shell example here, they started out using Cyrene because they wanted to bio-based solvent but they actually found that it outperformed their incumbent products by reducing the energy requirement.

Solvay has enabled using Cyrene, for the first time, the recycling of epoxy reinforced composites, a growing class of materials that are very high value and up until now could never be recycled. So this is a game changer for Solvay.

BASF by comparison, is using Cyrene to improve water-based coatings technology and important to make the coatings industry more sustainable.

And finally, Pirelli has been working on Cyrene to produce next-generation tire materials for more fuel efficient and safer tires.

The important thing to note on this slide on the right-hand side is that those comments regarding reduced energy costs, regarding enabling new processes and regarding the replacement of fossil-based materials with bio-based materials is that they are not our comments. These are all comments taken for verbatim from those patents of the companies. So you can see with this that the demand for Cyrene is real.

But as mentioned by Martin, Cyrene actually is finding utility in a broad range of markets. And aside from those ones I've just mentioned, we are interacting with a broad variety of markets and having projects with leading manufacturers in a range of different end-use applications going from pharmaceuticals, where MSD, for example, has developed a leukemia drug candidate using our products through the ag industry, graphene, an upcoming material, the electronics industry, obviously, a hugely growing market through paints and coatings, plastics and bioplastics. All of these industries are working with Cyrene and our other products, we're having projects in these areas.

But we're not only dealing with existing markets, which is great having these existing markets, we're also enabling and developing new markets. For example, textile recycling and carbon capture, very important for decarbonization and the circular economy. Cyrene is also in these. I'll tell you more about these markets later, but right now, I'll hand over to Tone to tell you more about the business.

[Tone Leivestad, executive]

Thank you, Nick. So the Circa story starts in 2006 when Circa Group was founded in Australia. After pilots 1 and 2, we raised the initial capital in 2010. Cyrene has been on the market since our pilot 2 in 2010, and we have been in continuous production since 2019.

In 2015, we partnered with Norske Skog, on our FC5 plant in Tasmania, and Norske Skog later converted its partnership into an important equity position in Circa. This track record as well as our patented process act as considerable barriers to entry for any competitors.

In the 2.5 years since the IPO, we have continued to lead the way to commercial success in a very complex and challenging operating environment. We have strengthened our team in Europe, hiring industry leaders as we transferred our business to Norway and established a corporate office here in Oslo.

This year, we partnered with the University of York to develop an application-focused institute, the Circa Renewable Institute, where customers can go to develop opportunities as they transition to using our products.

FC5 has maintained continuous production, delivering and increasing the output of product throughout this period, and we have stayed on track with our strategic vision. Essentially, we have continued doing what we said we would. Our vision to change chemistry for good remains our core strategic intent.

The business is considerably derisked from where it was 2 years ago. We have moved forward on ReSolute. We have clarity around the FC6 build requirements and have developed a modular engineering approach, which will facilitate building future plans.

We have signed key contracts with vendors and distributors and have commitments for offtake. We have brought in considerably industry expertise in Europe and run a highly professional organization. Market demand has continued to increase since 2021. We have a clear view on the future revenue streams from the Furacell process. We have also managed to de-risk energy costs and volatility by adding a waste biomass boiler to a process. This is real progress.

Circa is not a new concept. We have built and developed our process and our team since 2006. We have solid partnerships with companies like Merck and with leading academic research labs, and we know that we can scale our production.

We have already built 5 plants. Each 1 progressively bigger than the one before, and this gradual scale up has allowed us to collect data and manufacturing issues before moving to the next stage.

We have found that at every stage of scale up, we have maintained exactly the same chemistry and manufacturing process conditions. Unlike with many scale-ups, Circa has fund yields have stayed constant and sometimes even increased. This proves that the base chemistry and engineering is robust and scalable.

We have been shipping product for our plants for 12 years. We sold chemicals over 1,500 chemical industrials and researchers. We currently supply deliveries of over 1,000 kilos to European customers from our plant in Tasmania, and we are the largest supplier of LGO by far.

We are working with Valmet and EKATO as our principal technology partners. Valmet is a leading global developer of process technologies for the pulp, paper and energy industries. They are uniquely positioned to deliver on our scale-up timetable.

