Atlantic Sapphire Asa · OSL:ASA

Atlantic Sapphire Asa — Investor Presentation (April 2018)

64 slides from Atlantic Sapphire Asa's investor presentation, Apr 24, 2018

  1. Slide 1: Company Presentation

    Company Presentation 24 April 2018 |

  2. Slide 2: Important Information

    IMPORTANT INFORMATION This presentation (the "Presentation") has been produced by Atlantic Sapphire AS ("Atlantic Sapphire" or the “Company” and together with its subsidiaries, the “Group”), solely for use in connection with the contemplated offering of shares by the Company (the "Private Placement"

  3. Slide 3: Summary of Key Risk Factors (1/2)

    SUMMARY OF KEY RISK FACTORS (1/2) RISK FACTORS In the following is a summary of the key risks facing the Group. Please see slide 36-42 for a full description of risk factors. Key risks relating to the Group and the industry in which it operates: • Land-based salmon farming is a new industry and is s

  4. Slide 4: Summary of Key Risk Factors (2/2)

    SUMMARY OF KEY RISK FACTORS (2/2) RISK FACTORS • The Group is exposed to fluctuations in the global economy in general, as well as end consumers’ spending. • Atlantic Sapphire may be target of activism of various kinds with the aim to cause reputational damage or damage to production facilities (spr

  5. Slide 5: Contents

    Contents 1. Massive Transformative Purpose 2. Opportunity 3. Corporate Overview 4. Management 5. Protein Production Efficiency 6. Market 7. Industry Economics 8. Conventional Industry Issues 9. Unique Value Proposition 10. Technology and Infrastructure - BluehouseTM 11. Intellectual Property 12. Cos

  6. Slide 6: Massive Transformative Purpose

    1. Massive Transformative Purpose Pioneering BluehouseTM Farming, Locally Transforming Protein Production, Globally “Blue Is The New Green” 6|

  7. Slide 7: Opportunity

    2. Opportunity … and is experiencing high sea lice and disease management Sea farming requires 2-20 ̊C sea temperature and sheltered areas… issues Area not eligible for conventional net pen salmon farming  More than 99.9% of the global supply of Atlantic salmon is produced in sea  The conventional

  8. Slide 8: Corporate Overview

    3. Corporate Overview Headquartered and OTC-listed, Norway. Founded in 2010 Innovation Center, Denmark  3 kt HOG1 annual production ‘commercial pilot’, on the west coast of Denmark  Technology development leveraging more than 7 years of innovation strictly focused on managing full-cycle land-raise

  9. Slide 9: Management

    4. Management Selected board Executive management members Johan E. Andreassen Damien Claire CEO & Co-Founder EVP - Offtake  Headed a 30,000 tonnes capacity salmon farming company, Villa  Currently CEO of Platina Seafoods1, the US sales channel of Organic, from idea inception to IPO and strategic e

  10. Slide 10: Protein Production Efficiency

    5. Protein Production Efficiency World population forecasted to grow by ~1.5bn towards 20351 bn 9.0 8.9 8.6 8.5 8.2 8.0 7.8 7.5 7.3 7.4 7.1 7.2 7.0 7.0 7.0 6.5 6.0 2010 2011 2012 2013 2014 2015 2020E 2025E 2030E 2035E Compared to land animal proteins, salmon offers higher protein and resource effici

  11. Slide 11: US Salmon Market

    6.1 US Salmon Market US is the single largest market for Atlantic …and the US demand for salmon is …with considerable upside potential salmon… increasing rapidly… Market size Atlantic salmon (kt) US Atlantic salmon demand (WFE kt) Salmon consumption per capita (kg/year) 9.5 500 450 92 % implied incr

  12. Slide 12: Global Salmon Market

    6.2 Global Salmon Market Norway, Faroe kt Islands, Iceland Harvest 1,388 Market 50 Russia kt Harvest 39 Market 135 North America kt EU kt Harvest 175 Harvest 236 Market 520 Market 1,158 Japan kt Other Asia kt Harvest 10 Harvest 2 Market 276 Market 257 5-8 days LatAm kt Harvest 838 Market 189 Oceania

  13. Slide 13: Industry Economics

    7. Industry Economics Sea-based supply growth curbed by regulations and biological issues Biological issues have led to higher costs Global harvest Supply growth Production cost, Norway Oslo spot price, Atlantic salmon (rhs) NOK/kg NOK/kg kt % +67% 3,000 25 40 70 38 38 2,500 20 60 35 15 33 50 2,000

