March 2, 2023 | 01:06 ET~  

   
Base Carbon Carbon Innovation
Rachel Walsh, CFA Analyst
rachel.walsh@bmo.com (403) 515-1517
BCBN-NEO
  Rating
Outperform(S)
Price: Mar-1
$0.48
Target
$1.25
Total Rtn
160% Legal Entity: BMO Nesbitt Burns Inc.

 
Not Proceeding With Final Phase of the HCBL
Acquisition
 
Bottom Line:
Slightly Positive. We believe the possibility of Phase 3 of the acquisition of HCBL could  
have been acting as an overhang on the stock given the original terms disclosed. In
  2YR Price Volume Chart
0.90
our view this was a prudent move by management, and we believe both Base and
0.80
HCBL remain strategically aligned following the structure and ownership agreements
0.70
established from the first two phases of the acquisition. We maintain our C$1.25 target
0.60 6
and Outperform (Speculative) rating. 0.50 4
  0.40 2
Key Points
  0.30
Sep Mar
0

HCBL Acquisition Status Update. Base Carbon provided an update on the phased LHS: Price (C$) / RHS: Volume (mm) Source: FactSet

acquisition of Hardwick Climate Business Limited (HCBL), where both Base and HCBL  
have mutually agreed to not complete the third and final phase of the acquisition.
As a reminder, HCBL brings a depth of knowledge and experience in environmental
commodities markets to the story. Base currently owns 49.9% of HCBL and the two
share an equity ownership of the joint venture entity Base Carbon Capital Partners
Corporation (BCCPC) with Base owning 78% and HCBL the remaining 22% (Base has an
89% total ownership of BCCPC). We believe the current structure still ensures that the
two groups remain strategically aligned. Both Base and HCBL are currently working on a
master service agreement regarding the terms of the forward operating relationship.
Avoiding Dilution. Based on the disclosures available in the listing statement, Phase
3 of the acquisition could have included an incremental consideration of US$8.7 million
given the current share price through a significant issuance of Base Carbon shares. Had
the company proceeded this could have been 5.7% dilutive on a NAV basis compared
to our base case estimates. We intentionally did not build Phase 3 of the acquisition
into our estimates and see no changes as a result. We view this as a prudent move by
management and believe this may have been acting as an overhang on the stock.
Valuation and Recommendation. Base continues to trade at 0.4x NAV compared to its
royalty and streaming peers at 0.9x. Base will start generating positive cash flow in the
back half of this year, significantly ahead of its carbon peers. Interestingly, we estimate
that the company’s cash balance will exceed its market cap in 2025. We maintain our
Outperform (Speculative) rating and C$1.25 target.
Company Description
Base Carbon, Inc. provides financing solutions and
development expertise to the global voluntary carbon
market. It seeks to utilize technologies within the evolving
carbon industry to enhance efficiencies, commercial
credibility, and trading transparency.

This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not
BCBN-NEO Glossary Company
registered as a research analyst(s) under FINRA rules.
For disclosure statements, including the Analyst Certification, please refer to page(s) 2 to 5. Research   Models
 
 Base Carbon Rating History as of 03/01/2023
I:OP:C$1.25
09/29/2022
C$1.40

C$1.20

C$1.00

C$0.80

C$0.60

C$0.40
Apr 2020 Jul 2020 Oct 2020 Jan 2021 Apr 2021 Jul 2021 Oct 2021 Jan 2022 Apr 2022 Jul 2022 Oct 2022 Jan 2023

Closing Price Target Price

Outperform (OP); Market Perform (Mkt); Underperform (Und); Speculative (S); Suspended (Spd); Not Rated (NR); Restricted (R)

Source: FactSet, BMO Capital Markets

IMPORTANT DISCLOSURES
Analyst's Certification
I, Rachel Walsh, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or
issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views
expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and
their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in
generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service
to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These
analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures

Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Base Carbon.

Methodology and Risks to Target Price/Valuation for Base Carbon (BCBN-NEO)

Methodology: Given the early-stage nature of the company, we base our target price methodology entirely on net asset value.