EKATO's expertise is in mixing technologies, and they have a world leader -- they are the world leader in this sector. We have partnerships and offtake agreements in place with leading companies, including Merck Group, Okema, Villano, Huntsman and Taga.

And here on the right, the ReSolute plant is an EU flagship project with a consortium of leading companies and research institutes. The goal of the project is to establish a route for the industrial scale production of a lot toxicity, high-performance solvent.

And with that, I will leave the stage to our VP of Manufacturing, Philipp, who will go more into depth in that area.

[Philipp Morgenthaler, executive]

Thank you, Tone. Good morning, and good afternoon, everyone. Circa has a leadership position with a highly scalable manufacturing model built on the use of cellulose, the world's most abundant and sustainable polymer. This is combined with a growing market of over 1 million tonnes, of which over 350,000 tonnes can be uniquely addressed by Cyrene.

The market is also under pressure from governments, brand owners and citizens who want industry to change to a lower carbon and more sustainable products. Circa has invested in patents and know-how to deliver sustainable business models.

As we scale our process, we have significant economies of scale. Our plants can be constructed in parallel. They do not need to be sequential. At this time, we are developing FC6 while we are building ReSolute. And we are the only company able to produce more than 20 kilograms of LGO with a patented production process. Our leading patented know-how gives Circa a strong Tier 1 position.

You see here the different stages of the Furacell process and the equipment needed. We use standard equipment from our suppliers, combined with our patented chemistry and know-how. This together reduces the risk of scaling up significantly. So we are using systems from our main technology partners, Valmet and EKATO and also from [indiscernible] for the distillation equipment, and that equipment is already installed in our FC5 plant in Tasmania. All of these companies are world leaders in their field of expertise, and their equipment has been installed and operated in multiple installations around the globe.

The Circa engineering team as well has been working on the design, construction and operation of FC5, FC5 and ReSolute since 2014.

Our next plant is ReSolute in Northeastern France. After that, we have FC6, and here you see the scale-up model trajectory. LGO is the platform chemical behind Cyrene and our other products, and Cyrene is the commercial foundation for the ReSolute plant. As you see here, scale-up is manageable, modular and significant increases in capacity are achievable.

The permitting process is well underway and equipment is already arriving at the site. We will start with the commissioning of ReSolute in the mid of 2024 and have the production fully ramped up by 2025. This considerable work to achieve this has seen a number of changes to plans, and we have been fortunate to have incredible support from our partners to achieve these tight dates. Valmet has already completed detailed engineering and the delivery of equipment is ongoing to the site since 1 month. The entire Valmet package will be delivered by the end of the year.

EKATO is about to finish the detailed engineering and 1 factory acceptance test for a part of equipment has also taken place already.

Procurement of the balance of plant items is going on and on track. Several items like tanks, agitators and transformers have been ordered. Others like pumps, chillers, cooling water at towers are in preparation, call for tenders have been issued.

A very important package to be awarded in the next weeks is the package for the civil works. As you can see here, civil works will start at the beginning of the fourth quarter in 2024. The package for the installation of the temporary site facilities has already been awarded and is ready to be installed.

Building back after the pandemic and investing in sustainable technologies is a key focus of France and European Union governments. We have received approximately EUR 20 million for the ReSolute plant from the EU and France, which is a very strong show of considerable support from these governments. We feel confident that due diligence already done by the EU and France confirms that our outputs are absolutely relevant to the growing demand from governments for new innovative products to support the decarbonization of the industry and combat climate change. We believe that Circa is an important role to play in these crucial issues.

A benefit of long-term partnership agreements is the opportunity to coordinate future plans. While Circa and our partners focus on ReSolute, the long-term opportunity for much larger plant is driving not only decisions regarding plant technology, but also time lines.

As we grow known technology, new opportunities present themselves, one of them being the opportunity to valorize side streams from the process another one being to bring in raw material fractionation. These are all technologies where ReSolute is too small, but they are very feasible for FC6 or for larger plants.

The thinking is already shaping future planning, research and resource considerations. We have been working with Valmet since May 2022, and the time line you see here has been developed jointly between Valmet and Circa. Valmet works on large-scale projects for the pulp and paper and energy industries, which is a distinctive advantage as we scale up our production capacity, fc6 will be a 12,000-tonne plant for our scale-up, and the scale-up is to continue to deploy these 12,000 tonne units. This can be arranged in multiples. This can be arranged in parallel and allow us to scale quickly and consistently.

