Responses to Audience questions -Rastech Producers Panel June 9, 2021

During the panel discussion yesterday several questions were asked of me that I did not get a chance to respond to. Here are my answers:

Phil, are you convinced that 10 x 1,000 tonne facilities will give you the scale and cost you want vs 1 x 10,000 tonne?

This question was posed to Phil, but I thought I would add my thoughts. Taste of BC has a plan to build 20 farms ranging from 1500-3000 Tonnes. Our analysis shows that in fact there is an increased cost due to scale for larger facilities than this. Most of the cost projections for the large facilities are a result of spreadsheet analysis. In our opinion spreadsheets are fine but not a very accurate forecasting tool, especially when there is little or no history on which the projections are made. We have looked at the many spreadsheet projections and consistently find a lot of things left out of the equation. The cost overruns at the Florida facility and the large losses so far incurred by others are a good indication that predictions can be somewhat off. 

With our plans we are able to use accurate and complete data and have demonstrated what our required inputs will be. We don’t necessarily compare our numbers with others in the RAS sector, nor do we try to compare/compete with net cage operations. What we set out to do was build a model for a good profitable business and we are confident on our scale choice. Capex is one factor for Opex is most important as it is the ongoing factor that will determine profitability. We will stand behind our choice of scale and are confident that regardless of what others do Taste of BC will be a significant profitable player in Salmon RAS and our scale and method of roll out will prove more than viable.

Please comment on strategies for purging. How much water / kg fish do you use for purging?

We have had our struggles with purging. Early on we seemed to have it well controlled, and our fish consistently tasted great. We then came upon a wall where off flavor was persistent and although we followed the same protocols for purging we had previously we just could not arrive with the same results we had previously. It was a challenge for some months. Now we have arrived at a point where our fish are reliably great tasting without any sign of off flavor. In fact, we can – but don’t – eat them right out of the RAS.  There are a number of protocols that we have embraced that we can’t share (yup trade secrets!) but I can say it is a combination of factors up to an including a 7-day purge that we are settled on.

Would love to know from Steve about the plan to add 20 new farms. Will a new fundraising effort have to be started? How quickly do you hope to get started on this? What kind of production capacity for each facility do you envision? Will they be larger than the current facility? 

Our current facility is a 100 Tonne pilot. We set out to develop a module that could be replicated with known and proven inputs and outputs. Through operating this farm since 2013 and producing at or above target levels on a consistent basis for nearly 2 years we have determined our initial design can be tweaked into a 150Tonne module. We think a sweet spot for operations runs at about 1500Tonnes. This sweet spot takes into account many factors not just financial, but the numbers here give a good return on investment. We think some circumstances will allow farms to be 3000 Tonnes and after our first 5 farms we will look at moving forward with some at that size. We hope to move forward on our first farm with construction starting in less than 12 months from the closing of our Blue Star deal. Planning is already underway and permitting will start very soon. Our plan is 20 farms by 2018. Blue Star will be up listed from the OTC to the NASDAQ soon after the merger and our expansion will be largely funded by public offerings on the NASDAQ.

Steve do you anticipate these new facilities will be in Canada?

Question for Steve - will all 20 farms be built in BC or Canada or are you considering other markets?

Right now, our main focus will be in British Columbia. However, Blue Star is already a multi-National company with operations in several parts of the world. Our eyes will be open to any opportunity.  The beauty of our operation is that we can replicate almost anywhere. One of the strengths of our choice of scale is that we do not need hard to find sites.  We will be flexible and nimble and be able to embrace opportunities as they rise. While we are not looking at franchising, at least not at this juncture, we are looking at the success of operations such as McDonald’s. They established a formula for success and replicated, replicated. They are one of the most successful businesses on the planet and we see a path to be as well. 

Steve -- Is the future salmon net pen ban in BC one of the reasons you are looking first to expand there?

One thing that has set us apart from much of the Salmon RAS community from the beginning is that we have never made any of our plans, decisions, or projections about net-pen salmon farming. We believe that RAS salmon farming has a future regardless of what happens in the oceans. We are looking to expand in BC because we are from here.  The current politics and moves regarding net pens in BC does put us in a very fortunate position as we are the only player that is looking at significant investment in RAS in BC right now.  We have a “secret sauce” that makes us a fit. We will start in BC but I am confident our reach will grow far beyond. There will be an ongoing demand for salmon, some grown on land, and some grown in the ocean. Our business model stands independently of net pen salmon farming.