Risks: Current risks include delivery risk, both in timing and total volume, and marketing risk of carbon credits.
Distribution of Ratings (March 01, 2023)

Rating category BMOCM US BMOCM US IB BMOCM US IB BMOCM BMOCM IB StarMine

BMO rating
Universe* Clients** Clients*** Universe**** Clients***** Universe~
Buy Outperform 48.6 % 18.6 % 55.0 % 53.5 % 58.1 % 57.7%
Hold Market Perform 49.0 % 13.8 % 41.2 % 44.7 % 39.5 % 37.5%
Sell Underperform 2.5 % 25.0 % 3.8 % 1.5 % 1.9 % 4.8%

* Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
*** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services
as percentage of Investment Banking clients.
~ As of April 1, 2019.
Ratings Key (as of October 2016)
We use the following ratings system definitions:

Base Carbon | Page 2 March 2, 2023

OP = Outperform - Forecast to outperform the analyst’s coverage universe on a total return basis;
Mkt = Market Perform - Forecast to perform roughly in line with the analyst’s coverage universe on a total return basis;
Und = Underperform - Forecast to underperform the analyst’s coverage universe on a total return basis;
(S) = Speculative investment;
Spd = Suspended - Coverage and rating suspended until coverage is reinstated;
NR = No Rated - No rating at this time; and
R = Restricted - Dissemination of research is currently restricted.
The total return potential, target price and the associated time horizon is 12 months unless otherwise stated in each report. BMO Capital Markets'
seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap,
Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Rating System
(April 2013 - October 2016)
http://researchglobal.bmocapitalmarkets.com/documents/2013/rating_key_2013_to_2016.pdf
(January 2010 - April 2013)
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For Important Disclosures on the stocks discussed in this report, please go to https://researchglobal0.bmocapitalmarkets.com/public-disclosure/
or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1
First Canadian Place, Toronto, Ontario, M5X 1H3.
Dissemination of Research
Dissemination of fundamental BMO Capital Markets Equity Research is available via our website https://
researchglobal0.bmocapitalmarkets.com/. Institutional clients may also simultaneously receive our fundamental research via email and/or via
services such as Refinitiv, Bloomberg, FactSet, Visible Alpha, and S&P Capital IQ.
BMO Capital Markets issues a variety of research products in addition to fundamental research. Institutional clients may request notification
when additional research content is made available on our website. BMO Capital Markets may use proprietary models in the preparation of
reports. Material information about such models may be obtained by contacting the research analyst directly. There is no planned frequency
of model updates.
The analyst(s) named in this report may discuss trading strategies that reference a catalyst or event that may have a near or long term impact
on the market price of the equity securities discussed. In some cases, the impact may directionally counter the analyst’s published 12 month
target price and rating. Any such trading or alternative strategies can be based on differing time horizons, methodologies, or otherwise and are
distinct from and do not affect the analysts' fundamental equity rating in the report.
Research coverage of licensed cannabis producers and other cannabis-related companies is made available only to eligible approved North
American, Australian, and EU-based BMO Nesbitt Burns Inc., BMO Capital Markets Limited, Bank of Montreal Europe Plc and BMO Capital Markets
Corp. clients via email, our website and select third party platforms.
~ Research distribution and approval times are provided on the cover of each report. Times are approximations as system and distribution
processes are not exact and can vary based on the sender and recipients’ services. Unless otherwise noted, times are Eastern Standard and
when two times are provided, the approval time precedes the distribution time.
For recommendations disseminated during the preceding 12-month period, please visit: https://researchglobal0.bmocapitalmarkets.com/public-
disclosure/.
General Disclaimer
"BMO Capital Markets" is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank
N.A. (member FDIC), Bank of Montreal Europe p.l.c, and Bank of Montreal (China) Co. Ltd, the institutional broker dealer business of BMO Capital
Markets Corp. (Member FINRA and SIPC) and the agency broker dealer business of Clearpool Execution Services, LLC (Member FINRA and SIPC)
in the U.S., and the institutional broker dealer businesses of BMO Nesbitt Burns Inc. (Member Investment Industry Regulatory Organization of
Canada and Member Canadian Investor Protection Fund) in Canada and Asia, Bank of Montreal Europe p.l.c. (authorised and regulated by the
Central Bank of Ireland) in Europe and BMO Capital Markets Limited (authorised and regulated by the Financial Conduct Authority) in the UK and
Australia. Bank of Montreal or its subsidiaries ("BMO Financial Group") has lending arrangements with, or provide other remunerated services
to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital
Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents
have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete.
However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any
errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its
contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report
is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed
as advice designed to meet the particular investment needs of any investor. Nothing herein constitutes any investment, legal, tax or other

