JULY 26, 2021, TORONTO, ON – Star Royalties Ltd. (the “Company” or “Star Royalties”) (TSXV: STRR, OTCQX: STRFF) is pleased to announce the execution of a definitive royalty purchase agreement and gross revenue royalty agreement with Elizabeth Metis Settlement (“EMS”) to acquire a 13.5% gross revenue royalty (the “Royalty”) on EMS’ revenue share from the creation and sale of emission reduction benefits (“ERBs”) (including, for example, carbon offset credits and  emission reduction credits) from forested lands located in Elizabeth Metis Settlement (the “EMS Forest Project”) in Alberta, Canada for a total consideration of C$300,000 in cash.

Alex Pernin, Chief Executive Officer of Star Royalties, commented: “We are proud to partner with EMS and assist in advancing the EMS Forest Project, which has the potential to sequester significant amounts of atmospheric CO₂ per year from enhanced management of their forest resource. This royalty transaction not only represents a pure green investment in a tier one jurisdiction with cash flow visibility, but it also highlights the potential for us to transact with other Indigenous communities in unlocking 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.”

Transaction Terms

• Star Royalties has agreed to acquire a 13.5% Royalty from EMS on their revenue share from the EMS Forest Project for a total consideration of C$300,000 in cash.
• The Royalty covers the entire EMS Forest Project and has a term of the earlier of: 1) 10 years commencing on the date EMS receives any gross revenue from the monetization of ERBs, or 2) the date hereof until the first 225,000 ERBs are issued and sold in connection with the EMS Forest Project.

EMS Forest Project

The EMS Forest Project covers a forested area of 15,457 hectares and is located in Elizabeth Metis Settlement in Alberta, Canada, approximately 230 km northeast of the provincial capital city of Edmonton. Bluesource Canada ULC (“Bluesource”), a leading North American carbon offset developer and marketer, is assisting EMS in developing the EMS Forest Project with the intent of generating ERBs, including carbon offset credits, that can be sold to federally regulated industrial emitters. The future financial benefits derived from the monetization of these ERBs will be split with the significant majority going to EMS and the remainder to Star Royalties. Star Royalties expects the Royalty to generate revenue starting in 2023.

Carbon Offset Credits

The Paris Agreement was adopted by 196 nations and entered into force in 2016 with the purpose of reducing global greenhouse gas (“GHG”) emissions. Specifically, the Paris Agreement reaffirms the goal to limit global temperature increase to below 2°C above pre-industrial levels, with a secondary aggressive target of limiting that increase to 1.5°C. In order to achieve these levels, many governments have meaningfully increased their commitment in recent years to reducing GHG emissions, with over 100 countries and thousands of corporations having since committed to significantly reducing GHG emissions by 2030 and being carbon-neutral by 2050. For instance, the Government of Canada announced in December 2020 an updated climate plan to raise the federal carbon price from the current C$40/tonne CO₂e to C$170/tonne CO₂e by 2030 via progressive annual C$15/tonne CO₂e increments starting in 2023.

Carbon offsets are generated from any activity that either prevents or reduces carbon emissions (such as renewable energies or methane capture technology), or improves carbon sequestration (such as reforestation and conservation of forested lands or direct carbon capture technology). Carbon offset credits, also referred to as ERBs, are effectively a measurable net benefit from an activity versus the status quo. Their units are measured in tonnes of CO₂ equivalent, meaning one carbon offset credit is equal to one tonne of CO₂e emission reduction.