Confidential

Carbon Cycle Ltd

Business Plan
April 2019

CONFIDENTIAL
Not to be disclosed without the express
written permission of Carbon Cycle Ltd

Carbon Cycle Ltd

248 Sutton Common Road
Sutton, Surrey SM3 9PW
United Kingdom
Telephone: +44 (0)208 288 0199
www.carbon-cycle.co.uk
Prepared by: Carbon Cycle Ltd
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Financial Services & Markets Act 2000 (Britain)

This Business Plan is not a prospectus and does not, and is not intended to, constitute an offer or
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investors are strongly advised to take advice from an authorised person who specialises in advising
on investments of this kind.
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Table of Contents

1: Executive Summary 1
2: Calcium Mineral Purification (CMP) Process 2
3: Intellectual Property Rights 3
4: Market Analysis 4
5: Sales Strategy/Route to Market 9
6: Path Forward 11
7: Financial Projections 12
8: Company Background 13
9: Corporate Governance 13
10: Staffing and Company Structure 13
11: Risks 14
12: Funding Requirement 14
Appendix 1 - Gypsum & Rare Earth Markets 15
Appendix 2 - References for Target Mines 16
Appendix 3 - Projected Income and Profit Forecast 17
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1. Executive Summary
Carbon Cycle has developed a breakthrough process for commercially purifying abundant global
supplies of contaminated calcium-based minerals such as gypsums and chalks and transforming
them into high-value products. The Calcium Minerals Purification (CMP) process further uses novel
chemistry and optimised design to separate and concentrate dilute and often highly-valuable rare-
earth contaminants whilst producing marketable clean gypsums and chalks.

The CPM process has numerous industrial applications. The most significant of these is to purify
phosphogypsum, a major by-product of phosphoric acid fertiliser production. In excess of 300 million
tons of phosphogypsum is produced annually throughout the world1. Most of this phosphogypsum
cannot be used due to high levels of impurities. It is consequently either stored in large waste stacks
or lagoons or discharged into the ocean, each with adverse environmental impacts.

The disposal of phosphogypsum is a serious operational and financial constraint on the phosphorous
fertiliser industry. Our process works with all phosphogypsums and no competing commercial
process cleans up contaminated gypsum.

Phosphogypsums can contain high levels of rare earths which the British government says has the
greatest supply risk of any raw material2 and which accounts for half a trillion Euros of economic
activity in Europe3. The CMP process will allow this resource to be tapped, thus greatly reducing the
supply risk. It also provides the only viable method of extracting phosphate and rare earths from
high phosphorous mine tailings such as those produced from iron ore mining.

Phosphogypsum must meet stringent environmental standards in order to be stacked and stored.
Higher standards are required to enable the phosphogypsum to be used in cement or plasterboard.
To meet the environmental standards, phosphorous fertiliser producers often need to buy purer and
more-expensive phosphate rock feedstock or invest in more expensive plant. By using the CMP
process, many constraints can be removed thus providing significant financial benefits to the
phosphoric acid producer.

Carbon Cycle intends to licence the CMP process to major companies within each of the applicable
markets. Carbon Cycle has already agreed partnership agreement terms with a leading designer for
phosphoric acid processes. Our partner will deliver the CMP process and sub-licence it to its clients
throughout the world. Carbon Cycle will share the licence fee which will be based on the benefits
(increase in revenue/decrease in costs) brought to the client. We already have relationships with off-
takers for rare earths and gypsum in place and intend to have other off-taker agreements in place
shortly.

The Carbon Cycle team has strong commercial and technical expertise. The extended team includes
an industrial chemist, mechanical engineer, chemical process engineers, a technology management
consultant and a retired chemical industry executive. Among us, we have run multiple profitable
companies, have developed and brought new products to market, and have successfully licenced
technology to third parties.

Carbon Cycle Ltd aims to raise 1.25 million pounds (Sterling) through the sale of shares. This
investment is expected to cover approximately two years of company operations, patent costs and

1
https://www.sciencedirect.com/topics/engineering/phosphogypsum
2
Supply Risk List, British Geological Survey 2015, Rare Earths had a rating of 9.5 out of 10.
3
EU Commission Report, “Study on the review of the list of Critical Raw Materials” 2017

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bridge us to licence income. Based upon the projected company income and profit forecast,
together with the potential for future growth, we currently expect the company to have a valuation
of five times its current share value by 2024.

2. Calcium-Based Mineral Purification (CMP) Process

Carbon Cycle has developed and patented a commercially viable process for separating
contaminants enveloped in gypsums (calcium sulphate) and chalks (calcium carbonates) that
involves both novel chemistry and optimised design. The process enables the purification of the
incoming calcium-based mineral and the extraction of the contaminants. This process is a
breakthrough that these industries have sought to develop in vain for decades.

How the CMP process works

The CMP process works by reacting an impure calcium-based mineral such as gypsum (i.e. calcium
sulphate) with an ammonium sulphate solution at moderate temperature to form a double salt of
calcium sulphate and ammonium sulphate. The transformation from the calcium sulphate crystal to
the double salt crystal causes contaminants bound in the original calcium sulphate crystal to be
released (Fig 1).

