ICC_Corporate Presentation_Sept 2013.pdf

7/27/2019 ICC_Corporate Presentation_Sept 2013.pdf

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Corporate Presentation

September 2013

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TSX-V: INP


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This Presentation discloses management policies, investment strategies and courses of conduct that may constitute forward-looking

information within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, includedherein may be forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminologysuch as plans, expects or does not expect, proposed, is expected, budgets, scheduled, estimates, forecasts, intends,anticipates ordoes not anticipate, orbelieves, or variations of such words and phrases, or by the use of words or phrases which statethat certain actions, events or results may, could, would, or might occur or be achieved. This forward-looking information reflects theCompanys current beliefs and is based on information currently available to the Company and on assumptions the Company believes arereasonable at the time of preparation. These assumptions include, but are not limited to, the actual results ofinvestees being equivalent to orbetter than estimated results by the Company. Forward-looking information is subject to known and unknown risks, uncertainties and otherfactors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from thoseexpressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business,economic, competitive, political and social uncertainties; commodity prices; cyclical nature of the agricultural industry; weather; the earlystage development of the farming operations or dishonesty of the streaming partners; reliance on Messrs Emsley, Nystuen, Farquhar, andBurgess, uncertainty in identifying and structuring streaming agreements, liquidity of investments, potential conflicts of interest, failure of theCompany to meet targeted returns, limited transferability of Shares, defaulting streaming partners, competition; changes in project parametersas plans continue to be refined; delay or failure to receive board or regulatory approvals; changes in legislation, including environmentallegislation affecting the Company and its streaming partners; timing and availability of external financing on acceptable terms; conclusions ofeconomic evaluations; and lack of qualified, skilled labour or loss of key individuals. Although the Company has attempted to identifyimportant factors that could cause actual results to differ materially from those contained in forward-looking information, there maybe otherfactors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicablesecurities laws. As a result of these risks and uncertainties, actual events or results and the actual performance of the Company or its business

may be materially different from those reflected or contemplated in the forward looking statements or information. Likewise, in considering theprior performance information contained herein, prospective investors should bear in mind that past performance and experience is notnecessarily indicative of future results, and there can be no assurance that the Company will achieve comparable results.

The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the1933Act), or any state securities laws. Accordingly, these securities may not be offered or sold within the United States of America or to a U.S.Person (as such term is defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities lawsor an exemption from such registration is available.

Forward Looking Information


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Board of Directors & Special AdvisorName Highlights

Doug EmsleyChairman

Co-Founder and President of Assiniboia Capital and Palliser Farmland Management Corp. President of Emsley & Associates (2002) Inc., Chairman of Security Resource Group Inc. and Sabre West Oil & Gas

Ltd. Board member Bank of Canada, Public Policy Forum, Saskatchewan Roughriders Football Club

Brad FarquharDirector

Co-Founder, Vice-President & CFO of Assiniboia Capital and Palliser Farmland Management and President of NomadCapital Corp.

Director of Greenfield Carbon Offsetters Inc., Frontier Centre for Public Policy, and SIM Canada Member of the Regina & District Chamber of Commerce Policy Committee

David LaidleyIndependent Director

Chairman Emeritus, Deloitte Touche LLP (Canada) Director, Aimia Inc., EMCOR Group Inc., ProSep Inc., Bank of Canada, Nautilus Indemnity Holdings Ltd. CPA (Quebec)

Dr. Lorne HepworthIndependent Director

President of CropLife Canada and Chairman of Genome Canada, Director of CARE Canada Independent Review Committee Assiniboia Farmland Limited Partnership Member, Canadian International Food Security Research Fund Scientific Advisory Committee Former Saskatchewan Minister of Agriculture, Finance, Education, and Energy & Mines

David A. Brown, QCIndependent Director

Counsel, Davies Ward Phillips & Vineberg LLP Former Chairman & CEO Ontario Securities Commission (OSC) Former Chair, Board of Directors, Canadian Employment Insurance Financing Board

Member, Investment Advisory Board, Westerkirk Capital Inc. Director & Member, Funds Advisory Board, Invesco Trimark Group of mutual funds

Special Advisor:

John BudreskiSpecial Advisor

CEO, Morien Resources and Director, Erdene Resource Development Director, Sandstorm Gold Ltd., Sandstorm Metals & Energy Ltd. and Delta Gold Ltd. Director, Alaris Royalty Corp. Formerly Vice-Chairman, Cormark Securities, President & CEO of Orion Securities Inc., and Head of Investment

Banking, Scotia Capital Inc.