Base Carbon | Page 3 March 2, 2023

advice nor is it to be relied on in any investment or decision. If you are in doubt about any of the contents of this document, the reader should
obtain independent professional advice. This material is for information purposes only and is not an offer to sell or the solicitation of an offer
to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on
a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO
Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or
sell securities of issuers discussed herein.
Additional Matters
This report is directed only at entities or persons in jurisdictions or countries where access to and use of the information is not contrary to local
laws or regulations. Its contents have not been reviewed by any regulatory authority. BMO Capital Markets does not represent that this report
may be lawfully distributed or that any financial products may be lawfully offered or dealt with, in compliance with regulatory requirements in
other jurisdictions, or pursuant to an exemption available thereunder.
To Australian residents: BMO Capital Markets Limited and Bank of Montreal are exempt from the requirement to hold an Australian financial
services licence under the Corporations Act in respect of financial services they provide to wholesale investors (as defined in the Corporations
Act). BMO Capital Markets Limited is regulated by the UK Financial Conduct Authority under UK laws, and Bank of Montreal in Hong Kong is
regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission, which differ from Australia laws. This document is
only intended for wholesale clients (as defined in the Corporations Act 2001), Eligible Counterparties or Professional Clients (as defined in Annex
II to MiFID II) and Professional Investors (as defined in the Securities and Futures Ordinance and the Securities and Futures (Professional Investor)
Rules under the Securities and Futures Ordinance of Hong Kong).
To Canadian Residents: BMO Nesbitt Burns Inc. furnishes this report to Canadian residents and accepts responsibility for the contents herein
subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should
do so through BMO Nesbitt Burns Inc.
The following applies if this research was prepared in whole or in part by Colin Hamilton, Alexander Pearce or Raj Ray:
This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and
distributed by BMO Capital Markets Limited or Bank of Montreal Europe Plc and is subject to the regulations of the Financial Conduct Authority
(FCA) in the United Kingdom and the Central Bank of Ireland (CBI) in Ireland. FCA and CBI regulations require that a firm providing research
disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer.
Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it
and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore each of BMO Capital Markets Limited
and Bank of Montreal Europe Plc will disclose its and its affiliates’ ownership interest in the subject issuer only if such ownership exceeds 5%
of the equity of the issuer.
To E.U. Residents: In an E.U. Member State this document is issued and distributed by Bank of Montreal Europe plc which is authorised and
regulated in Ireland and operates in the E.U. on a passported basis. This document is only intended for Eligible Counterparties or Professional
Clients, as defined in Annex II to “Markets in Financial Instruments Directive” 2014/65/EU (“MiFID II”).
To U.S. Residents: BMO Capital Markets Corp. furnishes this report to U.S. residents and accepts responsibility for the contents herein, except to
the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should
do so through BMO Capital Markets Corp.
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005 (the "Order") or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as
"relevant persons"). The contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
To Hong Kong Residents: In Hong Kong, this report is published and distributed by Bank of Montreal. Bank of Montreal (incorporated in Canada
with limited liability) is an authorized institution under the Banking Ordinance and a registered institution with the Securities and Futures
Commission (CE No. AAK809) to carry on Type 1 (dealing in securities) and Type 4 (advising in securities) regulated activities under the Securities
and Futures Ordinance (Cap 571 of the Laws of Hong Kong). This report has not been reviewed or approved by any regulatory authority in Hong
Kong. Accordingly this report must not be issued, circulated or distributed in Hong Kong other than (a) to professional investors as defined in
the Securities and Futures Ordinance and the Securities and Futures (Professional Investor) Rules under the Securities and Futures Ordinance of
Hong Kong, or (b) in circumstances which do not result in or constitute an offer to the public in Hong Kong.
To Korean Residents: This report has been provided to you without charge for your convenience only. All information contained in this report is
factual information and does not reflect any opinion or judgement of BMO Capital Markets. The information contained in this report should not
be construed as offer, marketing, solicitation or investment advice with respect to financial investment products in this report.
To Japan Residents: This report has not been reviewed by any regulatory authority in Japan. This report is provided for information purposes only
and it should not be construed as an offer to sell, a solicitation to buy, or a recommendation for any security, or as an offer to provide investment
management or advisory or other services in Japan. Securities may not be offered or sold in Japan by means of this report or any other document
other than to Qualified Financial Institutions within the meaning of item (i) of Article 17-3 of the Government Ordinance to enforce the Financial