Figure 1. Release of Contaminants

These contaminants are then separated from the pure double salt and the double salt is then
decomposed back to gypsum and ammonium sulphate solution using water (Fig 2). The pure gypsum
is then separated and washed and the ammonium sulphate recovered for reuse back in the initial
reaction.

Figure 2. Double Salt Separation

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Process parameters can be adjusted to achieve the desired level of purification/extraction. If the
released contaminants contain valuable elements, they can be concentrated and separated out.

The CMP process produces very clean gypsums and chalks suitable for many market applications.
There is no other commercial processes we are aware of that can achieve this.

The process has been proven to be very effective at extracting and separating contaminants within
gypsums such as rare earths, uranium, heavy metals, phosphate and fluoride. The only other
commercial processes that can achieve this are acid leaching methods which are hazardous, capital
expensive and that consume the acids used, resulting in high operational costs.

Current Position
After several years of development Carbon Cycle has moved our process from a laboratory process
to a design suitable for operation at commercial scale. We have an optimised design with credibly
estimated costs that is commercially viable for plant processing 200 thousand tonnes of
phosphogypsum per annum with expected IRR returns to the operator of above 30%.

3. Intellectual Property Rights

The CMP process is protected by a combination of patent and trade secret rights.

Patents & Patent Applications

The company currently has a patent and a patent application relating to the CMP process:

British patent (GB2557605) - granted on 19th February 2019

International patent application filing (PCT/GB2017/053697)

Other Intellectual Property Rights

In addition to the patented process, we have developed a deep understanding of the CMP chemistry
and developed optimised engineering designs. These trade secrets are as valuable as our patent
applications. We will use trade secret rules that are backed by international legislation to protect the
value of our understanding and design work to leverage licences and joint venture partnerships, in
conjunction with our patent applications.

Freedom to Operate
Carbon Cycle and its patent agents have conducted extensive patent and document searches before
filing for its patents to ensure we understood the prior art that covered the area of the proposed
patent. Those searches identified nothing that overlapped with our claims.

In addition, the applications have now been the subject of both UK and international searches and in
the UK a substantive examination. These have identified no potential infringement issues. None of
the prior art listed are current patents or current applications. We are not aware of any
infringements of any other third party IP.

In terms of implementation, the process uses no proprietary equipment designs belonging to others
that could infringe on others IP.

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4. Market Analysis
Several industries requiring clean calcium-based minerals feedstocks. Equally many industries are
seeking feedstocks of rare elements found in abundance within the contaminants that our process
can separate. Industries such as the phosphate fertiliser industry need a means of cleaning up the
large amounts of waste gypsum that is produced. All are potential markets for the CMP process.
These industries have, in some cases for decades, been seeking in vain to develop a process that
achieves what the CMP process accomplishes. For these industries, the CMP process can provide
cost savings, environmental benefits and create new revenue streams.

Carbon Cycle is focusing on two primary markets: phosphate fertiliser producers and the extraction
of phosphates and rare earth elements from mine tailings. In both applications, we would be
working with similar type feedstocks that will use the same process equipment design. Beyond
those primary markets, we have several secondary markets which may be somewhat smaller or
more specialized, which will be pursued later.

4.1 Phosphoric Acid Producers

The Opportunity
Producing one tonne of phosphoric acid (required to produce phosphate fertilisers) produces 4.5 to
5 tonnes of a waste by-product called phosphogypsum. In excess of 300 million tons of
phosphogypsum is produced annually and this figure is rising in line with the world demand for
phosphate fertilisers. The vast majority of the phosphogypsum produced is contaminated with
phosphate, fluoride, rare earths, radio-nucleotides or heavy metals and has to be stored in waste
stacks or lagoons (there are decades of past production stored in this way) that present both
environmental and financial liabilities for the owner. Typically phosphogypsum has to be neutralised
(to raise pH) using lime before it can be added to the stack or lagoon. Only a very small amount of
produced phosphogypsum meets the relevant industry standards for contamination to enable its use
in plasterboard or cement.

Meanwhile the demand for ‘clean’ gypsum for cement and plasterboard production is running at 200
million tonnes per annum and global demand is growing at 10% annually (Appendix 2) whilst
availability is reducing due to closure of coal fired power plants.

Additionally, waste phosphogypsum can contain a high level of rare earth elements and to-date
there has been no way of tapping into this valuable resource. Global demand for rare earths is also
growing sharply with a CAGR of 17.4%4 and 95 to 97% of supply dominated by China.

Value Proposition for Phosphoric Acid Producers

The CMP process can be added to existing phosphoric acid production to enable the
phosphogypsum to be purified and rare earths to be extracted. This will benefit phosphoric acid
producers by;

a) Enabling dirtier, cheaper and more plentiful phosphate rock feedstocks to be used
Producers need to keep their phosphogypsum within acceptable target levels of contamination
to be permitted to store it. To achieve this, the producer may need to buy a ‘clean’ phosphate
rock at a premium price. The CMP process enables the producer to use cheaper, more plentiful
feedstock whilst still meeting the targets for the phosphogypsum contamination levels.