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Name Highlights

Doug EmsleyPresident, CEO &Chairman of the Board

Co-Founder and President of Assiniboia Capital and Palliser Farmland Management Corp.

President of Emsley & Associates (2002) Inc., Chairman of Security Resource Group Inc. and Sabre West Oil & GasLtd.

Board Member Bank of Canada, Public Policy Forum, Saskatchewan Roughriders Football Club, GreenfieldCarbon Offsetters Inc.

Former Board Member Royal Utilities Income Fund (TSX)

Brad FarquharExecutive VP, CFO &Director

Co-Founder, Vice-President & CFO of Assiniboia Capital and Palliser Farmland Management and President of

Nomad Capital Corp.

Director of Greenfield Carbon Offsetters Inc., Frontier Centre for Public Policy, SIM Canada

Member of the Regina & District Chamber of Commerce Policy Committee

Gord NystuenVP, Market Development

Previously served as VP of Corporate Affairs at SaskPower Former Deputy Minister of Agriculture, Chief of Staff to the Premier of Saskatchewan and Chairman of Saskatchewan

Crop Insurance Corporation Partner, Golden Acres Seed Farm & Director of Avena Foods Ltd.

Jamie BurgessDirector of Finance &Administration

Director of Finance & Administration for Assiniboia Capital Corp. and Palliser Farmland Management Corp. Previously served as a senior manager at Deloitte & Touche LLP

Director of Saskatchewan Science Centre

Management


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Launched first farmland private equity fund in Canada in 2005

Raised $53 million in equity through eight private & public offerings since 2005

$40 million farmland mortgage facility from Farm Credit Canada

Largest farmland investment fund in Canada

Now a diversified $125+ million portfolio of ~117,000 acres of Saskatchewanfarmland

136 high quality farming tenants across Saskatchewan

20.2% IRR (net of all fees) since inception in 2005

Assiniboia LP Units have appreciated from $18 / unit in 2005 to ~$59 / unit in 2013

Since inception, initial investors in Assiniboia have also received $4.93 / unit in cash distributions

Management Track Record

Leaders in Canadian Agriculture Investing


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Input Capital Corporation (Input Capital or the Company) is the worlds first agriculturalcommodity streaming company

Input Capital was created to bridge the gap in available funding sources for farm workingcapital by providing non-constraining long-term working capital aimed at boosting productionthrough agronomics

Crop insurance mitigates downside crop yield risk while the negotiated interest in cropproduction allows Input Capital to participate in any increased crop yield

Canola is the initial focus of Input Capital as it is the most profitable commodity for Canadianfarmers with an addressable target market of 50,000+ farmers in Western Canada alone

Management has developed a strong track record in the ag-sector, currently managing aportfolio of $125+ million of farmland rented to 136 farmers, at least 75 of whom are canolaproducers

The Worlds Premier Ag-Streaming Company


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Investment Highlights

GameChanger for Farmers Accelerates farm growth and productivity and improves bargaining power with grain handlers and input providers

100% of Current Streams Will Generate Revenue in 2013 No production delays or capex overruns and close to immediate revenue (unlike many mining streams)

Scalable, Diversifiable Model where Key Relationships Create Barriers to Entry Best in class farming relationships with the largest investor-to-farmer footprint in all of Saskatchewan

Strong Risk / Return Profile with Meaningful Future Growth Potential Excellent returns with potential IRRs of 20-40%+ and unlevered, operating cash flow margins of 50%+

Strong Board and Management Team with Demonstrated Track Record in Ag-Space High profile experienced management team