And with that, I'll hand back over to Tone for the financials.

[Tone Leivestad, executive]

Thank you, Philippe. So back to the financials, and we will start with status as per Q2. And accumulated ReSolute CapEx is approximately EUR 18 million for the second quarter of '23. And this is offset by grants received of EUR 3.3 million.

Our current cash balance is EUR 27.5 million, and we have also announced grants of EUR 20.3 million for ReSolute, where we have received EUR 8.2 million, and the remaining funds will be received based on the progress of the ReSolute project during 2023 and 2024.

FC5 continues to provide product for Cyrene sales and trial products to customers and the spend continues to be in line with the expected quarterly run rate.

The company has already commenced work on the next large-scale plant, the FC6 plant, and this has generated spending related to these activities, and we expect this to accelerate in the second half of 2023 and into 2024.

Going forward, the company will initiate discussions with the industrial strategic and financial partners to accelerate the process and initiation related to the FC6 project and to enhance the long-term liquidity of the company. And Circa is evaluating the best strategic and financial options, including potential partnerships.

This slide reinforces our strategy outlined at the IPO. By 2030, the vision is to have 80,000 tonnes of product in the marketplace with sales approaching EUR 1 billion. This will be achieved from 2 drivers underpinning the growth.

Modular, probably brownfield plants producing LGO and Cyrene located near feedstocks. Geographically, there are numerous opportunities, and we are currently in early stage conversations in the EU, the U.S. and Asia relating to both forestry and sugarcane residue feedstocks.

Increasing sales of non-Cyrene/LGO derivatives, which command higher revenues and margins, and Nick will mention a couple of these shortly.

In simple terms, Cyrene provides the baseload to achieve these volumes while NGL derivatives are the opportunity. And this table outlines the economics for the plans that were various volumes in steady state. We expect to see additional efficiencies over time as we scale up our process.

Funding comes from a range of sources as well as the financial markets. For ReSolute, we have received considerable support from the EU and from the French government as well as various regional [indiscernible] in France, and we are very grateful for this.

Circa is on the right side of history. As we mentioned, our business aligns strongly with the current EU and U.S. government priorities regarding decarbonization, sustainability and the circular economy. Both the EU and U.S. are making considerable investments for upscaling technologies at similar development stages to ours through mechanisms such as the EU Green Deal and Inflation Reduction Act. These include direct grants and loans. We see that there are considerable opportunities for government funding here.

And then I will leave the stage for Nick and the market.

[Nick Smith, executive]

Thank you, Tone. I'd like to bring us back to the market and the global context, which is what is making the Circa story such a compelling and commercially sustainable one. We're seeing many different global forces that are driving the -- we're seeing many different global forces that are driving in favor of sustainable chemicals as brand owners, driven by regulators, and consumers are actively seeking to remove toxic chemicals from the supply chain. In other words, chemical manufacturers are under pressure both from their customers and from regulators, with the twin challenges of toxicity and decarbonization. And what we have at Circa of course, is a solution to both of those challenges.

I mentioned before that the competitor products to Cyrene for example, NMP and DMF are toxic. And now the regulatory consequences of that toxicity are starting to manifest themselves with, for example, both DMF and MMP having been labeled as substances of very high concern by the European Chemicals Agency. And they're under pressure elsewhere, too. But we fully expect that once Cyrene scales up as a viable alternative that those restrictions will actually turn into bans. Again, this is a 1 million tonne market opportunity. And the beauty of it is it exists right now. It's happening right now.

Let's take a closer look into Europe because the EU environment, in particular, is very favorable for sustainable chemicals. As part of the EU Green deal, just mentioned by Tone, the objectives of the EU chemical strategy include the better protection of citizens and the environment. And at the same time, to boost and foster innovation for safe and sustainable chemicals. Safe and sustainable is a big watch word in the EU. And of course, it's at the very heart of our story too.

It's the EU chemical strategy that's driving all of these actions around toxic chemicals. But more than that, it's boosting the possibility for investment in production for the use and sale of these chemicals in the European space. Overall, this political focus is creating a once-in-a-generation opportunity for Circa to produce better products for the EU and beyond.