4
Adamas Intelligence Report 2016

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b) Enabling ‘dirty’ phosphogypsum to be cleaned and sold rather than stored in waste stacks
Using the CMP process, the phosphogypsum meets industrial standards required for use in
cement and plasterboard. This enables phosphogypsum to be sold instead of stored. This creates
a new revenue stream and removes the costs associated with storage.

c) Eliminating or greatly reducing the use of lime to neutralise residual acidity within
phosphogypsum
Before it can be stored, phosphogypsum generally has to be neutralised to remove acidity. This
can represent a significant cost to the producer. The CMP process will remove this requirement
and the associated costs.

d) Enabling improved selling price for phosphogypsum that is sold

When phosphogypsum is sold it usually commands a very low price. This is because it has
contamination and needs to be blended with ‘good’ gypsum to meet the required industry
standards. The ‘clean’ gypsum produced by the CMP process will command full market price.

e) Allowing valuable contaminants such as rare elements and phosphate to be recovered

The CMP process enables valuable contaminants within the phosphogypsum, such as rare earth
elements, to be extracted and sold. This creates a new and potentially significant revenue
stream.

f) Enabling cheaper phosphoric acid processing plant to be used

Our process enables low cost phosphoric acid production processes to be used while producing
cleaner phosphogypsum.

g) Extends the Life of the Plant

The requirement to store the phosphogypsum produced by a phosphoric acid production plant
can be a constraining factor and several phosphoric acid plants have closed in recent years due
to lack of storage space. If the phosphogypsum is sold, this constraint is removed.

The table below provides an indication of the potential savings and revenue enhancements that
would be available for an average sized phosphoric acid plant producing 1 million tonnes of waste
phosphogypsum. The actual benefits will depend on the individual circumstances of the phosphoric
acid plant and the local labour & energy costs, the feedstock, the local markets and the level/ mix of
rare earths contained within the phosphogypsum.

Table One: Potential Savings/Revenue Enhancements for Phosphoric Acid Plant Producing
1 Million Tons of Phosphogypsum per Year

Benefit to Phosphoric Acid Producer Estimated Value Comment

per annum ($)
a) Change of Feedstock $14-20m Depends on local availability
b) Selling Phosphogypsum $7-22m Cost saving and new revenue
c) Reduction of Lime for Neutralisation $2-7m Lime @ $100 per tonne
d) Improved Selling Price/Volume $5-10m Depends on local factors
e) Sale of Rare Earths and other elements $25-40m Depends on source rock
f) Cheaper Processing Plant $60-75m One off cost
g) Extended Life of Plant $- Difficult to estimate

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The Carbon Cycle licence fees will be a mix of one-off fees and ongoing royalties. The value of the
licence fee will be based on the total benefit that the CMP process provides to the phosphoric acid
producer. This will vary from plant to plant. We will seek to take a ‘run of the mill’ licence fee of
around 7.5% of revenue on average. In line with industry practice, we will also charge a one-off
engineering fee of 5% for project delivery.

Competitors
With the sole exception of a phosphoric acid production process developed by a phosphate process
design company, we are unaware of any other commercial processes to produce lower
contamination in phosphogypsum or to purify phosphogypsum. This company’s process for this
requires 30 to 40% higher capital costs and the gypsum produced has much higher levels of
contamination compared to gypsum processed by the Carbon Cycle process. Furthermore, some
gypsum samples produced and supplied to us by this company do not meet the requirements for
supply to the cement or plasterboard industry. In addition, this phosphoric acid process design
company is now our strategic partner to develop and market our process to the phosphate fertiliser
industry.

4.2 Extracting Phosphate/REEs from Mine Tailings

The opportunity
There are many open and closed iron mines around the world (Table 2) which have tailings that
contain high levels of phosphate and rare earth elements. At present there is no viable method of
processing this material to realise the lost value of the phosphate or rare earths. The theoretical
method used for extracting rare earths from apatite minerals is through a technique called Solvent
Extraction. However, Solvent Extraction costs are not economically viable when used for mine
tailings as the level of rare earths in the feedstock is insufficient.

Value Proposition for Mine Owner

Working with phosphoric acid process , who are a phosphoric acid equipment manufacturer (Section
4.1), we have created a viable process for extracting phosphate and rare earths from iron mining
apatite wastes. We achieved this by using a standard phosphoric acid process with the CMP process
integrated. Figure 3 below outlines the process and the costings involved. This model works because
it gains the revenue from both the phosphate and the rare earths due to the addition of the CMP
process. The combined phosphoric acid/CMP process compares favourably with traditional rare
earth mining processes to deliver rare earths at a highly competitive price.

Financials
The financials shown in Figure 3 are for a mine in the USA where we have discussions ongoing and
the mine owner is keen to exploit the value in the tailings. This site has in excess of 26 million tons of
high rare earth tailings in waste lagoons.

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Figure 3. Extracting Phosphate/REEs from High Phosphorus Mine Tailings

We believe this example would support royalties of 6.9% of revenue which would result in an
average annual licence fee of circa $3.2 million. Other opportunities will be different and dependent
on the phosphate/REE make-up of the deposit and local factors such as labour, energy, markets, etc.

Iron Mining Sites with High Value Tailing Wastes

The list below shows some of the mines which have high phosphorous mine tailings that could be
targets for the extraction of phosphate and rare earths by our process.