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The Opportunity

Western Canadas agriculture sector is significantly undercapitalized

and offers excellent, overlooked investment opportunities

Source: Statistics Canada

Big Market Canadian farm assets = $330+ billion with Western Canada accounting for 52% 50,000+ canola farmers in Canada

DemographicallyDriven

Massive intergenerational transfer of farm assets over the next 10-15 years:

Expected to be over $30 billion in Saskatchewan alone Aging Western Canadian farmers more than 35% over age of 55 (vs. Canada @ 30%)

Consolidation ofSector

Ongoing consolidation of farming sector

Many farmers are faced with once-in-a-lifetime expansion opportunities they cannot affordon their own

UnderservedMarket

Significant shortage of financing available for working capital in the farming sector

that matches the needs and requirements of farmers

Unlimited supply of farmland mortgage capital (FCC - $23 billion book) and leasing capital(i.e. John Deere)

Precision farming is more capital intensive than older, less productive farming methods


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Business Process

1. Up Front Payment

Up front payments to farmerfor a Crop ProductionInterest

2. Consulting AgrologistAssigned

Retain services of a science-based agrologist

3. Farmer Grows the Crop

The farmer and theagrologist work to grow thebest possible crop

4. Crop Payment

The farmer delivers InputCapitals share of crop to

established elevators and ispaid a fixed price/tonne

5. Upside Potential

Input Capital receives ashare of measured yieldimprovement on farmresulting from improvedagronomy

6. New StreamingContracts

Free cash flow reinvested innew streaming contracts forcompounding returns


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Risk Management

Crop Shortfall(i.e. weather, bad crop, etc.)

Geographic diversification

Streaming contracts call for f ixed tonnage and are not yield dependent

Crop Insurance, paid for by the farmer, guarantees 70% ofthe farmers long-term averageyield

Science-based agrologist on every farm helps ensure optimum crop yields

Ability to accept other commodities of equal value in lieu of canola

Strong track record with ~$19 million deployed within the first 6 months of operations

Relationships with farm advisory firms provide thousands of potential clients

Assiniboia Farmland provides a pipeline of 75 canola farmer tenants

Typically-sized deal with each tenant would require over $130 million in capital

Capital Deployment

Counterparty Risk

Potential Concerns Mitigating Factors

Contractual protection on the use of proceeds

Strong security covenants embedded into every contract

General Security Agreement on the entire farm

Purchase Money Security Interest on inputs used and crops being grown (like a Crop Lien)

Second Mortgage against farmland in many cases

Term life insurance provides an easy exit in the event of death of the farm operator


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Other Crops Grown by Existing Farm Partners

Farms produce other crops that provide ancillary streaming opportunities i.e. grains (wheat, barley, oats,durum), pulses (lentils, peas, beans), and oilseeds (mustard, flax)

Geographic Expansion

Expansion to Northern U.S. states that grow similar crops to Western Canadian farms i.e. ND, SD, MT

Expansion to global food companies and overseas farmers that deal in a variety of agricultural

commodities

Growth Opportunities

Additional capital to be raised to match farmer demand

Growing marketing channels lead to large deal-flow

3 million acres 6+ million acres 3,000+ farm clients75+ canola farmers

Pending Strategic Relationship
http://www.agritrend.com/


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Inputs Crop Revenue

Traditional Farming $200/acre $150-$250/acre

Input Capital $300/acre $300-$450/acre

Benefits to Farmers

Farmer Input

Leverage to canola price

No crop input overruns

No ongoing capex

Fixed cash costs for life ofcontract

Buying inputs off peak-season

$25 - $30 per acre savings on fertilizer alone, reducing fertilizer costs by 20% to 25%

By buying and applying fertilizer in the fall, spring seeding logistics are improved and de-risked

20-40%

Discounts for cash purchases 3%

Interest Costs 10%

Flexible Crop Marketing Program 6-12%

Total (Inherent Cost of Capital) 39-65%

It is expensive to be poor we help farmers drive down their cost of capital.