But moving on to our platform. It's about much more than Cyrene at Circa. The levoglucosenone platform is really versatile, giving Circa access to a broad range of market and different product possibilities. Up until now, we've talked mainly about markets for Cyrene, but there are a large number of different product markets that we can access to with this platform. And I show some of these markets on this chart here with the price, upper left, on the y-axis and the volume across the bottom on the x-axis, ranging from the larger volume markets at the bottom right, like Cyrene and our new furatech derivatives for carbon capture, going up through pharmaceutical intermediates, and latent dairy lactone product, up to the top left of the chart, where you can see pheromones. And the market for these kind of products is measured in the kilos rather than the kilotons but the average selling prices are upwards of USD 1,000 or even USD 10,000 per kilo. The benefit of this versatility is it gives us the possibility to have many different strategic options to develop the business, and at the same time, we can balance price and volume.

Our mission at Circa is changing chemistry for good. And change in chemistry for good has two meanings. Firstly, it means changing it for the better. And secondly, it means changing it for the long term.

Now we sometimes see that sustainability is becoming something of a marketing term, but at Circa, what we do is we look at requirements and urgency for better sustainability, and we see how these can be translated into economic opportunity. We do that primarily through 3 pillars: decarbonization, circularity and well-being.

In decarbonization, we support companies to substitute those toxic solvents. And at the same time, this is decarbonizing because Cyrene has such a significantly lower carbon footprint than the incumbent products.

Also, our new Furatech products are directly helping to develop and support the fast-growing carbon capture industry, and that will clearly contribute to decarbonization.

In circularity, we work with the recycling industries, also super important for the circular economy. For example, batteries recycling, textiles recycling or the aforementioned recycling of epoxy-reinforced polymers. Also, we explore the concept of Cyrene as a service, whereby we would be seeing the recycling of Cyrene post use in order to extend its life and value and of course, also reduce waste.

Finally, well-being. And well-being is about much more than the obvious replacement of toxic solvents. It's also about direct community engagement and employee well-being, creating a platform of shared values and the alignment of corporate and individual interests, but it's also about new products to water purification and LGO-based herbicides.

And now I'd like to give you just one real business example of each of these sustainability pillars. Firstly, in decarbonization, carbon capture. Carbon capture is clearly going to be an important part of the solution as we move to net zero. And at the moment, it's a USD 6 billion market. But the important thing about carbon capture is the high rate of growth. It's expected to grow at more than 20% per year continuously. That means it will more than triple by the end of this decade. And here, Circa has developed and recently patented 2 new products called Furatech, which can contribute and play in the majority of the different technology applications that are being assessed by industry at the moment. And the benefit of Furatech in these applications is that it uses much less energy than incumbent products because it operates at a significantly lower temperature.

Let's talk about circularity and the textile industry. The textile and apparel industry is a disaster for the planet with production of 8% to 10% of global carbon emissions, the generation of 90 million tonnes of waste and currently, the recycling of only 12% of all clothing. There's a lot of investment going into this industry and particularly the recycling industry because it's become a matter of urgency for regulators. In the EU, for example, after 2025, it will no longer be possible to put textiles to incineration or to landfill. And the EU is encouraging very strongly fiber-to-fiber recycling, which means closed loop necessary for a true circular economy.

Now currently, fiber-to-fiber recycling or closed loop recycling in textile industry is only 1%, and that's because the technology can't keep up with the complex synthetic fibers. Cotton and synthetic blends, which you find in the majority of textiles are very, very difficult to separate. But our product Cyrene does exactly that. Our customer textile change, a European textile recycler and our main partner in this area has gone in public on record saying that Cyrene offers them the best performance and the best sustainability profile of the solvents available to them.

Finally, herbicides. This one is an enormous market, already $200 billion. And herbicide is a market with a continuous need for innovation provided by mother nature herself because bugs and diseases tend to evolve and become resistant to crop protection products, meaning there's a continuous need for new products.

We have developed based on LGO, a product called PT139, which has trialed successfully as a broadleaf herbicide. And as soon as LGO is available on commercial scales, this is another avenue that Circa will be able to exploit. And in the business of herbicides, when you are in, these provide you with business for a very long time.

So overall, you can see that Circa with addressing sustainability, we're getting right to the heart of those note sustainability challenges that the globe is facing.

That was all for me. I'd like to hand it over finally, now to our CEO, Tony.