Table 2 – List of Potential Target Mines

Mine Country Region REF5

Pea Ridge USA St Francois Mountains 1
Old Bed USA Mineville 1
Cheever USA Mineville 1
Smith USA Mineville 1
Kirunavaara Sweden Northern/ South-central 2
Malmberget Sweden Northern/ South-central 2
Grängesberg Sweden Northern/ South-central 2
Chadormalu Iran Bafq District 3
Chogart Iran Bafq District 4
Avnik Turkey Avnik 5
Los Colorados Chile Chilean Iron Belt 6
El Romeral Chile Chilean Iron Belt 7
Cerro de Mercado Mexico Chupaderos Caldera Complex 8
Olympic Dam Australia South Australia 9

5
These references can be found in Appendix 2 – References for Target Mines

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Competitors

LKAB/Easymining
We are aware of one other company who are attempting to extract phosphate and rare earths from
high phosphorous iron ore mine tailings. Swedish mining company LKAB are working on a method to
extract the phosphate and rare earths from tailings at their mines with a partner called ‘Easymining’
(http://www.easymining.se/). However, the Easymining process cannot recover the rare earth
elements from the phosphogypsum by-product which is where the majority (60-80%) of the rare
earth elements are transported to. The Easymining process also produces mono-ammonium
phosphate (MAP) which is a lower value phosphate product than the 54% P205 phosphoric acid
produced by the standard phosphoric acid process and hence the total value extracted from the
tailings will be substantially lower than with the Phosphoric acid process/CMP solution.

4.3 Secondary Markets

In addition to the primary markets outlined above, we also see the following potential secondary
markets for the CMP process:

Upgrading of waste and low-quality chalks to produce high white fillers

Useful feedstocks to make white fillers are rare. The CMP process enables even very poor quality
feedstock to be used. We are working with a global white filler company to develop the CMP process
to purify waste chalks to produce high white engineered chalk (PCC). They have accessed the process
and believe that it will be viable. This could open up a large market and licence opportunity.

Upgrading of low-quality natural gypsums and mine tailings to produce high quality gypsum
In some places good quality gypsum supplies do not exist. Upgrading poor gypsums will be useful in
these places.

Remediation of incinerator flue gas desulphurisation gypsum to produce saleable gypsum

These gypsums are very expensive to dispose of. Cleaning up this gypsum is expected to be a lower
cost option.

Remediation of water treatment sludge to produce saleable gypsum

These sludges have very small amounts of heavy metals mixed into gypsum. Disposal is costly. Using
our CMP process, the metals can be concentrated and clean gypsum produced. This would be at a
lower cost in many instances.

Extraction of valuable elements from other mining wastes

Virtually all mining processes create waste. Some of this waste will contain heavy metals and rare
earths at useful levels that our process can strip out and concentrate. We are already working with
the UK Coal Authority on waste materials from lagoons from closed mines to explore whether we
can use the CMP process to upgrade the materials to high value pigments.

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5. Sales Strategy/Route to Market

5.1 Strategic Partner – Phosphoric Acid Producers

The phosphoric acid industry, like most mature industries, is cautious and generally works through
existing personal and business relationships. To enable rapid and low resistance to implement our
process, Carbon Cycle has created a strategic partnership with a phosphoric acid process designer
who is the largest producer of phosphoric acid production equipment in the world, to market and
sell process plant based on our technology.

Phosphoric Acid Process Designer

The company we have chosen as strategic partner in this market is the world leader in phosphoric
acid equipment supply. Their sister company own and operate multiple phosphoric acid plant in
Europe and the US. The company name is very well known in the phosphate industry and they have
access to most of the world phosphoric acid producers. Sixty percent of phosphoric acid producers
globally are this company’s customers. They typically deliver 3 new phosphoric acid plants, each with
a value of several 100 million’s Euro, to clients across the world each year. They are a credible and
well trusted company.

In addition to their extensive knowledge of the phosphate industry, this phosphoric acid process
designer has a high level of technical capability and resources. They also have significant experience
in technology licensing and legal capability in relation to intellectual property and commercial
agreements. They have good knowledge of the various phosphogypsum produced around the world
and those that may present good future opportunities for REE extraction.

Our technology can be directly integrated into new phosphoric acid production plant or it can be
bolted onto existing production plant. In both situations, the plant would be operated by the plant
owners as part of normal plant operations. Licence fees will be based on the benefits achieved by
the client through cost savings and enhanced revenues.

Strategic Partner Role

As our strategic partner in the phosphoric acid arena, the phosphoric acid process designer will:

1. Help us scale the CMP process by providing funding and resources to build a test unit
2. Promote the CMP process at industry conferences and seminars
3. Undertake sales and marketing to attract and sign up clients to sub-licence agreements
4. Assist us with intellectual property management
5. Include the CMP process in their design packages for phosphoric acid plant
6. Collect the monies due from sub-licence agreements and pay Carbon Cycle monies due

We have already agreed terms of working together and are now working on the legal agreement
between us.