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Ideal farm has 3,000 12,000 acres of land located in dark brown & black soil zones ofManitoba, Saskatchewan, and Alberta

Young farmers who possess the agronomic skills to grow great crops but require capital

partners to finance the intergenerational transfer of the farm

Established farmers with large expansion opportunities

Pre-qualified farmers without sufficient working capital to achieve their production goals orpotential

Farmers looking to expand significantly without degrading their balance sheets

Profile of Target Farmers

Per Acre Capital Required

Size of Farm: 4,000 acres

Farmland $1,000+/acre $4,000,000+

Equipment ~$337/acre ~$1,350,000

Annual Inputs $200+/acre $800,000+

Totals $1,537+/acre $6,150,000+

Source Assiniboia Farmland, Iron Search, Input Capital


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Sample Streaming Transaction Total farm size = 4,000 acres

Acres of canola = 1,500

Upfront payment = $1.2 mm

Base tonnes = 734 tonnes / yr or 924 tonnes / yr

Crop payment = $0 / tonne or $100 / tonne

Bonus tonnes (upside) = 15% of yield over 30 bu/acre

Bonus tonnes crop payment = $200 / tonne

1 tonne = 44.092 bushels

Year Tonnes Market Price/ Tonne

CropPmt

Input CapitalCash Flow

Upfront Pmt ($1,200,000)

2013 734 $500 $0 $367,000

2014 734 $500 $0 $367,000

2015 734 $500 $0 $367,000

2016 734 $500 $0 $367,000

2017 734 $500 $0 $367,000

2018 734 $500 $0 $367,000

@ $450/tonne: IRR = 16.5%@ $500/tonne: IRR = 20.7%@ $550/tonne: IRR = 24.7%

*If annual cash flows are reinvested in new streaming deals, IRRs increase to 27.3% at $450 / tonne, 34.2% at $500 / tonne and 40.9% at $550 / tonne

Tonnes Market Price/ Tonne

CropPmt

Input Capital CashFlow

($1,200,000)

924 $500 $100 $369,600

924 $500 $100 $369,600

924 $500 $100 $369,600

924 $500 $100 $369,600

924 $500 $100 $369,600

924 $500 $100 $369,600

$0 Crop Payment $100 Crop Payment


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Capital Structure

We help farmers unlock their productive potential

Capital Structure Shareholders

Price (September 3) $1.74

Shares Outstanding 35.6 million

Market Cap $62 million

Fully Diluted Shares 39.2 million

Cash $2.0 million

Directors & Mgmt30.8% Basic

37.1% FD

Private Individual 5.6%

Exploration CapitalPartners 2000 LP

4.2%

Gendis Inc. (TSX: GDS) 2.8%

Widely Held 56.6%

Source: Company Filings & Records, TSX.com.


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Appendix 1: Canola Streaming Agreements


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Canola Streaming Agreements

Current

SK-1 SK-2 SK-3 SK-4 SK-5 SK-6 SK-7 SK-8 SK-9 AB-1Portfolio

Totals

Province SK SK SK SK SK SK SK SK SK AB

Crop District 6A 5B 2B 5B 5A 1B 5B 7A 5A 7

Crop Ins Risk Zone 15 14 17 17 11 5 14 16 11 22

Rural Municipality/County 310 274 338 338 215 93 277 261 185 MackenzieFarm Size (acres) 4,000 8,000 2,191 1,727 40,000 8,664 4,000 2,300 7,000 8,000 85,882

Canola Acres (2013) 2,000 3,000 700 700 22,000 4,332 1,500 800 3,000 4,000 42,032

Contract Length (years) 7.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.10

Upfront Payment $1,300,000 $2,528,200 $603,002 $502,501 $7,460,000 $2,500,000 $1,200,000 $400,000 $1,743,750 $1,000,000 $19,237,453