  14. Slide 14: Conventional Industry Issues

    8.1 Conventional Industry Issues Untreated fish waste Diseases and parasites Conventional ocean net pen farming experiences a series of concerns Medicines and pesticides Escapes Micro plastics Predators Conventional Ocean Net Pen Farming Industry Issues Are Significant, Costly And Growing. We believ

  15. Slide 15: Conventional Industry Developments

    8.2 Conventional Industry Developments Smolt phase Post-smolt phase Grow-out phase (11 months) (11-16 months) (16-27 months) 6 Historically: Land Historically: Sea Historically: Sea 5 Currently: Land Currently: Land/Sea Currently: Sea Future: Land Future: Land Future: Land/Sea 4 Fish size (Kg) 3 His

  16. Slide 16: Unique Value Proposition

    9.1 Unique Value Proposition Typical conventional sea based salmon farming value chain Land-based Well boat Sea based Well boat End Processing Trucking Airfreight Trucking hatchery transport net pens transport consumer Atlantic Sapphire Miami operation value chain BluehouseTM Trucking End consumer A

  17. Slide 17: Unique Value Proposition

    9.2 Unique Value Proposition  Portable BluehouseTM technology disrupts requirement for conventional ocean net pen Portable, disruptive conditions technology  Target salmon markets globally are susceptible to the highest air freight costs Air freight cost  Air freight related costs impact up to 25

  18. Slide 18: Technology and Infrastructure - Bluehouse

    10.1 Technology and Infrastructure - BluehouseTM 1 Egg hatchery 2 Juvenile tanks 4 3 Smolt tanks 4 4 Grow-out tanks 6 3 5 Biofilters 5 2 1 6 Processing 7 5 7 Truck pick-up Treated, non-toxic waste water Fresh and saline discharged intake water From Egg To Plate – BluehouseTM Fully Controls Key Drive

  19. Slide 19: Supply Chain Partners

    10.2 Supply Chain Partners Atlantic Sapphire and ATLANTICTM technology partners US expansion Innovation center SAPPHIRE driving innovation DENMARK 7 Years Of Collaboration And Innovation In Denmark With Leading Supply Chain Partners Drives The BluehouseTM Platform 19 |

  20. Slide 20: Quality Control

    10.3 Quality Control BluehouseTM Drives Unprecedented Innovation And Risk Management Control BluehouseTM Variables Performance Impact & Consistency Control Measures Intake Water Salinity, biosecurity ppt, micron meters, cfu Oxygen Biological performance, biofiltration % saturation Carbon Dioxide Alk

  21. Slide 21: Fish Harvest Size And Quality

    10.4 Fish Harvest Size And Quality Comments Average harvest weight (kg)  Atlantic Sapphire Denmark experienced strong development in the biological performance 6.0 No Harvest in June from the beginning of 2016 to mid-2017 5.0 4.4  The achieved average size of the salmon during the first half of 20

  22. Slide 22: US Water Infrastructure

    10.5 US Water Infrastructure  Critical production wells are already completed Unique Florida groundwater aquifer production and discharge geology and tested water quality successfully  Onsite access to underground aquifers for fresh and saline water supply  Deep well waste water discharge to the

  23. Slide 23: US 3-Phased Growth – Rendering

    10.6 US 3-Phased Growth – Rendering Phase 3 (2024-2026): • +60,000 tons • Smolt, grow-out, parking, processing and feed plant Phase 2 (2022-2023): • +20,000 tons • Grow-out and R&D Phase 1 (underway): • 10,000 tons • Smolt, grow-out, administration and processing 23 |

  24. Slide 24: US Market Potential

    10.7 US Market Potential Estimated US market size, Atlantic salmon (kt) US market projection, 2027 (kt) ~900 ~900 Large addressable market +8% at play for Sapphire and other land-raised producers ~400 90 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Supply from Total US market conventional

  25. Slide 25: Risk Mitigation With Scale

    10.8 Risk Mitigation With Scale # % of biomass per independent system # of separate growout systems % 100 100 90 90 80 80 70 65 70 60 60 50 50 40 40 30 30 21 20 20 10 8 10 1 2 0 0 DK 1 DK 2 DK - US 1 DK - US 2 DK - US 3 Risk Of Biomass Loss Is Sought Reduced With Scale Due To Increasing Number Of In

  26. Slide 26: Intellectual Property

    11. Intellectual Property Three strategic patent clusters defined 1 2 3 Quality and Closer to Sustainability Consistency Market A Roadmap Of Comprehensive IP Patent Opportunities Identified – Up To 23 Patent Filings Targeted By 2020 Patent permitted Patents filed Identified opportunities Note: no pa