5.2 Strategic Partner – Rare Earth Refiners

REEtec
REEtec is a Norwegian rare earth refiner start-up that are based in Oslo and owned by Scatec AS, a
Norwegian cleantech investment group that funds companies in the renewable energy industry.
REEtec have developed a new and unique separation method for REEs. They are currently seeking to

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secure a minimum of 3000 tons/year of cerium depleted rare earth oxide (REO) to achieve
competitive scale up.

We have a tentative memorandum of understanding with them that is currently being negotiated to
a full memorandum of understanding and support. The support and assistance they are offering
includes:

 R&D support & resources

 Design of the REE concentration process
 Support to scale/commercialise the REE concentration process
 Financial modelling
 Regulations – particularly around radio-activity
 Project financing through their equity and debt partners

Usefully, as they want to expedite projects where an REE feedstock will result, Scatec have stated a
preference to be the lead investor in such CMP process implementations and to bring co-
investors/debt providers on-board. This should greatly simplify the financing of these projects.

Rare Earth Salts

Rare Earth Salts is a North American rare earth refiner start-up that is based in Nebraska. They have
developed a unique low cost method of rare earth refinement. They have considerable skills in the
separation of contaminates from rare earths to enable efficient separation of rare earths.

Rare Earth Salts has sent us a letter of intent/interest to take the contaminate concentrate produced
by our process by projects on a 50% profit share model basis subject to testing of produced
concentrate within their process plant.

5.3 Strategic Partner – Gypsum Off Takers

ZAG International
Zag International is a commodity trader that specializes in shipping gypsum. This company currently
supplies gypsum to production plants across the globe. They are interested in finding new gypsum
supplies to compensate for reducing FDG supplies in the Western world and to meet the general
increase in worldwide demand for gypsum. We have a letter of intent from them to become a
purchaser of the gypsum produced by future projects based on our process.

Knauf
We have a close working relationship with Knauf who is a large consumer of gypsum for its
plasterboard manufacturing operations across the world. Knauf is keen to find new sources of
gypsum particularly now that many coal fired power stations are closing and the supply of flue gas
desulphurisation (FGD) gypsum is reducing rapidly. They have been looking at the potential to use
phosphogypsum for their plasterboard manufacture for many years but to date this has not been
possible due to the lack of a viable purification process to remove the unacceptable levels of
contamination within phosphogypsum.

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6. Path Forward
Technical Development
Together with our phosphoric acid process design partners and located at their site in Belgium, we
will build a test unit at a scale of 30 to 50 kg of phosphogypsum per hour to prove the process and
confirm equipment selection. This is scheduled to be completed within 12 months.

Pilot Production Plant – Foskor, South Africa

A 600,000 tonne per annum production plant will be built at Foskor who are a large phosphoric acid
producer based in Richards Bay in South Africa. The phosphogypsum produced by Foskor contains a
high level of REEs which will provide a significant amount of rare earth concentrate that
Scatec/REEtec seek as feedstock for their rare earth refinery in Norway. For Foskor, the project
would present a good commercial opportunity and also a solution to their existing waste
management issues as they currently pump millions of tonnes of phosphogypsum into the ocean.
Phosphoric acid process design partners have a working relationship with Foskor and know their
process and site very well. Scatec have companies in their portfolio which are based in South Africa
and have already undertaken due diligence on the CMP process including the Foskor opportunity.
Furthermore, Scatec are prepared to organise finance for plant in order to expedite and control the
project to fit in with REEtec’s planned development. The clean gypsum produced can be sold to the
local markets and/or sold to the global gypsum market via ZAG International. For this first plant, we
will design the plant to produce clean gypsum for sale into the cement market. The technical
requirements of gypsum for use in cement are low and easy to achieve. We anticipate that the pilot
production plant would be commissioned and operational by April 2022.

For the 600,000 tonne production plant, predicted build costs are circa 35 million dollars and are
expected to increase Foskor profits by 8.4 million dollars annually.. Foskor currently produces 3.5
million tons of phosphogypsum per year.

First Mine Tailings Plant – Pea Ridge, Missouri, USA

Once the design of the pilot production plant at Foskor is complete we will start the design and
development of the first mine tailings plant at Pea Ridge, Missouri, USA. This will be undertaken in
conjunction with our phosphoric acid process design partners who will be delivering a small
phosphoric acid plant as part of the project. The phosphoric acid plant will generate 200,000 tonnes
of phosphogypsum rich in REE’s which will then be processed through the CMP process to obtain
clean gypsum and REE concentrate in addition to the phosphoric acid product. The investment
involved represents a fraction of the investment that would be required for a rare earth solvent
extraction plant. The phosphoric acid plant technology used is well established.

Predicted build cost for 200,000 tonnes of production plant to produce phosphoric acid, clean
gypsum and rare earth contaminant concentrate is circa 62 million dollars. Predicted annual profits
for the mine owner are over 24 million dollars (41.9 APR and 71.1% ROE.)

Due to lack the lack of alternative rare earth extraction from apatite based tailings technologies and
the high predicted profit margins, there is a strong incentive for and desire by the mine owners to
start this project before the completion of the Foskor project.

Subsequent Production Plant

Once our initial production plant has been running for 3 months, we will seek to add further
production plant capacity. Once our first production plant is operational, our phosphoric acid
process design partners anticipate that the addition of 3 million tons of production capacity per year

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based on our process is a reasonable sales target. This is less than 1% of global phosphogypsum
production and a target that we feel is feasible and probably conservative.