Base Tonnes (2013) 700 1,500 360 300 8,550 2,075 734 370 1,675 888 17,152

Bonus Tonnes (2013) 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

Crop Payment per Tonne $0 $0 $0 $0 $100 $100 $0 $100 $100 $100 $79.05

Input Yield (bu/ac) 15.4 22.0 22.7 18.9 17.1 21.1 21.6 20.4 24.6 9.8 18.0

% of Est. Farm Revenue 22% 23% 21% 22% 27% 30% 23% 20% 24% 14% 24%


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Existing Streaming Contracts

Source: Saskatchewan Ministry of Agriculture, Input Capital

High quality asset base, well-

diversified by geography

10 producing farms in 2013

All new contracts in 2013

Avg. contract duration = 6.1 years

Avg. contract size = $1.75 million

Farm partners range in size from1,700 40,000 acres farmed

Most recent contract representsfirst expansion of Input into Alberta

Operating in a well-established

industry in an area of negligible

political risk


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Appendix 2: Canola Industry


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Ag-Industry Fundamentals

IncreasedPopulation

Long-Term Rising

Global Incomes

Decreasing ArableLand

Long-term food production must increase to keep pace with needs of a rising

population with the U.N. forecasting the global population will grow to 8+ billion within

the next decade.

Economic growth in developing nations (i.e. China, India) fueling demand for more

and better food, driving demand for meats and better quality grains.

Decreasing amount of arable farm acreage per capita is increasing pressure on

farmers to produce more food from less land by increasing crop yields.

Recent Interest inBiofuels

Rising interest and production in biofuels increasing demand for all grain products and

feedstock commodities.


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Global Canola Production

Canola is a crop that produces pods from which seeds are harvested and crushed to create canola oil and meal.

Canada is one of the largest producing countries of canola and the largest exporter, exporting more than twothirds of global canola.

Exports from Canada are driven primarily by demand in China, Japan, Mexico, the U.S., and other parts of Asia.

Canola produced in Canada is used for food (oil, animal feed) and industrial products (bio-fuels, lubricants, etc).

Source: USDA (2012/13) Source: International Grains (2011/12)

Global Canola Producers Global Canola Exports

Canada,72%

Australia,17%

Ukraine,8%

Other,3%

EU-27,32%

(19.9mT)

Canada,24%

(14.7mT)

China,19%

(12mT)

India,11%

(6.9mT)

Other,13%(8mT)


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Sources: Statistics Canada, Industry Canada Trade Data Online, Potash Corporation of Saskatchewan, Sask Mining Association, Canola Council of Canada

Canola is Bigger than the Potash Industry

Canola is a bigger global market than potash Canola is a bigger export business for Canada than potash

Canadian canola exports have been growing at a CAGR of 18.3% over the last 10 years (compared to13.6% for potash)

Canola is Canadas #7 export to the world (potash is #10)

Canadian canola exports have double the market share in global export markets than potash

Canadian canola exports to China are 8.5x the value of Canadian potash exports to China Canadian canola exports to China have been growing at a CAGR of 36.4% over the last 10 years

(compared to 4.1% for potash)

Canola represents 16.0% of all Canadian exports to China (compared to 1.9% for potash)

Canola is Canadas #1 export to China (potash is #12)

Canola employs 228,000 Canadians. Potash employs 5,041 Canadians.

There are three companies providing investment exposure to Canadian potash production: POT, AGU,MOS. They have a combined market cap of $60 billion.

In canola, there are 50,000 canola producers, but only one public company Input Capital Corp.


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Country % of CanadianExport Market for

Canola (2012)

Volume Growth Rate(Last 5 Years)

Canola Rank AmongImports from Canada

Ranked by $ Value(2012)

Canola Value as %of Total Value ofGoods Imported

from Canada(2012)

China 36.3% 333.0% 1 15.6%Japan 28.2% 21.1% 2 14.4%

Mexico 18.1% 35.1% 1 17.8%

United ArabEmirates

6.9% 216.6% 1 22.7%

USA 5.0% 75.5% 25 0.4%

Pakistan 2.7% 48.1% 1 44.5%

Bangladesh 1.2% 130.2% 2 15.8%

Others 1.5% 129.5%

Source: Statistics Canada, as published in the Western Producer, March 21, 2013; CanolaCouncil.org; Industry Canada Trade Data Online

Canadian Canola Exports

Canadian exports of canola continue to be driven by demand from Asia and emerging markets with Chinaaccounting for the largest share of Canadian exports at 36.3%.