[Anthony Duncan, executive]

[indiscernible] a couple of closing comments. As you heard from the team, Circa is on track and delivering very strong growth plan. The process is patented and sustainable with first-mover advantage. Our process has been improved concisely as we scale them up.

Through 5 bioplants of [indiscernible], which will come in [indiscernible] few years. With a clear scale-up plan and committed partners remain [indiscernible] commercialization. And that's where we are currently when for.

Now what you also learned today is [indiscernible] advantage that we will [indiscernible]. Now [indiscernible] is manage of initiatives and projects internally to take [indiscernible] to the next stage. It do improves capital options and what we're doing that today. It improves [indiscernible] development, market opportunities, cost down initiatives and process optimization and new partnering.

You learned some of these initiatives today and we [indiscernible] on our website, check out this presentation on our website.

So what you will see there is a rollout of further specific announcements over the next few months relating to this program and this [indiscernible] going forward.

So with that, what I'd like to do is to close off and open to Q&A.

[Unknown Analyst]

So just a that you will start production at reset someone or there about. Can you comment a bit regarding how much you will produce initially and risks related to to wrap up up to full production?

[Anthony Duncan, executive]

[indiscernible]

[Philipp Morgenthaler, executive]

Thank you. you're on the right there would be Small volumes, which are excuse me. So the -- I repeat, the commissioning will start mid of 2024 and will run into '25 and then we will ramp up solely. The -- to say how many -- how much volume we will produce in the ramp up is difficult. But the question of the risk, the risk is low because we have run trials. And as we discussed before, the equipment we are using is standard equipment, which has been proven in the industry. So the risk of ramp-up is low. Certainly, it's, as we say, it's a first of its kind. The unit is first of its kind, but technology itself is proven through 12, but it's difficult to name any volumes during that ramp-up because the commission will take place in, also in stages, will start with the oil paralyze and then go through the different stages until the full plant is commissioned to get product out that will take a few months.

[Unknown Analyst]

Another question maybe for you as well related to that FC6. Start thinking about site selection. And can you comment on that? And also when or anything related to timing around that decision?

[Philipp Morgenthaler, executive]

The decision for FC6, we said it's going to be end of 2024.

And so the key for FC5 will be the availability of biomass. We need a significant amount of biomass for FC6 will be in the range of about 300,000 tonnes. We are currently running a study of selected areas in Europe, but also other parts of the world to identify the current year availability and also the future availability and use competition is coming on stream to have a good picture about the availability of biomass because that is key cannot transport sorts around the globe to produce it locally. That would not be a good story for the sustainability story.

[Unknown Analyst]

Another question, maybe one Will you only be selling Cyrene from the ReSolute plant? And what will it take to further commercialize and be able to potentially obtain orders on other products. at Cyrene.

[Unknown Executive]

Thank you for the question. Yes. So as mentioned before, we have already around 5,000 tonnes of capacity reservations and LOIs. So the ReSolute plant will relatively soon not be sufficient. So I'll be waiting on the development and construction of the following plant Philipp has just been referring to. Regarding the development of other products, as mentioned, we've recently patented the Furatech solvents for carbon capture. So these products are still in, with a little bit more work to do, but these products will begin to the commercialization work very soon. We're also discussing in a number of other areas mentioned with a few other molecules. For example, I mentioned the herbicide.

So we we're focusing on Cyrene at the moment because, obviously, this is the lead product to provide the baseload and the marketing activities with other LGO derivatives is coming later because this is the big opportunity which needs to come in that sequence.

[Anthony Duncan, executive]

The next presentation [indiscernible] other items. We're [indiscernible] for 10% to 20% of the upward of ReSolute [indiscernible] Cyrene type products. going forward, now the reality is that the word we're doing in the Valmet for [indiscernible] solvents [indiscernible] now we're not on that. But what we're doing in the short term is going form product that can move into markets rather than to move [indiscernible] 2 to 3-year [indiscernible]bran to engines in the moment going forward.

We've also seen the work [indiscernible] from real announcement, and those are large markets by themselves, and we're not seeing the biggers moves in revenue on Cyrene, a large market out the[indiscernible], comfortable when the market [indiscernible].

[Unknown Executive]

I think that concludes the presentation for today. Thank you, everyone.