7. Financial Projections

Carbon Cycle’s Projected Income and Profit Forecast shown in Table 4 outlines the revenue, costs
and profits for the business over the next ten years and is based on the following:

Income from Primary Markets

1) Pilot Production Plant

We will charge a combined engineering fee of 5% of the capital cost of the plant and a single one-off
technology licence fee of a further 5% of the capital cost. Both fees will be shared 50/50 by Carbon
Cycle & our phosphate process design partners in accordance with our agreement. For this plant
there will be no ‘run of the mill’ royalties to reflect the first of a kind risk that Foskor are accepting.

2) First Mine Tailings Plant – Pea Ridge, Missouri, USA

Pea Ridge will be the first of the mine tailings model and combines a phosphoric acid plant with the
CMP process. This falls outside of the fee sharing agreed with our phosphoric acid process design
partners in our collaboration agreement. In this instance our phosphoric process equipment
designers will earn their usual engineering fee from the phosphoric acid plant that they will deliver
and ¼ of the engineering fee due from the CMP process, whilst Carbon Cycle will take ¾ of the one-
off 5% engineering fee and all of ‘run of mill’ royalties.

3) Subsequent Production Plant

The fees for all subsequent CMP process plant will be based on an engineering charge of 5% of the
capital cost and ‘run of the mill’ royalties averaging 7.5% of gross revenue or 25% of EBT. These fees
will be shared 50/50 with our phosphoric acid process design partners. The ‘run of the mill’ royalties
will be based on the individual circumstances and benefits delivered to the plant and may range
from 1% to 20% of gross revenue.

Royalties and Profits

The standard ‘run of the mill’ royalty in the chemical industry ranges between 1 and 25% with the
average being 4.8%. Typically royalties are taken as a percent of revenue but in some instances,
they are calculated as 25% of operating margins.

In the Projected Income and Profit Forecast, the company would be in a position to issue its first
dividend in 2023.

Income from Secondary Markets

We have made conservative estimates for income from the white filler market. Presently a global
white filler company, Minerals Technologies Inc., is evaluating our technology for the purification of
waste chalks so that they can be converted to structured white fillers. They are potential licensees
and have a significant position (70% of global market) building and operating satellite PCC
(precipitated calcium carbonate) production plant.

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We anticipate income from the outlined secondary markets (see section 4.3) over the next few
years but we have NOT included this in our Projected Income and Profit Forecast as these
opportunities are not yet sufficient developed to forecast market size or income.

8. Company Background
Carbon Cycle Ltd was originally established in 2009 to develop commercial solutions for the carbon
dioxide global emissions problem. Our initial focus was on a carbon capture and utilization process in
which captured carbon dioxide was reacted with ammonia and gypsum to create ammonium
sulphate (a fertiliser for supplying sulphur and nitrogen) and calcium carbonate (a high value white
filler).
During our development of process, we found that it was impossible to create useful pure calcium
carbonate due to the lack of clean gypsum sources. No viable methods existed to address this
problem in spite of repeated attempts to create a solution over many decades by industry. The
economics of selling white filler was critical to the process economics.

To overcome this challenge, we refocused our company’s resources on solving this mineral
purification problem. It took us four years to create discover a radically new way to purify gypsum
and calcium carbonates and to reach our current level of process development. Our company is now
exclusively focused on commercial applications of the purification technology that we have created.

9. Corporate Governance
Our company uses a board structure underpinned by articles and a shareholder agreement. Our
board currently consists of four directors. One of the directors is an elected shareholder
representative. The board meets regularly on an as needed basis. Decisions are made on a majority
basis and the rules defining this are laid out in the articles of association and shareholders
agreement. In addition, Jeffrey Price, who is a US based management consultant and Bill McAuley, a
retired chemical engineer with extensive experience operating large chemical businesses, are
advisers to the board.

10. Staffing and Company Structure

Our management team has a strong mixture of commercial focus and technical experience. The day-
to-day management is by David Sevier and Ian Thaxter. Both have successfully brought new
technology to market and licenced it in the past. Both have extensive experience running businesses.
The company directors are David Sevier, Ian Thaxter and Mike Frith and Tony Payton.

David Sevier – Director. David has 25 years’ experience in chemical and water treatment technology.
He has extensive business management experience and founded Aqueous Logic a water treatment
chemicals company. He is the co-inventor of the CMP process. BSc. Chemistry University of
Connecticut.

Ian Thaxter – Director. Ian has extensive experience in general business management, project
management, commercial negotiation, IT and logistics. HNC Mechanical and Aeronautical
Engineering.

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David Sevier and Ian Thaxter previously invented a new aerosol can technology that they
successfully licensed to the market leader in the domestic water treatment industry.

Stephen Armstrong - A senior chemical process design engineer who has decades of experience
working on projects from initial concept through to construction and operation. In his professional
career he has delivered operational and validated projects of in excess of £60 million. BEng
Manufacturing Engineering Design & Management. HND Chemical Process Technology. HND
Electrical and Mechanical Engineering.