  27. Slide 27: Comparative Cost Analysis

    12.1 Comparative Cost Analysis US landed production cost: Industry Norway vs Atlantic Sapphire (NOK/kg HOG) 53 1 6 15 36 5 1 2 3 4 Industry average Feed Other production cost Freight Depreciation and interest Atlantic Sapphire 2023E Norway (US landed) 1 2 3 4 Superior biological Optimal farming No a

  28. Slide 28: Bluehouse Performance Measurement

    12.2 BluehouseTM Performance Measurement The Key Biological Performance Equation In A BluehouseTM Density Fish appetite Yield (Biomass per m3) (% bodyweight gain per day) (Daily total biomass gain per m3)  Average kilogram of fish per cubic  Consideration: ‘risk-adjusted’ biological  Daily biomas

  29. Slide 29: Offtake

    13.1 Offtake Brand attributes and promises  Delicious taste – mild flavor, delicate texture, very versatile for cooking  Sustainable – lower carbon footprint and FI:FO ratio  Eco-friendly – reduces impact on wild species and the environment  Made in the U.S.A – local economic impact, job creatio

  30. Slide 30: Unique Market Opportunities For Atlantic Sapphire

    13.2 Unique Market Opportunities For Atlantic Sapphire Description From menu Sapphire salmon has won blind tastings with 1 Celebrity chefs and high Michelin starred and celebrity chefs. Our name is end restaurants printed on menus, building strong brand awareness Sustainability oriented Several reta

  31. Slide 31: Financial and operational targets – Consolidated figures

    14.1 Financial and operational targets – Consolidated figures US Phase 3 US Phase 2 US Phase 1 Denmark Capital requirements 91,710 DK Phase 1+2 & US Phase 1 Harvest (HOG tonnes)  US Phase 1 will have an expected capital need of 61,904 USD 130 million (fixed assets), plus an expected increase in wor

  32. Slide 32: Financial targets - assumptions

    14.2 Financial targets - assumptions Atlantic Sapphire USA Atlantic Sapphire Denmark Financial targets - Assumptions Phase 1 Phase 1+2 Phase 1+2+3 Phase 1+2 2021 2023 2026 2021 onwards (DKK) Volume (mt HOG) 9,484 29,806 89,418 2,292 Sales price ($/kg HOG) 11.00 10.00 9.50 61.00 Feed price ($/kg) 1.3

  33. Slide 33: Sources & Uses

    14.3 Sources & Uses (March 31, 2018 projections, April 30, 2018 funding) Sources Amount (USD 000s) Uses Amount (USD 000s) RCF (DK) 2,400 Ch In Working Capital 9,616 LT Debt (US) 60,000 Net Operating Cash 3,058 Equity 76,531 Cap Ex 110,503 Cash 20,432 Cash* 36,186 Total 159,363 Total 159,363 - Beginn

  34. Slide 34: Milestones

    15. Milestones Equity raise to Q4: US hatchery-post finance US smolt (freshwater) April: Well drilling and expansion construction complete US Phase 1 facility US Phase 2 harvest construction begins commences Q2: US Phase 1 first Q4: secured water harvest usage and well drilling permits Today 2016 20

  35. Slide 35: Summary

    16. Summary 1 Leading land-raised salmon company with business performance and knowledge 2 Experienced management team, equity linked performance culture 3 Sole US land-raised salmon company at scale, avoiding costly air freight 4 Strong offtake demand for year round supply, compelling brand promise

  36. Slide 36: Key risk factors (1/7)

    17.1 Key risk factors (1/7) RISK FACTORS Investing in the shares ("Shares") issued by Atlantic Sapphire AS ("Company" or "Atlantic Sapphire", and together with its subsidiaries, the "Group") involves inherent risk. Investors should consider all of the information set forth in this Presentation, and

  37. Slide 37: Key risk factors (2/7)

    17.1 Key risk factors (2/7) RISK FACTORS (CONT’D)  The Group is in an ongoing developing and commercialization process where one of the Group’s key strategies is to develop and build a land-based recirculating aquaculture system for farming of Atlantic salmon in the United States. The Group has lim

  38. Slide 38: Key risk factors (3/7)

    17.1 Key risk factors (3/7) RISK FACTORS (CONT’D)  The Group’s activities are subject to extensive international and national regulations, in particular relating to environmental protection, food safety, hygiene and animal welfare. The Group’s sale of its products is also subject to restrictions on

  39. Slide 39: Key risk factors (4/7)

    17.1 Key risk factors (4/7) RISK FACTORS (CONT’D)  All of the Group’s operations are currently carried out by the Company’s subsidiaries, which are the only group entities with sales revenues. As such, the Company depends on obtaining cash from its subsidiaries in order to pay dividends to its shar