Base Carbon | Page 4 March 2, 2023

 Instruments and Exchange Act (Kinyu Shohin Torihiki Ho Sekou Rei). Unless specified otherwise, the securities that may be offered to you are
not and will not be registered in Japan pursuant to the Financial Instruments and Exchange Acts.
To Taiwanese Residents: This report is not intended to constitute investment advice nor a public offer for any investment products to investors
in Taiwan. This report should only be accessed by investors in Taiwan that are qualified to invest in investment products pursuant to relevant
Taiwanese laws and regulations, and subject to sales restrictions as set forth in the relevant Taiwanese laws and regulations. BMO Capital
Markets has not and will not secure the required licenses in Taiwan for the offer of securities and investment services. Any offer of securities
has not been and will not be registered or filed with or approved by the Financial Commission of Taiwan and/or other regulatory authority
pursuant to relevant securities laws and regulations of Taiwan, and may not be issued, offered or sold within Taiwan through a public offering
or in circumstances which constitute an offer that requires a registration, filing or approval of the Financial Supervisory Commission of Taiwan
and/or other regulatory authority in Taiwan under relevant securities laws and regulations of Taiwan. No person or entity in Taiwan has been
authorized to offer or sell the securities in Taiwan.
To Singapore Residents: This report is intended for general circulation and does not and is not intended to constitute the provision of financial
advisory services, whether directly or indirectly, to persons in Singapore. You should seek advice from a financial adviser regarding the suitability
of the investment products, taking into account your specific investment objectives, financial situation or particular needs before you make a
commitment to purchase the investment product. This report has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, it should not be circulated or distributed, nor may the securities described herein be offered or sold, or be made the subject of
an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (a) to an institutional investor or a
relevant person as defined in and pursuant to and in accordance with the conditions of the relevant provisions of the Securities and Futures Act
of Singapore or (b) otherwise pursuant to and in accordance with the conditions of, any other applicable provision of the SFA.
To Israeli residents: BMO Capital Markets is not licensed under the Israeli Law for the Regulation of Investment Advice, Investment Marketing
and Portfolio Management of 1995 (the "Advice Law") nor does it carry insurance as required thereunder. This document is to be distributed
solely to persons that are qualified clients (as defined under the Advice Law) and qualified investors under the Israeli Securities Law of 1968.
This document represents the analysis of the analyst but there is no assurance that any assumption or estimation will materialize.
These documents are provided to you on the express understanding that they must be held in complete confidence and not republished,
retransmitted, distributed, disclosed, or otherwise made available, in whole or in part, directly or indirectly, in hard or soft copy, through any
means, to any person, except with the prior written consent of BMO Capital Markets.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
For assistance with accessible formats of online content, please contact research@bmo.com.
The recommendation contained in this report was produced at March 02, 2023, 01:06 ET. and disseminated at March 02, 2023, 01:06 ET.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate
banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking
clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A. (member FDIC), Bank of
Montreal Europe p.l.c, and Bank of Montreal (China) Co. Ltd, the institutional broker dealer business of BMO Capital Markets Corp. (Member FINRA and SIPC) and the agency broker
dealer business of Clearpool Execution Services, LLC (Member FINRA and SIPC) in the U.S., and the institutional broker dealer businesses of BMO Nesbitt Burns Inc. (Member
Investment Industry Regulatory Organization of Canada and Member Canadian Investor Protection Fund) in Canada and Asia, Bank of Montreal Europe p.l.c. (authorised and
regulated by the Central Bank of Ireland) in Europe and BMO Capital Markets Limited (authorised and regulated by the Financial Conduct Authority) in the UK and Australia.
“Nesbitt Burns” is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. “BMO Capital Markets” is a trademark
of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.
® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
TM Trademark Bank of Montreal
©COPYRIGHT 2023 BMO CAPITAL MARKETS CORP.

Base Carbon | Page 5 March 2, 2023