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North American Canola Production

Input Capital Targetarea

Canada is the largest single producer ofcanola with production concentrated inWestern Canada (specifically, Saskatchewan),consisting of 20+ million acres seeded tocanola.

There are also approximately 1.7 millionseeded acres of canola grown in the north

central and south eastern U.S. with NorthDakota as the dominant producing region.

Source: Canola Council of Canada, U.S. Canola Association
http://www.canolacouncil.org/images/gallery/CanadaUS%20Growing%20Regions%20Map.JPGhttp://www.canolacouncil.org/images/gallery/CanadaUS%20Growing%20Regions%20Map.JPG


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Western Canadian Expansion

Source: Food and Agriculture Organization of the U.N.

Major Soil Zones of the Prairie Region

The ideal combination of soil organic matter and climate for canola production is found in the Black,Dark Brown, and Dark Gray soils of Western Canada.
http://www.google.ca/url?sa=i&source=images&cd=&cad=rja&docid=HDrUBjtTQlCwPM&tbnid=-IKWQo3lsiBQBM:&ved=0CAgQjRwwAA&url=http://www.fao.org/ag/AGP/AGPC/doc/Counprof/Canada/Canada.html&ei=wDxCUf68H-SI2gXqu4H4BA&psig=AFQjCNEs3juh-4drifCX9dbVWLnU-Zw0rw&ust=1363381824572949http://www.google.ca/url?sa=i&source=images&cd=&cad=rja&docid=HDrUBjtTQlCwPM&tbnid=-IKWQo3lsiBQBM:&ved=0CAgQjRwwAA&url=http://www.fao.org/ag/AGP/AGPC/doc/Counprof/Canada/Canada.html&ei=wDxCUf68H-SI2gXqu4H4BA&psig=AFQjCNEs3juh-4drifCX9dbVWLnU-Zw0rw&ust=1363381824572949


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Canadian Canola Industry

Canada is the dominant exporter ofcanola to the world with domesticproduction having increased by ~300%over the last decade.

Canola is one of the worlds mostimportant oilseed crops, and the mostprofitable commodity for Canadian

farmers, representing 25% of all farmcash receipts in the country.

Canola is grown by 52,000 Canadianfarmers with 52% of Canadian canolaoriginating from Saskatchewan.

Canadas dominant export position ofcanola creates a natural hedge forpricing.

When production falls due to poor cropresults, prices tend to rise tocompensate for lost tonnage.

For example, when 8 mm acres wentunseeded in W. Canada in 2010, canolaprices rose from $373/tonne to over$600/tonne

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000Alberta Saskatchewan Manitoba

Western Canadian Canola Production in Tonnes

Source: Canola Council of Canada


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Canola Volatility and Prices

Canola prices have risen significantly over the last two years driven by increased demand from Asia, theemerging biofuels industry., and the war on trans fats in western economies.


Historical Canola Prices 10 Year

$-

$100

$200

$300

$400

$500

$600

$700

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

CADperTonne

Canola Monthly Price


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The average canola in Saskatchewan is typically 25-30 bushels / acre while the yield potential of modern

canola varieties, using modern farm practices with optimal weather, is between 60-70 bushels/acre.

With the right agronomic program, farmers can focus on optimizing the yield potential of their crops

through;

Soil & tissue testing;

Seed & seed treatments;

Seeding precision;

Weed control;

In-crop operations perfect timing & application;

Crop residue management; and

Yield goals.


Value Creation of Agronomics
http://www.agritrend.com/


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Issuer: Input Capital Corp.

Ticker Symbol: TSX-V: INP

President, CEO & Chairman: Doug Emsley

(306) [email protected]

Executive VP, CFO & Director: Brad Farquhar(306) [email protected]

Contact Information
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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