  40. Slide 40: Key risk factors (5/7)

    17.1 Key risk factors (5/7) RISK FACTORS (CONT’D)  The Group’s existing or future debt arrangements could limit the Group’s liquidity and flexibility in obtaining additional financing and/or in pursuing other business opportunities. Further, the Group’s future ability to obtain bank financing or to

  41. Slide 41: Key risk factors (6/7)

    17.1 Key risk factors (6/7) Risks relating to the Shares:  An investment in the Company’s shares involves risk of loss of capital. The market value of the shares may fluctuate significantly in response to a number of factors beyond the Company’s control, including adverse business developments, var

  42. Slide 42: Key risk factors (7/7)

    17.1 Key risk factors (7/7) RISK FACTORS (CONT’D)  Beneficial owners of Shares that are registered in a nominee account or otherwise through a nominee arrangement (such as through brokers, dealers or other third parties) may be unable to exercise their voting rights for shares unless their ownershi

  43. Slide 43: Appendices

    APPENDICES 1. A-3 Organizational Chart 10. A-12 Competitive Cost Analysis 2. A-3 Shareholder Overview 11. A-12 Historical Feed Price Development 3. A-3 Sapphire US Under Development 12. A-14 Financial And Operational Targets – US 4. A-6 Global Salmon Supply 13. A-14 Financial and Operational Targets

  44. Slide 44: A-3 Organizational Chart

    A-3 Organizational Chart Atlantic Sapphire A.S. 100% Atlantic Sapphire Denmark (Denmark Operation) 100% 100% 100% Atlantic Sapphire USA, LLC S.F Development, LLC Atlantic Sapphire IP, LLC (U.S. Operation) (Land Holding) (Intellectual Property) 100% AS Purchasing, LLC (U.S. Purchasing entity) 44 |

  45. Slide 45: A-3 Shareholder Overview (23 April 2018)

    A-3 Shareholder Overview (23 April 2018) Ranking Name Percentage Holding Type of account 1 ALSCO AS 19.3% 8,919,130 Ordinary 2 SKAGEN KON-TIKI 10.0% 4,628,090 Ordinary 3 Danske Bank A/S 5.1% 2,356,030 Nominee 4 Louise Mohn 3.9% 1,814,570 Ordinary 5 Norron Sicav - Target 3.0% 1,398,830 Ordinary 6 SUN

  46. Slide 46: A-3 Sapphire US Under Development

    A-3 Sapphire US Under Development Injection well 68.5” bit MF-4 saline intake well BA-1 fresh well Water sampling "Lake Sapphire" Drone shot site Denmark expansion Florida Geology Danish equipment on site Portland, OR - promo Hiring US Veterans 46 |

  47. Slide 47: A-6 Global Salmon Supply

    A-6 Global Salmon Supply kt Others Faroes Canada UK Chile Norway 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E Harvest 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E ‘000 tons wfe Norway 945 1,006 1,183 1,144 1,199 1,234 1,171 1,211 1,284 1,348 Chile

  48. Slide 48: A-10 Notice of Permit – Water Disposal Well Permit

    A-10 Notice of Permit – 20 Million Gallons Per Day Water Disposal Well Permit 48 |

  49. Slide 49: A-10 Location Rationale – Miami, Florida

    A-10 Location Rationale – Miami, Florida 5¢ 10¢ 7¢ 14¢ 12¢ Atlantic Ocean 11¢ 7¢ 1 Discharge water – ONLY area with geology to sustainably discharge salt water in quantities required to scale Pacific Ocean 2 Intake water – ONLY area with available high quality salt and fresh groundwater in sufficien

  50. Slide 50: A-10 Carbon Footprint Analysis By Production Method

    A-10 Carbon Footprint Analysis By Production Method - Delivered U.S. Net pen frozen, ocean freight Feed production Construction of facility and equipment Gerow out and smolt (fuel and electricity) Net pen airborne Oxygen and lime Transport, road Transport, air and water Bluehouse renewable energy Pa

  51. Slide 51: A-10 Industry Acreage Required For Salmon Farming In Bluehouse

    A-10 Industry Acreage Required For Salmon Farming In BluehouseTM With unlimited intake and discharge water, the entire Norwegian salmon industry would fit in 2 square miles of land. BluehouseTM Farming Is Area Efficient, However It Is Critical And Challenging To Find High Quality In-Take Water And D

  52. Slide 52: A-10 Issues, Learning Points and Market Position of Atlantic Sapphire Denmark

    A -10 Issues, Learning Points and Market Position of Atlantic Sapphire Denmark Reason Actions taken Implication  Bio filters design updated  Automatic cleaning of filters Too high level of hydrogen sulfide (H2S)  New improved routines Upgrade and improvement of Atlantic Intoxication in 2017 due t