Waqas Mirza - A chemical engineer with four years’ experience who co-invented the CMP process.
MEng. Chemical Engineering, University of Bradford

Joshua Sanders – A chemical engineer focused on the experimental information gathering on the
CMP process. MEng. Chemical Engineering, University of Sheffield

Mike Frith – Director. Mike has extensive experience in general business management, sales,
project management and commercial negotiation. Owner and managing director of a £1m+ turnover
water treatment company. He is an Incorporated Engineer.

Anthony Payton — Director and Shareholders’ Representative, elected by non-director

shareholders to directly represent their interests. BSc London University

11. Risks
Carbon Cycle Ltd is a start-up company with a new technology that has not yet been proven at scale
and has only just begun to be marketed. Potential business partners and investors should be fully
aware that Carbon Cycle Ltd is a venture that carries risk. Risks could include developmental risks to
the technology, timing issues, unforeseen markets movements that impact cost of supply inputs and
outputs, new technologies that impact on opportunities, unanticipated costs, unanticipated
government regulations, war, new trade barriers, changes to regulation environments, intellectual
property challenges, sovereign and currency exchange risk, unexpected difficulties raising capital,
debt issues if this is taken on in the future, unexpected technical issues with the process,
contractual issues, contact risks from licencing and joint venturing activities and, unforeseen
customer and licence issues. This list is not a full list of potential risks and is meant only as an
indicative list of possible risks the company may face in the future.

12. Funding Requirement

Carbon Cycle Ltd wishes to raise 1.25 million pounds (Sterling) through the sale of 250 shares at
£5000 (Sterling) each. In total, these 250 shares would represent a percentage holding of 14.8% of
Carbon Cycle Limited. There are currently 1435 shares issued held by 63 shareholders. The
investment would be in Carbon Cycle Ltd and not in a commercial CMP plant unless Carbon Cycle
Limited was to enter into a partnership relationship for an individual plant project.

This investment is expected to cover approximately two years of company operations, patent costs
and bridge us to licence income. No further investment/dilution is anticipated.

Based upon the projected company income and profit forecast, together with the potential for
future growth, we currently expect the company to have a valuation of five times its current share
value by 2024.

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We will seek when possible to give our shareholders preferential access to opportunities for
investment in projects that Carbon Cycle has partnership arrangements for.

Appendix 1 - Gypsum & Rare Earth Markets

Gypsum Market

Gypsum is primarily used to make cement (70% of global demand) and plasterboard (30%) although
this varies heavily by region. In developed countries most gypsum goes to plasterboard production
whilst in the developing world the vast majority goes to cement manufacture. Gypsum is an
essential part of cement formulas (circa 5% of cement is gypsum) and has no substitute.

Global gypsum demand is currently 275 MT per year and projected to increase by an average
compound annual growth rate of 9.9%6 to 480 MT per year by 2026. There is particular strong
demand in the growing South Asia economies including India. Many of these regions produce
phosphogypsum that is either unusable or can only be used in agriculture (commanding very low
prices).

The pricing for gypsum after being relatively steady for decades is now experiencing significant
regional price movements due to the decline of flue gas desulphurisation (FGD) gypsum produced
from the burning of coal in electrical power stations. Countries such as India lack useful deposits of
gypsum and are forced to import gypsum. Indonesia imports gypsum from Morocco in spite of the
long distance because it is an essential mineral. Many of the regions that lack domestic supplies of
gypsum produce phosphates and have large amounts of waste phosphogypsum. In these regions,
the CMP process will convert this waste to clean gypsum and avoid the need for import of gypsum.
Depending on availability, the prices for gypsum can vary from $5 (US) per tonne where FGD gypsum
is available to >$45 (US) per tonne where gypsum has to be imported to meet local demand.

Rare Earth Market

The market for refined rare earths is large and growing. In 2017 the market was 135,650 tonnes of
refined REE. The total market is predicted to reach $20 billion (US) by 2024 according to Global
Market Insights.

Rare earths are currently extracted commercially through mining processes. Relatively few useful
rare earth mineral deposits exist and they tend to be quite dilute. Rare earth extraction via mining
has significant costs and requires a process of mining, crushing, floatation, acid extraction, and
drying to produce a rare earth concentrate suitable for refining. Only very small amounts of rare
earths are currently recycled due to significant separation issues and low concentration waste
streams. Some lamp phosphors are recycled but this is a declining waste stream.

At present approximately 95% of the world supply and refining of rare earths is controlled by the
Chinese government. Much of the new electronics and green technologies rely upon rare earths. For
most of these applications, there is no substitute. The British government considers rare earths to
have the greatest elemental supply risk. Over half a trillion Euros of economic activity in the
European Union is dependent upon rare earth supply.

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The most important application for rare earth elements is the production of high strength magnets.
These cannot be created unless neodymium and praseodymium are used and hence these elements
command high prices due to strong growing demand. Access to plentiful supplies of these two
elements is critical for the expansion of electric cars (motors and batteries), for wind turbines
(stronger magnets eliminate the need for gearboxes, have lower maintenance and are 10% more
efficient) and, high performance motors. Important military applications exist for rare earths.

