Star Royalties Ltd (TSX-V:STRR) said it has increased its gross revenue royalty on carbon offset credits from forested lands in Elizabeth Metis Settlement (EMS) in Alberta to 40.5%.
The royalty is owned by Star’s “pure green” subsidiary Green Star Royalties, which will receive a share of revenue from the creation and sale of carbon offset credits.
The royalty is now expected to generate annual revenues equivalent to around 9,000 carbon offset credits starting in 2023, expanding Toronto-based Star’s unique carbon credit portfolio.
READ: Star Royalties strikes innovative agreement with Bluesource to create verified carbon offset credits for farming industry
The move also provides carbon finance for improved forest management practices in Alberta to create biosequestration-based compliance carbon offset credits, according to a statement from Star.
As per the term sheet, Green Star paid EMS C$600,000 in cash to increase its royalty to 40.5% of EMS’s revenue share from the forest project. The royalty covers the entire forest project and has a term of the earlier of 10 years commencing on the date EMS receives any gross revenue from the monetization of carbon offset credits, or the date until the first 225,000 carbon offset credits are issued and sold in connection with the project.
Star Royalties CEO Alex Pernin told investors that the project has the potential to sequester significant amounts of atmospheric CO2 from enhanced management of their forest resource.
“This upsizing of our royalty not only represents a pure green investment in a tier-one jurisdiction with cash flow visibility, but it also highlights the intuitive and replicable structure of our revenue sharing business model,” Pernin said.
“This re-investment also demonstrates our ability to partner with Indigenous communities to unlock their many carbon sequestration opportunities. Our company is committed to sustainable environmental solutions and continues to view this as a highly scalable business model with attractive returns."
The EMS forest project covers a forested area of 15,457 hectares around 230 kilometres northeast of the provincial capital city of Edmonton. Carbon offset developer and marketer Bluesource is assisting EMS in developing the project to generate carbon offset credits that can be sold to federally regulated industrial emitters. Revenue will be split with the majority going to EMS and the remainder to Green Star Royalties.
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