  53. Slide 53: A-12 Competitive Cost Analysis

    A-12 Competitive Cost Analysis Atlantic Sapphire dwarfs any other known Production cost US landed compared to competitors1 project for land-raised salmon Projected harvest volumes comparable players Freight Production cost NOK/kg HOG (HOG, tons) 125,000 54 54 51 50 16 15 90,000 15 15 36 32 38 39 36

  54. Slide 54: A-12 Historical Feed Price Development

    A-12 Historical Feed Price Development …though in USD the development is Feed costs in Norway are on the rise… …weaker NOK is the main reason different… NOK/kg feed USD/kg feed USD/NOK 11.7 1.6 1.6 8.4 1.5 1.5 8.1 +5% 10.7 9.7 1.4 1.4 9.2 1.3 8.9 1.3 8.9 1.2 6.3 8.2 6.3 7.8 7.8 6.0 5.8 5.9 5.6 5.6 2

  55. Slide 55: A-14 Financial And Operational Targets – US

    A-14 Financial And Operational Targets – US phase 1, 2 & 3 Net cash flow, USDm US Phase 3 US Phase 2 US Phase 1 89,418 Cash Flow from Operations Cash Flow from Financing Harvest (HOG tonnes) Cash Flow from Investing 59,612 283.3 148.6 29,806 29,806 5,532 9,484 9,484 2016 2017 2018 2019 2020 2021 202

  56. Slide 56: A-14 Financial and Operational Targets – Denmark

    A-14 Financial and Operational Targets – Atlantic Sapphire Denmark Net cash flow, USDm 2,292 2,292 2,292 2,292 2,292 2,292 2,292 2,292 Harvest (HOG tonnes) Cash Flow from Operations Cash Flow from Financing Cash Flow from Investing 4.8 510 212 0.0 0.0 0.0 0.0 9.8 59 8.5 2016 2017 2018 2019 2020 2021

  57. Slide 57: A-14 US Capex Analysis (USDm)

    A-14 US Capex Analysis (USDm) 130 7 10 58 55 Denmark (engineering) US Construction Groundwater wells Other Total RAS - Includes Civil, building, bio Additional power hatchery, smolt, Fresh, saline and filters, tanks, infrastructure, grown-out and disposal water electrical, offices processing lines f

  58. Slide 58: A-14 Alternative Sources of Supply Growth

    A-14 Alternative Sources of Supply Growth Estimated capex requirement (USD/kg) 12.0 10.0 7.1 Norwegian Assumptions BluehouseTM 2026 Ocean Farms «Traffic Light System» Capex USD ~640m NOK 780m NOK 140m Capacity (kt) 90.0 10 1.5 Assumptions: USD/NOK 7.8 Capacity estimate for traffic light growth is ba

  59. Slide 59: A-14 Potential Concerns and Mitigating Factors (1 of 2)

    A-14 Potential Concerns and Mitigating Factors (1 of 2) Potential concerns Mitigating factors 1 “ I have heard that land-raised  Investments in technology/intake water (firewall) and continued process innovation Biological farmers struggle to grow their  Optimization of flow, CO2 stripping, partic

  60. Slide 60: A-14 Potential Concerns and Mitigating Factors (2 of 2)

    A-14 Potential Concerns and Mitigating Factors (2 of 2) Potential concerns Mitigating factors 4 “ How can we be sure that the  Leading Denmark / US multidiscipline, pre-construction services and construction management team Construction constructions are built in time  Facility will be constructed

  61. Slide 61: A-15 Atlantic Sapphire Denmark – Phase 2 Construction In Progress

    A-15 Atlantic Sapphire Denmark – Phase 2 Construction In Progress Grow-Out Tanks And Bio-Filters 61 61 |

  62. Slide 62: A-15 Atlantic Sapphire Miami – Phase 1 Construction In Progress

    A-15 Atlantic Sapphire Miami – Phase 1 Construction In Progress Construction On Track – Eggs In The Hatchery Targeted For Q4, 2018 62 62 |

  63. Slide 63: A-15 Atlantic Sapphire Miami – Phase 1 Construction In Progress

    A-15 Atlantic Sapphire Miami – Phase 1 Construction In Progress Post-Smolt Foundations Underway – Fresh Water Tanks On Site 63 63 |

  64. Slide 64: Atlantic Sapphire

    AT ANTIC GQ SAPPHIR

Atlantic Sapphire — Investor Presentation (April 2018) on 6ix