Adamas Intelligence estimates that the value of global annual rare earth oxides for the production of
rare earth permanent magnets totalled $1.44 billion in 2016. The firm sees demand for magnet-
oriented rare earth oxides increasing to $6.07 billion by 2025, representing a CAGR of 17.4 percent.7

Appendix 2 - References for Target Mines

1 Krishnamurthy, N. and Gupta, C. (2015). Extractive Metallurgy of Rare Earths, Second

Edition. Boca Raton: CRC Press.
2 Palsson, B., Martinsson, O., Wanhainen, C. and Fredriksson, A. (2014). UNLOCKING RARE
EARTH ELEMENTS FROM EUROPEAN APATITE‐IRON ORES. In:
ERES2014:1stEuropeanRareEarthResourcesConference. Milos.
3 Jorjani, E., Bagherieh, A., Rezai, B. (2007). 'Determination of Rare Earth Elements in Products
of Chadormalu Iron Ore Concentrator Plant (Iran) from Beneficiation Point of View', Iranian
Journal of Chemistry and Chemical Engineering (IJCCE), 26(4), pp. 11-18.
4 Hashemi, Mehdi & Zamani e Bakhtiyarivand, Masoume & Daneshjou, Mehdi. (2017). Study
Rare Earth Elements (REEs) Deposits in Iran.
5 Helvaci, C. (1984). Apatite-rich iron deposits of the Avnik (Bingoel) region, southeastern
Turkey. Economic Geology, 79(2), pp.354-371.
6 La Cruz, N., Simon, A., Wolf, A., Reich, M., Barra, F. and Gagnon, J. (2019). The geochemistry
of apatite from the Los Colorados iron oxide–apatite deposit, Chile: implications for ore
genesis. Mineralium Deposita.
7 Rojas, P., Barra, F., Deditius, A., Reich, M., Simon, A., Roberts, M. and Rojo, M. (2018). New
contributions to the understanding of Kiruna-type iron oxide-apatite deposits revealed by
magnetite ore and gangue mineral geochemistry at the El Romeral deposit, Chile. Ore
Geology Reviews, 93, pp.413-435.
8 Lyons, J. (1988). Volcanogenic iron oxide deposits, Cerro de Mercado and vicinity, Durango.
Economic Geology, 83(8), pp.1886-1906.
9 Krneta, S., Ciobanu, C., Cook, N., Ehrig, K. and Kontonikas-Charos, A. (2017). Rare Earth
Element Behaviour in Apatite from the Olympic Dam Cu–U–Au–Ag Deposit, South Australia.
Minerals, 7(8), p.135.

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Investing News, Melissa Shaw - December 11th, 2017

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Appendix 3 - Projected Income and Profit Forecast

Table 4: Carbon Cycle Ltd Projected Income & Profit Forecast (GBP 000’s)

Total 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Total Number of staff 6 6 7 8 8 9 9 9 9 9 9
Revenue
Phosphogypsum Process Licences 55,239 0 1,094 469 1,520 1,586 4,711 7,027 9,692 12,944 16,196 19,448
Chalk Process Licences 2,829 0 250 53 109 169 232 298 430 570 717 739
Total Revenue 58,068 0 1,344 522 1,629 1,755 4,943 7,325 10,123 13,514 16,914 20,187
Staff Costs
Executive and Commercial Staff 1,992 132 137 143 200 208 216 225 234 243 253 263
Engineering Staff 2,168 150 150 156 162 169 255 265 276 287 298 310
Administrative Staff 232 20 20 21 22 22 23 24 25 26 27 28
Employer NI 483 33 34 35 42 44 54 57 59 61 64 66
Pensions 244 17 17 18 21 22 27 29 30 31 32 33
Total Staff Costs 5,118 352 358 372 447 465 577 600 624 649 675 702
Overheads
R&D Equipment 252 20 60 20 20 21 21 22 22 23 23 23
Rent 239 12 12 25 25 25 25 25 30 30 30 30
Heat & Light 23 2 2 2 2 2 2 2 2 3 3 3
Insurances 52 3 5 5 5 5 5 6 6 6 6 6
Travel 131 12 12 12 12 13 13 14 14 14 15 15
Miscellaneous (lab testing etc) 93 8 8 8 9 9 9 10 10 11 11 11
Total Office Costs 790 57 99 72 74 75 76 78 84 86 87 89
Legal Costs
Legals 106 5 20 10 10 10 10 10 10 10 10 10
Intellectual Property/Patents 271 100 25 25 25 15 15 16 16 17 18 18
Accountancy 62 3 4 6 6 6 7 7 7 8 8 8
Total Legal Costs 439 108 49 41 41 31 32 33 34 35 35 36
Total Overheads 6,347 516 507 486 562 572 685 711 742 769 797 827

Depreciation 207 4 16 20 24 28 28 21 21 22 22 23

Net Profit 51,514 -520 821 16 1,042 1,155 4,229 6,594 9,360 12,723 16,094 19,338

Corporation Tax 9,374 0 156 3 188 208 761 1,187 1,685 2,290 2,897 3,481

Profit after Tax and Depreciation 42,140 -520 665 13 855 947 3,468 5,407 7,675 10,433 13,197 15,857

Accumulated Profit 108,607 -520 145 158 1,012 1,959 5,427 10,834 18,509 28,943 42,140 57,997

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